Coronavirus accelerates coal's decline
The coronavirus pandemic is accelerating a years-long decline in coal-fired electricity.
The state of play: Weaker electricity demand and super-low natural gas prices, both driven by the pandemic, have prompted coal to drop to just 15% of the U.S. electricity mix for the first time in modern history, according to a new analysis of government data by consultancy Rhodium Group.
- Rhodium analyzed hourly electricity data from the Energy Information Administration to conclude that wind and solar generated more electricity than coal for several days over the past week.
- "That’s never happened before," said Trevor Houser, a partner at the firm.
Flashback: A decade ago, coal powered nearly 50% of America’s electricity, by far the largest share.
- The one-two punch of cheap, cleaner-burning natural gas and tougher environmental regulations during the Obama administration pushed coal far from its traditional perch as America’s top power source.
Two factors are driving coal’s relative demise now compared to other power sources.
- Existing wind and solar plants have fixed costs and no marginal cost, which means they "generally get priority" when deciding which types of plants to run, Houser said.
- Natural gas prices are very low due to relatively warm weather and rock-bottom oil prices, which have also been driven lower by the pandemic. This means gas is beating out coal for whatever piece of the shrunken pie is left.
- The chart above excludes natural gas, the largest source of electricity, because it’s stayed relatively constant in this time frame, as has hydropower and nuclear power.
What we’re watching: Is this a temporary blip downward for coal that will change once shutdowns are lessened or will this acceleration cement a permanent new low?