The first three months of 2016 saw an unprecedented plunge in US coal production. The U.S. Energy Information Administration, which has numbers going back to the 1970s, shows only one quarterly decline of similar magnitude – and that came during a workers’ strike in the early 1980s. Aside from periods of labor trouble, US coal production has not been this low since the EIA began tracking it.
Part of the problem is temporary. The winter was unusually mild, which generally lowers energy consumption. As a result, many of the coal-fired power stations had large reserves of coal on hand; they burned these reserves instead of ordering new coal.
But most of the problems are systemic. Coal is now undermined by renewables and natural gas, which displace some of the demand. Utilities are responding to those low prices by adding new renewable energy and gas capacity. That extra capacity comes at a time when demand for electricity in the US is growing at an unexpectedly slow pace. Combined, these factors have led to less use of existing coal-fired power stations. New environmental regulations are also forcing the oldest and least efficient factories to close early. Most of these are also coal.
Finally, foreign demand has not made up for declining domestic consumption. Combined, these issues have led to a number of coal producer bankruptcies (although those companies continue to operate as they restructure their debt).