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Looming
power-plant retirements to put coal traffic back into decline over
next five years
Wolfe
Research analysis projects record decline in coal-fired power
generation
A Union Pacific coal train grinds
its way up Logan Hill in the Powder River Basin of Wyoming in October
2020. (Bill Stephens)
NEW YORK – Coal is enjoying a day
in the sun amid low stockpiles at power plants and high natural gas
prices.
Overall railroad coal volumes have
improved since the second quarter of 2021 and the trend is expected to
continue into next year.
But then a wave of coal-fired power plant
retirements will put coal volumes back into their long-term downward
trend, according to an analysis by Wolfe Research. “Headwinds from
coal plant retirements will accelerate in 2025 and into the latter
part of the decade, although near-term fundamentals for coal remain
positive,” analyst Scott Group wrote in a note to clients last week.
Some 23% of current coal-fired
electricity generation capacity is expected to be retired over the
next five years, according to Wolfe’s review of 70 power-plant
retirement dates that utilities have already announced. The
48-gigawatt reduction in coal-fired electricity generation will be
offset by a record 128-gigawatt expansion of natural gas, solar, and
wind power over the next five years, Wolfe says.
The result will be a 12.1% decline in
Class I railroad coal volumes through 2026, Wolfe projects.
Wolfe took the power plant shutdown data
and married it with the sources of their coal and what railroad or
railroads deliver the coal. Nearly three quarters of the plants
scheduled to shut down in the next five years burn coal from the
Powder River Basin of Wyoming and Montana, with retirements
concentrated in the Midwest and Mid-Atlantic.
Based on this data, over the next five
years Union Pacific stands to lose the highest percentage of its coal
volume (16%), followed by BNSF Railway (14.5%), CSX Transportation
(11.8%), Canadian Pacific (10.5%), Norfolk Southern (5.5%), and
Canadian National (1.1%).
Coal generates about 11% of railroad
revenue today, Wolfe says, down from 23% in the peak year of 2011.
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