Coal will remain dominant but diminished power source in U.S. — EIA

Source: Manuel Quinones • E&E • Posted: Tuesday, January 24, 2012

Coal will remain the dominant fuel for U.S. electricity production through 2035, but its share of power generation will continue to drop significantly, the Energy Information Administration said today.

EIA’s updated energy forecast said coal’s share of electric generation will drop from almost half in 2007 to 39 percent in 2035. That number is lower than last year’s estimate of 43 percent (Greenwire, April 28, 2011).

Howard Gruenspecht, EIA’s acting administrator, said he expects few new coal-fired power plants to come online other than the ones that are already in the works. In an event this morning at the Johns Hopkins School of Advanced International Studies, he warned against putting all the blame on new environmental rules.

“It’s a variety of things, and the cost of environmental retrofits are certainly one of them,” he said.

The outlook released today takes into account EPA’s Cross-State Air Pollution Rule (CSAPR), which is on hold amid pending litigation. The upcoming full Annual Energy Outlook for 2012 will also include projections based on the agency’s new Mercury and Air Toxic Standards (MATS) rule.

EIA continues to cite natural gas as one of coal’s main competitors. The agency said natural gas will account for 27 percent of U.S. electric generation by 2035, up from 24 percent in 2010.

The agency noted that natural gas prices in the United States remain low compared to other markets, while predicting coal prices will increase.

“The upward trend of coal prices primarily reflects an expectation that cost savings from technological improvements in coal mining will be outweighed by increases in production costs associated with moving into reserves that are more costly to mine,” EIA’s outlook said.

Forecasters do expect a bump in coal production, with Western mines accounting for much of the increase through 2035. Energy produced from those mines will likely rise from 47 percent of total U.S. coal output in 2010 to 56 percent by 2035.

However, even those mines are taking a hit, EIA said, because of low natural gas prices and coal power plant retirements. Also, electricity demand is expected to be lower in areas that depend heavily on coal-fired power.

Appalachian coal will continue its downward trend. Energy produced from states like Pennsylvania, Tennessee and West Virginia will decrease from 39 percent in 2010 to 29 percent by 2035.

In Kentucky, the state’s 2011 Energy Profile released last week said total coal production in 2010 fell by 3 percent compared with 2009.

Western Kentucky, however, saw a 12 percent increase in coal production. That number accords with EIA’s estimate that coal production in the country’s interior region will remain relatively stable.

The mining industry foresees coal’s growth mainly in overseas markets, with Asia leading the appetite to fuel its economic growth (Greenwire, Jan. 19). A new report by the International Energy Agency expects global demand for coal to grow by 600,000 tons every day for the next five years.

National Mining Association CEO Hal Quinn expressed skepticism in a speech last week about the ability of natural gas prices to remain low. But today, EIA predicted the trend would continue for roughly another decade, partly because of high crude oil prices and more finds.

“The resilience of drilling levels, despite low natural gas prices, is in part a result of high crude oil prices, which significantly improve the economics of natural gas plays that have high concentrations of crude oil, condensates, or natural gas liquids,” the report says.

The agency said U.S. natural gas production would soon exceed consumption. It said the United States would likely become a net exporter of liquefied natural gas by 2016 and a net pipeline exporter by 2025.