A recent boom in oil and gas prices, along with severe weather, is making the US energy mix more expensive, more volatile and more polluting. Coal, in particular, is growing again as a share of the U.S. energy mix, powering more of the country’s electricity than last year. The same dynamics are happening at the international level, reversing efforts to slow climate change.
Coal prices have more than tripled this year to a recent $243 per tonne.
The revival of coal is a pinnacle of the most recent short-term energy outlook from the Energy Information Administration, a US government agency that publishes energy consumption statistics.
The big problem for consumers entering the winter is that the prices of raw materials and refined products that most Americans use to heat their homes are rising. According to the EIA, natural gas prices could reach their highest level since the winter of 2007-2008. Those using gas could pay 30% more for heating this winter, while those using propane could see a 54% increase and heating oil users 43% more. People who use electricity to heat their homes are likely to see costs rise by 6%, the EIA predicts.
Natural gas is now the largest fuel source for electricity generation in the US, having surpassed coal several years ago. The switch to gas from coal has been a major reason US carbon emissions have declined in recent years. But rising gas prices are convincing some power plant operators to switch back to coal.
This year, coal is likely to account for 24% of electricity production, up from 20% last year. And next year it could be 23%, still above 2020 levels. The growth of renewable energy for electricity generation is likely to level off this year as drought in the West has reduced the amount of hydropower being produced. This shortage is partly compensated by more generation of sun and wind. All in all, renewable generation should remain stable this year at 20%, in line with 2020.
That said, coal use is unlikely to grow more dramatically, in part because coal supplies are low and prices have also risen. So the benefit of switching to coal from gas is not as dramatic as in previous years. Coal production should rise to 588 million short tons this year, 53 million more than in 2020. And by 2022, production could increase by another 34 million, the EIA predicts.
The increase in coal use and weak renewable energy growth this year means the US is falling behind in meeting its climate goals. After falling 11% in 2020 due to Covid lockdowns, energy-related carbon dioxide emissions are expected to increase by 8% this year and remain the same next year. Coal emissions fell by 19% last year and are expected to increase by 20% this year, before falling 5% in 2022.
The long-term picture for coal is still bleak, as environmental regulations and an increasing use of renewable energy sources displace it. Stocks of coal producers have risen this year, by
(ticker: BTU) more than fivefold. But Peabody shares are still trading at a third of 2018 levels.
Write to Avi Salzman at firstname.lastname@example.org