Power plant coal shipments dropped 8 percent in 2023 but will see a slight rebound in 2024

Energize Weekly, July 24, 2024

Coal shipments in the U.S. decreased 8 percent in 2023, continuing a two-decade trend as more coal-fired power plants are retired, although deliveries could see a bump this year, according to data from the federal Energy Information Administration (EIA).

In the last 13 years, coal shipments to power plants have dropped by more than half to 422 million tons in 2023 from 957 million tons in 2010.

The EIA is forecasting an increase in coal shipments of about 3 percent in the second half of 2024, thanks to a hot summer and high natural gas prices.

“In response, we expect coal production to increase month over month by 10 percent in June, 6 percent in July, and 13 percent in August. In August, we expect 69 percent more U.S. coal consumption compared with May, while production will increase 33 percent,” the agency said.

The EIA expects coal consumption to drop back to near 2023 levels in 2025.

In 2010, coal-fired capacity peaked at 318 gigawatts (GW) and coal plants accounted for 44 percent of the nation’s electricity, the single largest generation source. By 2022, capacity had dropped below 200 GW, and the share of generation was just 20 percent.

Electricity generation from coal-fired units in the U.S. Lower 48 states decreased for all hours of the day by about 23 percent between 2021 and 2023, according to EIA data.

Most of the decline occurred between 2022 and 2023, when coal-fired generation’s share of total electricity generation fell 19 percent. At the same time, the average natural gas price dropped by more than 60 percent.

Between March and June, the spot price for natural gas at the Henry Hub rose 70 percent to $2.53 for a million British thermal units, although prices remained lower than they were for the same period in 2023.

The EIA said several factors have accounted for the cutback in coal-fired generation since 2021:

• Coal capacity has decreased because operators have retired about 37 gigawatts, or 17 percent of the coal-fired fleet, since the beginning of 2021.
• Natural gas-fired and solar-generating capacity has increased.
• Utilities or grid managers generally select the lowest cost power available at a given point, which in recent years has usually been wind, solar, and natural gas rather than coal.

“Off-peak, coal-fired generation fell about 24 percent between 2021 and 2023, according to our data, due largely to natural gas-fired units displacing coal-fired units as an overnight source of electricity,” the agency said.

Shipments and power-plant coal consumption generally move in tandem but can vary from year to year. In 2023, for example, coal producers shipped 35 million tons more than power plants used, boosting inventory surpluses by 48 percent and reducing deliveries in early 2024.

Railroads were the main conveyance transporting nearly three-quarters of all U.S. coal in 2023 as many power plants are far from mines. Coal is also transported by barges on the inland river system, trucks, or by conveyer belts in much smaller quantities.