Coronavirus pandemic could spell the end for coal industry as renewable energy sources become cheaper
As the coronavirus pandemic rages on, many industries across the world are suffering from the repercussions of the lockdown and quarantine measures — chief among them is the coal industry.
Citywide and statewide shutdowns have caused a dramatic drop in electricity demand. An E&E News analysis showed that the average hourly electricity load or demand in New York's five boroughs for the five-day workweek beginning March 23 was 4,808 megawatts, a 12% drop compared with the same period last year.
Since the coronavirus shutdown, coal mines across the United States have laid-off workers, shut down operations and slowed down productions.
As Moody's investors downgraded all long-term ratings for Contura Energy Inc, the credit rating business noted, "Moody's expects a very challenging year for the coal industry in 2020 — including meaningful reduction in industry-wide demand for metallurgical coal and thermal coal in the next few months driven by an unprecedented shock to the economy due to the coronavirus outbreaks."
Last month, wind and solar actually produced more electricity than coal in the US, the first time that has happened, according to a research note from the Rhodium Group.
The research noted, "For the week of April 8-14, coal fell further, averaging 15% of total US power generation, with wind and solar generation surpassing coal during a three-day period for the first time in recorded history."
Coal accounted for just 16.4% of the US electric power from mid-March to mid-April, compared with 22.5% for a similar period last year. This trend continued during the whole month with renewables generating more power than coal through April.
The Institute for Energy Economics and Financial Analysis (IEEFA) notes that this happened due to a number factors, "particularly low gas prices, warmer weather, a significant amount of new renewable capacity connecting to the grid late last year, and more recently, lower power demand from the economic slowdown because of the coronavirus."
The repercussions are coming in aplenty. Allianz Insurance announced that it will no longer provide property and casualty insurance to companies whose business model is based around coal and that do not have a clear phase-out plan.
The new policy will affect companies with a coal share of power production of 25% or more and a coal-fired capacity of at least 5GW. The Coal Mining Market Global Report 2020 was released this week and offers an insight into the market for strategists and senior management.
The report noted that the global coal mining market is expected to decline from $816.5 billion in 2019 to $722.8 billion in 2020, again due to the economic slowdown brought about by the coronavirus pandemic.
IEEFA also noted in another report that thermal coal projects could continue to be on the decline with the "continuing uptake of cleaner and ever-cheaper renewable energy."
Moreover, cost reductions in both large scale solar PV and onshore wind projects lead to the clean energy sources being the cheapest form of energy generation in areas that count for two-thirds of the world's population — about 85 percent of the world's electricity generation.