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Long-term decline in coal industry projected to continue. What could this mean for electric bills?

A truckload of coal at the Midway mine Tuesday April 14, 2009 in Centertown, Ky
A truckload of coal at the Midway mine Tuesday April 14, 2009 in Centertown, Ky

When electric companies increased their rates for customers in Virginia last year, they said this was partly due to costs associated with closing many of their coal-fired power plants.

“It’s a rapid change,” said Taylor Kuykendall, who reports on the coal industry for S&P Global Commodity Insights.

“The industry is probably half if not less of what it was when I first started reporting on this almost a decade ago,” Kuykendall said.

Beginning in 2011, a boom in cheap natural gas, combined with stricter environmental regulations, drove up the costs of producing electricity from coal.

In Virginia, natural gas, nuclear, and renewable energy now supply far more electricity than coal.

Not everyone is on board with the shift away from coal. Recently, the West Virginia Coal Association asked some members of Congress to allow funding to help keep coal-fired power plants from shutting down.

In his submitted comments, Chris Hamilton, President of the West Virginia Coal Association, blamed environmental policies for crippling the coal industry and putting many miners out of work. “Some of our mining areas are struggling to survive and recover years after the social fabric of their communities were devastated by the reckless elimination of coal jobs,” Hamilton wrote.

Most energy analysts and environmentalists say offering tax credits to keep coal-fired power plants in operation would ultimately cost energy companies, and customers, more money, because of the expense to maintain aging coal plants.

Meanwhile, wind and solar are becoming cheaper, because of new technologies and federal incentives.

“At this point it just simply isn’t economic to continue to rely on coal fired power,” said Karan May, who works with the Sierra Club on the organization’s Beyond Coal campaign.

“There’s a huge economic opportunity, particularly in central Appalachia, and we’re well positioned to take advantage of those opportunities,” said May, who is based in West Virginia.

Kuykendall said he’s heard investors who own shares in coal mining companies who are now exploring investment in other sectors too, including renewable energy and using coal to source rare earth minerals. “I think you’re just seeing an awareness that coal is on a long secular decline, and for these companies to do well in the future they’re gonna have to diversify those business lines,” said Kuykendall.

Kuykendall forecasts that by 2030, only 10% of electricity in the United States will come from coal, a fifth of what it was a decade ago.

One other temporary impact on energy costs is the war in Ukraine, another reason utility companies said they needed to increase rates.

“A lot of European countries tried to get away from Russian energy,” said John Deskins, Director of the West Virginia University Bureau of Business and Economic Research. “That has greatly increased gas exports and coal exports to Europe. So, that’s increased the cost, and so that translates into higher rates. And I think that’s the biggest factor over the past year.”

Deskins said some European countries have doubled the amount of U.S. coal they’ve purchased, which has significantly increased costs. 35% of that exported coal, by the way, is shipped out of Virginia ports.

Deskins said he expects these energy prices to remain high over the next year or so, but that ultimately, production of thermal coal, especially for producing electricity in the United States, will continue to decline.

Roxy Todd is Radio IQ's New River Valley Bureau Chief.