The historic fall in natural gas prices created a significant competitor for coal. As a result, thermal coal production in the United States has been on a steady decline for over two decades, with its peak occurring back in 2007.
Despite this obvious market rivalry, Texas Attorney General Ken Paxton is leading a lawsuit against some of the largest institutional investors, claiming they are responsible for the decline, and for driving up energy costs. These assertions contradict decades of data, and a closer examination quickly (and unsurprisingly) reveals that consumers have been benefitting from a more competitive energy market, where there are more energy options for consumers, which leads to lower prices.
The 20-year decline in coal production is consistent across both public and private coal companies, driven largely by market forces and particularly regulatory actions – combining for a decrease in supply and demand. The demand for thermal coal has also decreased significantly, primarily due to the availability of cheaper natural gas. According to the U.S. Energy Information Administration (EIA), the total U.S. utility-scale electricity-generation capacity for natural gas in was 42.7% – the largest of all energy sources.
This shift towards natural gas reflects its widespread adoption as a primary energy source across various states due to its cost-effectiveness compared to coal-fired power plants. In contrast, coal’s share of electricity-generation capacity has dwindled from about 42% in 1990 to just 15% by the end of 2023, with its contribution to total utility-scale electricity generation dropping from approximately 52% to around 16%.
Several factors – aside from pricing, problems with coal waste, and decades of regulations – have influenced fluctuations in coal supply and demand during this period, including global events like COVID-19 and geopolitical tensions such as those between Russia and Ukraine, as well as industry-specific issues like labor disputes. Recognizing these various long-term dynamics, a lot of coal companies began to gradually shift away from thermal coal production – a process complicated by the capital-intensive nature of mining operations, which limits their ability to quickly adjust output based on short-term market demands.
In Texas specifically, natural gas has emerged as a dominant force for electricity generation. The state leads the nation in both natural gas consumption and production. And despite being historically reliant on coal – remaining the largest consumer due to historical infrastructure investments – the state has seen wind energy surpassing coal for four consecutive years starting from 2020.
Like Texas, states should be allowed to invest in and build up all different types of energy sources. Competition among energy providers often leads to lower prices, as companies strive to offer the most attractive rates to gain and retain customers. Basic supply and demand theory tells us this will result in cost savings for consumers. Beyond that, a competitive energy market encourages innovation and efficiency, leading to improved service quality and the introduction of new products, such as we saw with natural gas.
Rather than a conspiracy theory to drive up energy prices, the facts point to a decades-long transition towards cleaner energy sources, like natural gas, that are driven by economic viability and government regulations. And in order to keep the industry innovating and energy prices low, we need to ensure there are no unnecessary restraints – or flippant lawsuits – messing with the energy market. Consumers benefit from competition and choice.
Steve Pociask is President and CEO of the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on X @ConsumerPal.