Andrew Blumenfeld has been in the coal industry for over three decades. He saw his fair number of bad times for the industry. And Blumenfeld, a coal industry analyst with IHS Markit, says this downturn is as bad as he's ever seen before.
“It doesn’t compare — we have seen some relatively severe downturns. But nothing this sudden and this severe,” Blumenfeld said.
Businesses have slowed down the spread of COVID-19 and, as a result, the use of electricity is declining. That hurt the coal in particular.
Five years ago, coal made up one-third of the nation 's electricity. It's about half of that this year.
"We 're seeing coal production numbers and coal generation numbers going back to about the late 1960s, at the mid-1970s level," Blumenfeld said.
Since the coronavirus hit the U.S., coal mines across the country have begun to shut down, lay off workers, and slow down production. Bankruptcy is everywhere in the industry.
Consol idled its Enlow Fork mine in Washington County in Pennsylvania, citing low demand. Just across the border in West Virginia, Longview Power, the country's most efficient coal-fired power plant, filed for bankruptcy, citing reduced demand for coronavirus.
"All that can go wrong is wrong for the coal industry," said Matthew Preston, a coal analyst at Wood Mackenzie. He said that this year's demand for coal is down between 35 and 40 percent from last year, "and last year wasn't a great year."
Coal has been struggling for a number of years. Now, demand is falling due to the economic shutdown (as well as the warmer weather).
In the mid-Atlantic power grid, demand fell by 8 to 9 per cent in March.
Preston said that coal is now more expensive than natural gas, wind or solar in many parts of the country. So, when demand slows down, coal plants are the first to shut down.
In fact, three days earlier this month, wind and solar actually produced more electricity than coal in the U.S., the first time that has happened, according to a new research note from the Rhodium Group.
Rhodium found that coal accounted for only 16.4 per cent of U.S. electricity from mid-March to mid-April, compared to 22.5 per cent for the same period last year.
All of this means that — just as with the oil glut — there’s too much coal sitting around.
“We’re seeing coal stockpiles run up to some historically high levels,” said Joe Aldina, a coal industry analyst with S&P Global Platts. He said it’s “actually pushing the physical constraints of the coal fired generation system.”
Blumenfeld says coal stockpiles at power plants were “basically double what it should be at this time of year.” He also suspects excess inventory is forcing some mining companies to shut down.
Aldina said that the coal-fired power plants could decide to run at a loss this summer, just to burn off excess stock. He sees a potential rebound for coal next year if the prices of natural gas rise as expected.
The problems of the industry are weighing on people like James Starcher. He works at Cumberland's Contura Energy mine, where 46 miners were laid off last week.
Starcher, 44, from Grafton, W. Va., was not among the layoffs. But he says that the 500 or so other miners who work there are worried about the future of their jobs.
“Now everyone is thinking, ‘Oh, my goodness. Will there be more? Could there be more?’” Starcher said.
Analysts say there might be more layoffs, bankruptcies, and shutdowns this year. And if coal-fired power plants decide to retire early, the damage caused to the industry by coronavirus could leave a permanent mark.
This story is produced in partnership with StateImpact Pennsylvania, a collaboration between The Allegheny Front, WPSU, WITF and WHYY to cover the energy economy of the commonwealth.
