Is It Too Late For The Struggling Coal Industry?

The coal industry remains beleaguered, with challenges from all quarters domestic and international. In the U.S., strong competition from natural gas, stringent regulations and additional impetus to solar and wind power generation through the extension of tax credits are steadily luring away utility operators from coal.

Higher coal producing countries like Australia and Indonesia, and, importantly, a stronger greenback, are making the export market fiercely competitive for the U.S. coal players.

Even without the Clean Power Plan, utilities like NextEra Energy (NEE – Free Report) and Dominion Resources (D – Free Report) were already investing hugely to create a green energy generation portfolio, and have enhanced their focus on electricity from clean fuel sources.

The Clean Power Plan has been repealed by President Trump. Even still, new investments are being directed toward natural gas and renewable-based power production due to the clean-burning nature of natural gas and tax credits provided to produce more electricity from solar and wind.

Failing to cope with the continuous fall in demand and declining prices of coal, some coal miners have filed for bankruptcy. Companies like Patriot Coal and Walter Energy had tried all possible means to remain solvent, but the harsh reality is that coal demand is gradually going down.

In response to the anti-carbon drive, utility operators are shutting down coal-based power plants and are directing fresh investments toward constructing natural gas facilities and adding more renewables. U.S. coal production touched its lowest levels in 2016 to 739 million short tons (MMst) since 1978.

Here are some of the severe headwinds that the coal industry is up against:

Environmental Legislations: Coal has been losing importance as a fuel source over the last few years, particularly in the U.S., in comparison with other sources that are less harmful to the environment. Concerns over the emission of greenhouse gases and global climate change have resulted in the formulation of new legislations and policies which emphasize the use of environment-friendly fuel sources, particularly in the power sector.