Could Kentucky benefit from increased coal demand?

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LEXINGTON, Ky. – The demand for coal to generate electricity increases as businesses reopen after COVID-19 shutdowns, and some Kentucky mines could reap the benefits. 


What You Need To Know

  • Worldwide electricity use has risen by 5% in 2021
  • Increased electricity and high natural gas prices have elevated the demand for coal
  • Some Kentucky mines could reap benefits of uptick
  • Trend expected to last about two years

According to an analysis published by London-based think tank Ember, global electricity demand climbed 5% above pre-pandemic levels in the first six months of 2021. According to the report, electricity grids turned to more coal to meet that demand, and power sector carbon pollution rose 5% compared to the first half of 2019.

David Harris, head of the energy and minerals section at the Kentucky Geological Survey at the University of Kentucky, said he anticipates Kentucky’s coal production either increasing or at least the industry’s decline is slowed due to the increased demand for electricity. Harris said there is also the factor of supply and demand for coal and natural gas.

“Another factor, aside from the increased demand for electricity, is the price of natural gas going up,” Harris said. “A lot of natural gas is used to generate electricity, so that will favor coal if natural gas prices bump up. The utilities that still can burn coal may shift a little more of that demand over to the coal side where prices have been relatively stable.” 

Keeping coal mined in Kentucky for use in Kentucky could be tricky, Harris said, because most of the Commonwealth’s coal-fired power plants have either been retired or converted to natural gas. 

“That’s true across the nation,” he said. “There’s a limited amount of increased demand just because so much of the generating capacity has switched over to natural gas.”

China drove 90% of the rise in electricity demand and most of the increased demand for coal. China is the biggest carbon emitter in the world, that’s been mitigated by the fact that its per capita emissions are less than half that of the US, which is currently the second-biggest climate polluter. But China’s per capita electricity demand is also rising rapidly, Ember’s report shows. 

Kentucky ranks fifth in the nation in estimated recoverable coal reserves and fifth in coal production, according to the U.S. Energy Information Administration (EIA). About 11 billion tons of coal have been mined in the state. About three-fifths of Kentucky’s coal mines are surface mines, but underground mines account for more than 80% of the state’s coal production. Kentucky mines also produce only bituminous coal, the most abundant type of coal found in the United States and used for creating electricity, iron and steel. For many years, Kentucky was the third-largest coal-producing state, after Wyoming and West Virginia, and typically accounted for about one-tenth of total U.S. coal production. Kentucky’s coal production has declined as coal-fired electricity generating plants using Kentucky coal were taken out of commission or converted to natural gas. About one-fifth of all U.S. operating coal mines are located in Kentucky, more than in any other state except West Virginia and Pennsylvania.

About 90% of Kentucky’s distributed coal stays in the United States, with slightly less than half that coal remaining in the state and the rest sent to nearly 20 other states, where it is burned primarily by power plants to generate electricity. Kentucky exports about 10% of its coal to other countries. Kentucky ranks among the top 10 states in coal consumption, and nearly all that coal is used for electricity generation. Almost half of Kentucky’s coal consumption is met with the state’s coal. The remaining coal consumed in Kentucky is brought in primarily from Wyoming, Illinois, West Virginia and Indiana.

Exporting more Kentucky coal to other countries is a possibility, Harris said. 

“There’s certainly room for increased exports; it all depends on the type of coal they’re looking for,” he said. “China mines a lot of its coal, so there’s no need to import a huge amount of coal unless it has some kind of special characteristics.” 

The Internation Energy Agency (IEA) reports the global economic recovery in 2021 is expected to drive the short-lived rebound in coal demand following the significant drop triggered by the COVID-19 crisis.

“The COVID-19 crisis has completely reshaped global coal markets. Before the pandemic, we expected a small rebound in coal demand in 2020. Still, we have since witnessed the largest drop in coal consumption since the Second World War,” said Keisuke Sadamori, the IEA’s Director of Energy Markets and Security. “The decline would have been even steeper without the strong economic rebound in China – the world’s largest coal consumer – in the second half of the year.”

The rebound in coal demand is expected to flatten out by 2025 at around 7.4 billion tons. This would make 2013 when global coal demand reached 8 billion tons, coal’s all-time peak. But while coal’s share in both the electricity mix and the overall energy mix is steadily declining, coal use in absolute terms is not set for a rapid decline in the immediate future.

According to Ohio Valley Resource, Kentucky coal production and employment fell by the smallest amount in nearly two years in 2020, and Kentucky’s coal mines produced 6.5 million tons in the first three months of 2021, according to the Kentucky Energy and Environment Cabinet, a decline of 9.6% from 2020. Total employment fell by 14.6% to 3,983 workers.

The increased demand for coal production is cyclical, Harris said, and he expects the current trend to last a couple of years. 

“As prices for natural gas increase, that causes oil and gas companies to start drilling again, which increases reserves,” he said. “It’s a constant up-and-down cycle between supply and demand. It just really depends on how much pressure there is to continue burning coal and to switch over coal-burning plants to more natural gas.”

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