By Barry Cassell, GenerationHub
Slower growth in world coal demand, lower international coal prices and higher coal output in other coal-exporting countries have all led to a decline in U.S. coal exports, said the U.S. Energy Information Administration in its most recent monthly Short-Term Energy Outlook published Sept. 9.
Lower mining costs, cheaper transportation costs and favorable exchange rates will continue to provide an advantage to mines in other major coal-exporting countries compared with U.S. producers, EIA added. Coal exports for the first half of 2015 are down 20 percent compared with the same period in 2014, and U.S. steam coal exports fell by 21 percent, or 4.1 million short tons (MMst).
U.S. coal imports, which increased by more than 2 MMst in 2014 to 11 MMst, are expected to average near that level in 2015 and 2016.
EIA said it expects a 7 percent decrease in total coal consumption in 2015, with electric power sector consumption falling 7 percent. Lower natural gas prices are the key factor driving the decrease in coal consumption. Projected low natural gas prices (power sector natural gas prices are 27 percent lower in 2015 compared with 2014) make it more economical to run natural gas-fired generating units at higher utilization rates.
The retirements of coal-fired power plants, many of them done earlier this year, in response to the implementation of the federal Mercury and Air Toxics Standards (MATS) also reduces coal-fired capacity in the power sector in 2015. Because retirements are occurring throughout 2015, however, the full effect will not be evident until 2016.
Projected rising electricity demand and higher natural gas prices next year are expected to contribute to higher utilization rates among remaining coal-fired power plants. Even with continued implementation of MATS, which the U.S. Supreme Court in June sent back to the U.S. Court of Appeals for the D.C. Circuit for further review, coal consumption in the electric power sector is forecast to increase by 1.5 percent in 2016.
A barrier to larger rebound in coal-fired generation in 2016 is expected growth in renewable-based generation, EIA reported. Non-hydropower renewable-based electricity generation is expected to grow by 12 percent in 2016, with the largest growth (21 percent) occurring in the South.
Lower domestic coal consumption and exports combined with a slight increase in coal imports are projected to contribute to a decrease in production in all coal-producing regions in 2015, with the largest percentage decline occurring in the Appalachian region.
The annual average coal price to the electric power sector increased from $2.34 per million British thermal units (MMBtu) in 2013 to $2.36/MMBtu in 2014. EIA expects the delivered coal price to average $2.27/MMBtu in both 2015 and 2016.
Nearly 9,800 MW of Coal Capacity Retired in First Half Of 2015
The electricity industry retired nearly 9,800 MW of conventional steam coal-fired capacity during the first six months of this year. These retirements represent 3.3 percent of the amount of operating steam coal capacity existing at the end of 2014. The states with the largest amount of retired coal capacity include Ohio (2,659 MW), Georgia (1,861 MW) and Kentucky (1,409 MW). The industry plans to retire an additional 3,133 MW of coal capacity this year and nearly 6,000 MW during 2016.
Figure 1: U.S. Coal Consumption
While the retirement of some coal-fired capacity has contributed to the decline in coal-fired generation over the past year, the relatively low cost of natural gas has been a more significant driver in coal’s declining share and the increase in the share generated by natural gas. During the first half of 2015, coal accounted for 34 percent of total generation compared with 40 percent during the same period last year, while natural gas accounted for 30 percent, up from 25percent during the first half of 2014. For all of 2015, EIA expects the annual amount of coal generation will be 8.2 percent lower than in 2014, and the annual level of natural gas generation will rise by 14.5 percent.
A longer version of this article was originally published in GenerationHub on Sept. 9.
Barry Cassell is chief analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 26 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University. Reach him at email@example.com.