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Coal's Future Is Rocky at Best

Cheap, clean natural gas is quickly replacing gritty old coal
Forty percent of U.S. energy will come from coal this year
Forty percent of U.S. energy will come from coal this yearPhotograph by Don Farrall/Getty Images

Is coal doomed? The dirty yet abundant energy source has had some rough patches before, but nothing like this. In 1985 coal accounted for 57 percent of all power generated in the U.S. Last year it was 42 percent. The U.S. Energy Information Administration estimates it will fall to 40 percent this year. Prices for Appalachian coal are down 24 percent over the past 12 months; for coal from the Powder River Basin in Montana and Wyoming, they’re down 45 percent. “With the prices you’re looking at now, no one can make money,” says Lucas Pipes, an analyst at Brean Murray, Carret.

Coal is in a struggle with a perfect adversary: ultracheap natural gas. With all the shale reserves unlocked by fracking, gas prices have steadily declined since mid-2008, to the point where they’re hovering around $2 per million British thermal units for the first time in a decade. That’s lower than coal prices. The natural gas is all domestically derived energy, so the country’s fuel import bill doesn’t go up. It’s clean. And it’s so abundant that the industry may run out of places to store it. Utilities that switch to natural gas are already passing savings on to customers. In 2013 residential U.S. utility bills should fall 1 percent.