Mountains of unused coal causing financial headaches for US power sector: Report
American power producers over the past two years have accumulated massive amounts of coal that are now sitting idle at their facilities — creating financial and storage headaches for utilities and coal miners alike, a new analysis has found.
The coal stockpile has reached about 138 million tons, or about the equivalent of the quantity of coal that Appalachia is expected to produce in 2025, according to the report, published on Monday by the Institute for Energy Economics and Financial Analysis.
These mountains of coal are not only creating storage problems, but they are also posing financial challenges — piling up to about $6.5 billion in unused inventory, based on an average $47.22 per ton delivery rate, per the analysis.
"No power producer wants that much money idly sitting around," the report authors stated. "But it has become much harder to burn that coal without losing money."
The authors attributed these difficulties to lower natural gas prices, as well as a surge in solar and wind generation, which have made coal-fired electricity much less competitive. In addition, they noted that the occurrence of electricity price spikes during summer heat waves and winter cold snaps have declined.
As such, U.S. coal plants now burn a total of only about 1 million tons per day, half as much as they did in 2015, according to the analysis.
Meanwhile, coal deliveries have been dwindling for more than 15 years — falling from more than 80 million tons a month in 2008 to potentially less than 20 million tons during some months of 2025, per the report.
Given the buildup in coal stockpiles, the authors warned that at a certain point, power providers will buy a lot less of the resource from coal producers.
The analysis also estimated that due to the U.S. energy transition, another 13 gigawatts of the country's remaining 173 gigawatts of coal-fired capacity will retire by 2025.
"The longer that mountain of coal persists, the deeper the delivery cuts and ultimately production cuts will have to be," the authors added.