Apr

16

 If data matters, coal miners should worry. It appears another round of layoffs is in the making. Reducing regulations won't help. While regulations are an issue, they are not the industry's greatest challenge.

Here's some data to consider:

National power production increased year over year since 1949. It wasn't until 1982 before the first decline was recorded. Growth resumed in the subsequent years until production reached its peak in 2006. Since 2006, production ceased growing.

For 60 years, coal enjoyed between 44 percent and 57 percent of the power industry's market share. From a percentage point of view, the worst years were between 1971 and 1978 when market share hit their low near 44 percent. The best years were 1955, 1985, 1987, and 1988. The peak year occurred in 1988 when coal hit 56.97 percent

Since 1988, coal's market share has been in decline. In 2011, the percentage punched through 44 percent. In 2016, it sank below 30 percent. The trend is lower.

Percentages are one consideration. Raw production is another. Since 1949, the amount of power produced from coal (coal power) increased year over year. While there were minor declines, the general trend was upward from 1949 until 2005. Since 2007, the year-over-year trend has been in a steep decline. From 2005 to 2016, 20 years of growth had been erased leaving the industry at 1980 levels.

Politicians have it wrong. Most coal industry jobs were lost in the 1950s. Peak employment occurred in the 1920s. By 1970, 80 percent of the industry's jobs were lost. In 2003, employment numbers fell below 100,000. By 2011, 40,000 new jobs had been added; the industry was restored to 1992 levels. Today, it's returned to 2003 levels.

It wasn't regulation that killed employment. It was economics and efficiency. In 1950, the industry required 3.2 employees for each gigawatt-hour (GWh) of coal power produced. By 1955, that number dropped to less than 1 employee per GWh. By 1978, the number sank to 0.25. By 2003, it had bottomed out at 0.05 employees per GWh.

Here's a surprise. Since 2003, employee counts have been increasing. Today, counts are almost 50 percent higher than 2003 lows (.073 employees per GWh). As such, it appears the cost may be too high.
It appears the coal industry is gambling on the power industry. Specifically, employers may be gambling that wholesale power prices will increase. With higher power prices, utilities might be willing to buy more coal or pay more for coal. Either way, miners might earn more.

If the industry's gamble is wrong, there could be a problem. Either mining companies will cut fat or the power industry will do it for them. If higher labor costs percolate into a constrained power market, more power plants will be idled or retired. More plant retirements mean less coal consumed. Less coal consumed means fewer jobs.

Finally, it's important to appreciate that most members of the energy industry want government interference and regulations. The coal industry wants the government to force consumers to pay more. The power industry wants the same. The only stakeholder not wanting regulatory interference is the consumer, unless it's about regulating power plant emissions.

Notes:

Energy Information Administration (EIA), Mine Safety and Health Administration (MSHA) were the source of most data and analysis used in this discussion.  Their data appears to have an error rate near five percent.

Reliable power production data for 1948 or earlier was neither available nor relevant. Production for 1949 was approximately 290 GWh. Today, it's almost 4,100 GWh. Pre-1949 data had to be insignificant.

In earlier years, coal was used for heating. Heating coal was not considered in this discussion. That omission represents a flaw that could represent an error that's greater than five percent, particularly in pre-1960 discussions.


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