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Page added on January 12, 2014
Coal Makes a 2014 Comeback
While environmental regulations and cheap natural gas have worked together to kill off coal in the United States, coal is not dead yet. The rapidly unfolding shale gas revolution brought prices down so significantly in recent years that natural gas began to capture market share from coal in a meaningful way. In particular, coal’s share dropped from 42 percent in 2011 to 37 percent in 2012. There were even moments in time in 2012 when both fuels were making up equal percentages of the electric power sector.
Environmental regulations also are steering utilities away from coal. However, although some of the most biting regulations — limits on mercury pollution and greenhouse gases — will force the closure of dozens of coal-fired power plants over the next few years, they have yet to take effect.
That means that the recent rise in natural gas prices has made coal economically viable again, at least for the short-term. Coal took back some lost ground from natural gas in 2013, rising to 39 percent of electric power generation, while natural gas fell from 30 percent to 28 percent. That trend will likely continue into 2014 with natural gas prices now higher than they have been at any time in over two years. The Energy Information Administration predicts that coal’s share of the electricity market will add another percentage point this year, hitting 40 percent. Meanwhile, natural gas could fall further behind as it is projected to fall to 26.8 percent in 2014.
As mentioned above, several environmental regulations have been finalized but not yet put into effect. The Mercury and Air Toxics Standards (or, MATS) rule sets the first federal limits on toxic pollution from power plants. The Cross-State Air Pollution Rule will require upwind states to curb pollution that drifts to other states (although this rule is facing legal challenges). Even though it is difficult to find reliable estimates on how many coal plants will shutter due to these rules because many are closing for a variety of reasons, the Associated Press estimated that EPA rules alone could kill off about 8 percent of the nation’s coal fleet.
Therefore, the coal resurgence may be short-lived. The EIA estimates that with the MATS rule coming into effect in 2015, coal’s share of the electricity market falls back to 38.6 percent, with natural gas rising to 27.6 percent. Moreover, EIA projections are usually pretty conservative and tend to overlook things that could change the overall economic calculus, such as steep drops in the costs of renewable energy. Their models also only include current laws on the books so any legislation or regulation forthcoming could alter the trajectories of coal and natural gas. That means that the slope of decline for coal after 2015 could be steeper than the EIA envisions.
Take this example. The EPA proposed limiting greenhouse gases from new power plants last year as part of the President’s climate plan, and the much more significant limits on existing power plants are being considered by the EPA. If finalized, a massive amount of coal-fired capacity could become economically unviable, as costly carbon capture technology would be too expensive. That would be the final nail in the coffin for coal-fired generation. Yet, in the short-term, high natural gas prices are breathing a bit of life into the coal sector.
8 Comments on "Coal Makes a 2014 Comeback"
rockman on Sun, 12th Jan 2014 2:00 pm
“…to kill off coal in the United States”. As Twain commented: The rumors of my death are greatly exaggerated. Might have been more clear if they had specified US coal consumption as opposed the death of coal in general. While US coal production has recently fallen from it’s all time high in 2008 more coal has been mined in the US during the first decade of our new century than during any decade since coal was first mined here. And while we might be burning less coal in the US we are exporting record levels today. US coal exports to China has increased 500% in recent years. The US is now the 4th largest coal exporter on the planet.
And most of this production is from high sulfur deposits from western gov’t leases. The gov’t is also trying to expand coal export terminals on the west coast but are meeting strong resistance. So they’ve developed an alternate plan: permits from the feds to expand Texas coal export terminals have been approved. Local opposition is non-existent. Longer train hauls will produce more expense and GHG. But with the expansion of the Panama Canal almost completed the economics of making an end run to China will be greatly improved.
So China will continue to have great access to some of the dirtiest coal on the planet. The US coal industry will continue to prosper and be ready to increase supplies to US utilities as NG prices inevitably rise. And US gov’t royalties from selling some of the dirtiest coal on the planet will continue to feed the beast.
But perhaps future US regs on coal burning will limit some of the damage. OTOH regs can be changed. Especially when US citizens start suffering a combination of high electricity prices and black outs. Perhaps if alts can expand fast enough this won’t happen. But global coal consumption has been expanding at a much higher rate than the alts.
GregT on Sun, 12th Jan 2014 6:34 pm
The US is not alone in coal exports, Canada and Australia are also ramping up exports, mostly to Asia.
Australia:
http://www.australiancoal.com.au/exports.html
Canada:
http://www.vancouversun.com/technology/Industry+predicts+bright+future+coal/8906116/story.html
rollin on Sun, 12th Jan 2014 7:06 pm
China has gone from 1.5 billion tons in 2000 to 4 billion tons in 2012. The small loss in the US is miniscule compared to China’s gain. The US produces about 1 billion tons per year.
Compare this to a world production of about 8.0 billion tons per year.
Changes in the US are not a controlling factor in the world use. Considering that the replacement is also a fossil fuel, there is just continued BAU.
Powder River Basin coal is low sulfer. Eastern Bituminous is high sulfer. All of it contains mercury and other metals.
Kenz300 on Sun, 12th Jan 2014 7:28 pm
Renewables get cheaper every year…….
yellowcanoe on Sun, 12th Jan 2014 11:39 pm
“Renewables get cheaper every year…….”
Not here in Ontario, Canada where our idiot government is still signing 20 year contracts with big corporations for PV power at a FIT roughly three times higher than is currently paid in Germany. Five minutes research would show them what other countries are paying for new PV contracts and that solar panels now cost less than $1 per watt but apparently that’s way beyond what the folks at the Ministry of Energy are capable of.
Davey, Hermann, MO on Sun, 12th Jan 2014 11:48 pm
All the talk about the end of coal is just talk. The coal subject is very complicated. The cost of coal extraction is rising rapidly but so is everything else energy related. Regulations will kill off some of the worst polluting power plants. Yet, the sheer scale of coal generation and all the supporting infrastructure makes it unlikely coal will ever be phased out and replaced. I might mention it is very dangerous to close too many of these power plants thinking they can be replaced by natural gas and renewables. The same is true of Nuclear power. We may wake up one day and be short with no money to build out anything new. We need the whole buffet of energy options. That is unless we want to speed up the coming collapse. I could use another 8 years of preparation time so my vote is for holding off on shutting down any more power plants. I am all for a low carbon world but let’s face it a low carbon equals a collapse world. I laugh when I hear these greens claim we can go renewable and low carbon and raise our living standards at the same time. The prescription is maintain the energy infrastructure, mitigate pollution/climate instability, and adjust to less with less. That is the best it gets. We are screwed, blued, and tattooed. Let’s man up to reality and start living the tough life like humanity has for most of our history!!
andya on Mon, 13th Jan 2014 12:50 am
” a combination of high electricity prices and black outs.”
ROCKMAN sounds almost doomy. God help us.
rockman on Mon, 13th Jan 2014 6:50 pm
andya – I spend every day looking for oil/NG. They are very long days.