US thermal coal markets may remain under pressure in 2025, even as overall electric power demand is projected to rise and some coal power plant retirements are delayed.
A number of coal generators are expecting their coal consumption to be little changed from 2024 levels. This includes the Tennessee Valley Authority (TVA), which said it is "not expecting to see any substantial changes in our resource portfolio, including coal, in 2025".
TVA and others could adjust expectations as the year progresses based on costs and availability, something they typically do. Overall electricity demand and the pace for adding new generating capacity also could shift expectations.
Recently, Vistra Energy said it was delaying the planned 2025 retirement of the 1,185MW Baldwin coal-fired plant in Illinois to the end of 2027 because of "widespread" concerns over reliability in the Midcontinent Independent System Operator. Those types of extensions could preserve some coal demand.
Next year will be a "transition" year with coal and natural gas prices stabilizing after declining in much of 2024, one market participant said. That potentially will set the stage for future market trends, but he expects coal prices to decline in 2026 and 2027.
The US Energy Information Administration (EIA) in December projected electric power sector coal consumption would edge up to 372.5mn short tons (337.9mn metric tonnes) in 2025 from a projected multi-decade low of 369.4mn st in 2024 and that coal-fired generation would rise to 643.7bn kWh from 641.6bn kWh.
Robert Godby, an associate professor in the University of Wyoming's Department of Economics, also said he expects some increase in coal-fired generation next year.
"The problem is, I do not expect this to be long-lived," Godby said. "At best, I think it just gives [utilities] a little bit of a breather before that [downward] trend continues because the outcome of increased demand is going to be increased electricity prices and greater incentives to use those cheaper forms of generation, whether they're renewables or natural gas in the longer-term… and unfortunately for coal, coal is not the lowest cost."
In terms of thermal coal demand for 2025, at some point power plants' coal stockpiles should return "to more stable levels" after being above-normal in much of 2023 and 2024, a market source said. That could lead to some coal purchases later in the year.
Expected changes in the regulatory environment as president-elect Donald Trump takes office may not have much effect. While Trump has said his administration will reverse many of the policies put in place under President Joe Biden, a number of states are expected to maintain efforts to trim or halt coal-fired generation. Larger utilities also have signalled they will continue to work at de-carbonizing their generation portfolios, even if it is at a slower pace than previously planned.
"It might be too late for coal because utilities invested in closing coal units already," one market participant said.
To satisfy competing interests of states that are moving away from coal and states that want to maintain coal use, PacifiCorp earlier this year agreed to Utah lawmakers' request to study realigning the company. And, in November, the utility holding company submitted a report to Utah legislators showing how it might break up operations into distinct entities, but it did not commit to doing so. It also said developing such a plan would take time.
For the US in general, EIA earlier this month expected 11,000MW of coal-fired capacity retirements in 2025, most of them occurring in the latter half of the year. But this forecast was made before Vistra announced it was delaying the Baldwin plant's retirement.
In addition, "remaining coal plants will increase their output to help meet the growing power demand," EIA economist Jonathan Church said. "With inventories high and production falling, steady demand will be met by utilities drawing down inventories from about 130mn st to under 100mn st by the end of 2025," he said.
US generators are generally more optimistic about gas-fired power, given Trump's promise to "unleash American energy" by having his administration rapidly approve new pipelines and other infrastructure. Natural gas generation in 2024 rose by a similar amount as overall electricity output, EIA data show, but the agency expects gas power to dip in 2025.
EIA also projected earlier this month that the Henry Hub spot gas price will average $3.06/mmBtu in 2025, up from $2.28/mmBtu in 2024. That could make some coal-fired units cost competitive with natural gas, particularly older, less efficient natural gas plants.
But coal generation would have to rise more than some are currently expecting to illicit a jump in actual spot US thermal coal sales. The decrease in power plant inventories that EIA is expecting is not projected to happen until the third and fourth quarters of 2025.
