Coal has been a point of contention between political parties in the energy sector for several years now. The battle between renewable energy sources, like solar and wind, versus fossil fuels, like oil and coal, has been ongoing between both parties, with the former Obama Administration leaning towards renewable energy and cleaner resources like natural gas.
Now with Trump in office, he’s made it part of his campaign platform to revitalize the coal industry, to bring back jobs and to help America achieve energy independence. Companies like Arch Coal have restructured following the decline of the domestic coal industry and have put up impressive gains in the stock market so far. Arch Coal is up more than 23% since it relaunched in early October.
But before you hop on board the coal train, there’s more to the story. And despite all the optimism about the Trump Administration, making coal a reliable energy product again might not be so easy – or even recommended.
The Future of the Coal Industry
Even before politics came into play, the coal industry was struggling to stay alive amidst growing global changes. Alternative energy has become far more efficient from a price perspective, while other natural resources like natural gas have dropped in price so much that coal couldn’t compete.
According to the Energy Information Administration (EIA), U.S. coal mines produced just 900 million tons of coal last year – the lowest since 1986. Nearly 300 coal plants have been shut down since 2008 and around 50,000 jobs in the coal industry have been lost between 2008 and 2012, revealing a deeply rooted trend that seems to mark the end of the coal era.
The discovery of new natural gas reserves has translated to low prices for this alternative energy source, and solar and wind have been making giant leaps forward in terms of technology, becoming more price competitive everyday.
In addition, the solar industry is experiencing massive growth of 20% annually and employs more than 200,000 people. Wind employs around 80,000. But natural gas is coal’s biggest enemy, with new hydraulic fracturing processes making accessibility more affordable. In 2008, coal was responsible for 50% of power generation in the U.S. Now it has fallen to around 30% and is still declining.
Coal’s future may be a bleak one with other energy sources becoming the primary means of generation. While the Trump Administration might want to save the coal industry, any policies aimed at bringing back jobs or keeping coal competitive may simply be a stop-gap in the long term.
The coal industry could be on its last legs – at least in the U.S. Overseas, however, is a different story. Coal remains a viable source of energy in countries like Russia and China, but even they are moving away from coal and into more practical means of energy production.
Investors interested in the energy sector should avoid coal, considering the uncertainty surrounding its future right now. Natural gas and alternatives are becoming more popular and are responsible for supplying the U.S. with more power every year. Regardless of the economic policies implemented by the new administration, a fundamental change is happening in the energy sector, and delaying the inevitable is likely all that will be accomplished by supporting coal in favor of alternative energy.