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US power producers over the past two years have stockpiled massive amounts of coal that are now sitting idle at their facilities, creating financial and storage headaches for both utilities and coal miners, according to has found a new analysis.
Coal storage has reached 138 million tons, or about the equivalent of the amount of coal the Appalachians are expected to produce in 2025, according to the reportpublished on Monday by the Institute of Energy Economics and Financial Analysis.
These mountains of coal not only create storage problems, but also pose financial challenges: piling up about $6.5 billion in unused inventory at an average delivery rate of $47.22 per ton, the analysis found.
“No energy producer wants that much money sitting on their hands,” the report’s authors said. “But it’s become much harder to burn that coal without losing money.”
The authors attributed these difficulties to falling natural gas prices, as well as an increase in solar and wind generation, which have made coal-fired electricity much less competitive. They also noted that the occurrence of electricity price peaks during summer heat waves and winter cold snaps have decreased.
As such, U.S. coal plants now burn a total of just one million tons per day, half of what they did in 2015, according to the analysis.
Coal deliveries, meanwhile, have been declining for more than 15 years, from more than 80 million tons a month in 2008 to potentially less than 20 million tons for some months in 2025, the report said.
Given the build-up of coal reserves, the authors warned that, at some point, energy suppliers will buy much less of the resource from coal producers.
The analysis also estimates that due to the US energy transition, an additional 13 gigawatts of the country’s remaining 173 gigawatts of coal capacity will be retired by 2025.
“The longer this coal mountain persists, the deeper the delivery cuts and ultimately the production cuts will have to be,” the authors added.
