The answer to that question depends, to a significant degree, on geography, politics and economics. In the US, until recently, more than 50% of electricity generation was from coal. Today, coal utilization for electricity generation is down to approximately 15%, and cleaner, lower cost natural gas has substantially replaced coal as the primary fuel for electricity generation. Nevertheless, states that have a long history of coal mining, are still very reliant on coal. Outside the US, India and China are highly dependent on coal for electricity generation and are expected to continue to be for several more decades. Moreover, some European countries, particularly Germany, that were very dependent on Russian gas, have significantly increased coal consumption. Peabody, the largest coal producer in the US, recently said the world used more coal in 2024 than in any other year in history.
Coal may be enjoying significant international demand, but the US is another story. Coal powered electricity generation is generally not economically competitive in the US and many coal burning plants are too old and would require extensive and expensive upgrades to continue running. Moreover, while federal policies can play a role, (President Trump has issued executive orders supporting increased use of coal), utilities, state lawmakers and regulators and demand, determine how electricity is generated.
Looking at the big picture, renewables use is growing, but perhaps not as rapidly as the advocates would like, while demand for electricity is growing at the fastest pace in decades. Investors should be aware of a variety of proposals aimed at increasing electricity generation and storage, but there is a lot of uncertainty with no obvious solution in sight.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
