One-third of US coal volumes shipped to power plants set to retire by 2042

More than a third of the coal produced by US mines in the 12-month period that ended in the third quarter of 2023 went to power plants already scheduled to retire over the next six years.

US policy aimed at reducing global warming-inducing emissions has weighed heavily on domestic coal power plants, which are the highest CO₂ emitters in the power sector. A high concentration of power plant retirements in the Midwest will particularly weigh on Powder River Basin and Illinois Basin producers, which respectively shipped about 11.2% and 8.7% of their production volumes to power plants in the Midcontinent ISO region with retirement dates set before 2042. Total deliveries to power plants with set retirement dates by 2042 represented about 33.4% of all US coal shipments and about half or more of the coal produced in nearly all of the major US coal basins, according to an analysis of S&P Global Market Intelligence data.

A December 2023 analysis by S&P Global Commodity Insights found that, by the start of 2024, US coal capacity will have decreased 34% to 186 GW compared to 2015, a year that kicked off a wave of plant retirements. That report found that power generators already announced plans to shut down 70.6% of the US' pre-2015 coal fleet by 2050, a widely followed international target date for reaching net-zero emissions.

"Over the next five to 10 years, the US domestic steam coal market is forecast to come under increasing pressure from the expansion of zero-carbon electricity incentivized by the Inflation Reduction Act. The return of competitively priced natural gas is forecast to reduce coal volumes as well," Steve Piper, director of energy research at S&P Global Commodity Insights, wrote in a February analysis of Market Intelligence data. "Remaining coal plants will see their generation dramatically reduced, as Market Intelligence forecasts US electricity demand for coal will decline 44.1% by 2030, and account for just 9.1% of electricity generation."

Coal production data for the fourth quarter of 2023 was not yet available, and few utilities have scheduled coal retirements beyond 2042.

The impending loss of customers represents an existential crisis for coal producers. The impact to coal demand is coming soon. Power plants retiring between 2024 and 2042 took deliveries of 194.3 million short tons of coal in the 12-month period that ended with the third quarter of 2023. While only 14.8 MMst went to power plants retiring in 2024, 61.3 MMst went to plants retiring in 2025.

Three regions — Southern Wyoming, Four Corners and the Uinta Basin — delivered more coal to power plants slated to retire than what their mines produced during the 12-month period. Inventory practices and other factors contribute to coal deliveries exceeding production. Other major coal-producing regions, including the Powder River Basin, the Western Region, Northern Appalachia and the Illinois Basin, shipped high volumes of coal — about half or more — to retiring power plants relative to total production.

Central Appalachia, which shipped just 3.7% of its production volumes to retiring power plants, has become focused on metallurgical coal sold to steelmakers in the US and abroad. The region once produced higher levels of thermal coal shipped to power plants but, due to higher mining costs, had already contracted volumes substantially in previous years.

For the period examined, the analysis identified three coal mine owners that delivered more coal to power plants scheduled to retire by 2042 than they produced, comprising Leroy and Robin Lewis, White Forest Resources Inc. and Appalachian Resource West Virginia LLC. Further, 19 were identified that delivered more than three-fourths of the coal they produced to retiring power plants in the period.

Still, some producers remain optimistic about their long-term prospects. Joseph Craft, chairman, president and CEO of Alliance Resource Partners LP, expects concerns about grid reliability to delay scheduled coal retirements, particularly as the use of artificial intelligence and electric vehicles adds to overall electricity demand, Craft said on a Jan. 29 earnings call.

"We acknowledge the US grid will evolve with time. But policy decision-makers must be responsible and practical in doing so," Craft said. "Current policy needs to reflect the realities of exploding demand and of the laws of physics that dictate how electricity is generated, transmitted and delivered."

US coal production is expected to fall to 456 MMst in 2025, decreasing by 21.6% from the 582 MMst produced in 2023, the US Energy Information Administration reported in its monthly "Short-Term Energy Outlook" released Feb. 6.