COVID is killing coal
It’s Friday, March 20, and the coronavirus could hasten coal’s decline.
Coal was on its way out before the coronavirus pandemic struck. Despite President Trump’s promises to save the industry, the rapid growth of renewables combined with the lower costs of natural gas have forced coal-fired power plants to shutter across the nation. Now, COVID-19 could be speeding up the death throes of an industry on the brink.
As the United States grinds to a halt in an attempt to contain the novel coronavirus, electricity demand will likely fall over the next several months, Steve Piper, director of energy research for S&P Global Market Intelligence, said on Thursday. “A material impact on electricity demand over the next two quarters seems inescapable,” he said.
But wait, aren’t more people staying at home Netflixing now that much of the nation is social distancing? Yes, but while residential electricity demand may be up, it’s more than offset by the decrease in industrial and commercial demand as many businesses are forced to shut down or allow employees to work remotely.
If overall electricity demand falls, costly and aging coal plants may be the first to go. And according to the Energy Information Administration’s latest short-term coal consumption forecast, U.S. demand for coal is projected to decrease a little over 14 percent — from 590 million tons in 2019 to 505 million this year.
“If the economy slows, I do think you’ll see an acceleration of mine closures,” Ben Nelson, Moody’s senior credit officer and lead coal analyst, told S&P Market Intelligence. “Demand in that scenario would be weakened. Something would have to come out of the market to compensate for it.”
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