EIA: COAL WILL REMAIN PRIMARY FUEL SOURCE THROUGH 2040

Lindsay Kalter
GHG Monitor
12/7/12

Even as low natural gas prices continue to drive out coal-fired generation, coal will remain the dominant fuel for electricity production through 2040, according to the U.S. Energy Information Administration’s Annual Energy Outlook 2013. Though natural gas’s share of generation is expected to grow, coal generation is projected to recover after experiencing a dip in recent years.  “Coal regains a competitive edge against natural gas,” said EIA Administrator Adam Sieminski during a Dec. 5 press conference. “We’ll see natural gas rising pretty significantly from 25 percent to 35 percent market share, but coal holding onto a 35 percent market share by 2040.”

EIA’s predictions that coal will maintain its dominance come on the heels of several industry analyses that have projected a shrinking coal fleet to varying degrees in the coming years. The report does predict the retirement of 49 GW of coal-fired capacity by 2022, and an increase in natural gas demand from 7.6 trillion cubic feet in 2011 to approximately 9.5 trillion cubic feet in 2040. However, the report states that as gas prices increase, coal will regain momentum. “The key thing that’s driving the story for coal is a combination of its relative price with natural gas and demand growth,” Alan Beamon, the director of EIA’s Coal and Electric Power Division, said at the press conference. “If you look back just a few years ago, coal plants in the U.S. were operating at an average capacity factor of 70 percent, and now they’re down to the upper-50s…We expect that to come back a little bit as gas prices rise.”

According to Sieminski, between 1990 and 2008, coal-fired power plants accounted for 50 percent or more of domestic electricity generation annually. Since that point, coal’s share of the mix decreased to 42 percent last year. He added that coal and natural gas tied in electricity generation in April of this year, each with about 32 percent of the share of nationally. The report states that natural gas consumption in the industrial sector is higher in this year’s energy outlook than it was in EIA’s 2012, especially from 2011 to 2019, when natural gas prices remain below their 2010 levels. Coal-fired generation is predicted to hit its lowest point in 2016, at which point natural gas-fired generation will be 10 percent higher than in AEO2012. In 2035, it is projected to still be 9 percent higher than 2012 predictions.

EPA Regulations Cause Coal Production to Dip in Early Years

As forecasted in previous reports, the implementation of the Environmental Protection Agency’s Clean Air Interstate Rule (CAIR) and Mercury and Air Toxics Standards (MATS) will drive coal-fired generation down, but their effects will mostly be evident at the beginning of the time period discussed in EIA’s report. The report assumes the enactment of CAIR given a federal court ruling this summer that vacated EPA’s Cross-State Air Pollution Rule. “The lower natural gas prices in the early years of the AEO2013 Reference case result in switching from coal to natural gas-fired generation, more than offsetting any increase in coal-fired generation that might have occurred in the absence of CSAPR,” the report states. “AEO2013 continues to model the implementation of MATS, although the implementation date is assumed to move from 2015 to 2016 due to the large number of plants requesting extensions to comply.”

The growth rate for CO2 emissions continues to decrease each year, despite coal’s projected dominance in the energy sector, the report states. In the AEO2006, total energy-related CO2 emission predictions for 2030 were 8,114 million metric tons, with 40 percent of that comprised by coal. The AEO2010 projected 6,176 million metric tons in 2030, with 37 percent coming from coal, and the AEO2013 2030 predictions have fallen to 5,523 million metric with 34 percent coming from coal. “The change reflects both market and policy factors, including the adoption of tighter economy fuel standards, the implementation of efficiency standards, and a continued shift to less carbon-intensive fuels,” the report states.