Coal has been one of the most important sources of energy for the U.S. since the invention of electricity. It's cheap, abundant, and it's supported millions of jobs over the years. But everything must come to an end, and coal's best days may be behind it.
The U.S. Energy Information Administration estimates show that coal consumption will drop this year to levels not seen since 1996. The party is coming to an end and coal's reign as prom queen is over.
Natural gas driving the change
Cheap natural gas has been the driver of our reduced use of coal, a trend that will likely continue because the U.S. has an abundant supply of natural gas and plenty of drillers to find it. The natural gas boom in the U.S. is also leading China and Europe, two major coal importers, to look into fracking for energy. That could put a damper on the hope for growing exports.
Renewable energy is the next threat
So far, the impact renewable energy has had on the grid has been small. There just hasn't been enough wind, solar, or biomass to make coal or natural gas tremble. But that's about to change.
Wind's base has grown considerably in the last decade and it will continue to play an increasing role in coming years. Solar has reached grid parity in parts of the U.S. and grew more than 100% in 2011. Solar's small base will soon become a significant portion of our electricity infrastructure and continue to put pressure on coal demand.
In China, where investors have placed a lot of hope for coal, they expect to install at least 4 GW of solar in 2012, reducing the demand for U.S. imports.
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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
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