US coal use jumps as power generators switch from natural gas

US coal is enjoying a brief resurgence under Joe Biden — a president who promised to curb the country’s use of fossil fuels and will join other world leaders at the COP26 climate conference in Glasgow to pledge big new reductions in carbon emissions.

The amount of coal fed into US power stations this year will rise by almost 20 per cent to 521m short tons, according to the US Energy Information Administration, allowing the fuel to surpass nuclear as the second-biggest source of American electricity, after natural gas.

Awkwardly for Biden, who has pledged to eliminate all carbon emissions from the country’s power sector by 2035, the rise in coal use bucks a downwards trend that endured even during four years under Donald Trump, whose administration promised to revive the American coal industry.

It also comes as G20 leaders sealed a deal on Sunday to end international financing of coal power but stopped short of agreeing an end to domestic coal power in their own countries.

The jump in US coal use this year will also contribute to an 8 per cent surge in energy-related carbon emissions, according to the EIA.

Coal’s revival is partly an outcome of changes in US natural gas production, which fell last year as crashing oil prices forced shale operators to idle rigs and slash planned spending on drilling. That dearth of gas supply, coming alongside a recovery in the global economy and energy demand, has pushed up natural gas prices — and enticed power generators to burn more cheap coal.

Henry Hub, the US natural gas benchmark, is now trading at about $5.80 per million British thermal units, more than double the average price last year. Coal sold from Wyoming’s prolific Powder River Basin was selling for just $0.75/mBtu last week, according to the EIA.

Last Thursday, Jim Grech, chief executive of the biggest US coal producer, Peabody Energy, told analysts that his company was now “optimistic” regarding the “robust coal market dynamics”. Shares in Peabody, which emerged from bankruptcy in 2017, have more than quadrupled since the start of the year.

But the coal resurgence will be shortlived, according to the EIA and other analysts — and the long-term trend is for less US coal output and much less demand for coal in the country’s power sector. Next year, the volume of coal fed to US power plants will drop by 6 per cent and end up at less than half the peak seen earlier this century.

If global climate policy tightens in line with ambitions to hit net zero emissions, the International Energy Agency expects total global coal consumption to fall 55 per cent by 2030 and 90 per cent by 2050.