Coal faces more declines according to new report

February 7, 2018

A new report from the U.S. Energy Information Administration (EIA) predicts a stable, but declining outlook for coal production in the United States with a significant decline in production predicted for the Power River Basin in Wyoming.

According to the Annual Energy Outlook, production in Wyoming’s Powder River Basin could fall to about 235 Mt (260 million st) by 2023. Of the three coal regions in the country, the West and Appalachia are both poised to lose. Midwestern coal production may increase slightly.
The annual forecast from the EIA models a variety of outcomes for energy production, consumption and exports based on variables like oil and gas prices, technological development, and occasionally, policy changes.

In 2017, coal production climbed out of historic slump with a 6 percent increase, however, coal as an energy source for the electricity market continued its slump. In the last three years, coal went from producing about 40 percent of the country’s electricity, to 30 percent.

The EIA shifted its baseline expectations somewhat this year. Though conditions in the coal sector would certainly worsen under the Obama-era Clean Power Plan – a regulation currently being unraveled by the Trump Administration — other factors in play will continue to drive down coal demand nonetheless, according to the outlook.

Low natural gas prices are the key factor in the challenge to coal, said Linda Capuano, administrator of the EIA, in a release of this year’s outlook data.

As gas outcompetes coal in the electricity sector, the most expensive coal plants to run will continue to be shut down, she said.
Wyoming has already lost customers to this trend. Two coal-fired power plants slated to close in Texas bought the majority of their coal from Peabody Energy’s Rawhide mine north of Gillette.

Natural gas is the biggest variable in coal’s outlook, but it’s not the only one. Renewables are expected to grow in every scenario, whether gas prices are high or low, whether the country has economic growth or not.

“More intense natural gas competition. Greater renewable build out. It’s the two sides of the vice on coal,” said Rob Godby, director of the Center for Energy Economics and Public Policy, who has studied the Wyoming coal economy on behalf of the Wyoming Legislature told Casper Star Tribune.

Last year the EIA’s outlook contained more positive news for the coal sector. Production could have seen a rebound before slow declines in some scenarios. That’s diminished, Godby said.

“Where we are now, in 2018, they’re saying is as good as we get,” he said.

The outlook is not a sure bet, and highlights the complexity of forecasting markets like oil, gas and coal, Godby said.

“Energy systems are some of the most complex in the world,” he said. “What [the outlook] is useful for is in comparing the different side cases. You can see how changing one basic assumption changes the outcome.”


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