Coal Tattoo

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There’s a new report out today from the U.S. Government Accountability Office (thanks to the State Journal’s Taylor Kuykendall for tweeting his story about it) that confirms things we already knew about the future of Appalachian coal:

Retirements of older units, retrofits of existing units with pollution controls, and the construction of some new coal-fueled units are expected to significantly change the coal-fueled electricity generating fleet, making it capable of emitting lower levels of pollutants than the current fleet but reducing its future electricity generating capacity …

According to stakeholders and three long-term forecasts GAO reviewed, coal is generally expected to remain a key fuel source for U.S. electricity generation in the future, but coal’s share as a source of electricity may continue to decline. For example, in its forecast based on current policies, the Energy Information Administration (EIA) forecasts that the amount of electricity generated using coal is expected to remain relatively constant through 2035, but it forecasts that the share of coal-fueled electricity generation will decline from 42 percent in 2011 to 38 percent in 2035.

The report explains:

Two broad trends—recent environmental regulations and changing market conditions—are affecting power companies’ decisions related to coal-fueled electricity generating units.

Regarding environmental regulations, the GAO says:

For example, the units companies plan to retire emitted an average of twice as much sulfur dioxide per unit of fuel used in 2011 as units that companies do not plan to retire …

… Regarding retrofits, the coal-fueled generating fleet may also become less polluting in the future as power companies install controls on many remaining units. Regarding new coal-fueled units, these are likely to be less polluting as they must incorporate advanced technologies to reduce emissions of regulated pollutants. Coal-fueled capacity may decline in the future as less capacity is expected to be built than is expected to retire.

As far as other market factors, the GAO reported:

… Important market drivers have been weighing on the viability of coal-fueled electricity generating units. Key among these has been the recent decrease in the price of natural gas, which has made it more attractive for power companies to build new gas-fueled electricity generating units and to utilize existing units more. In addition, slow expected growth in demand for electricity in some areas has decreased the need for new generating units. Power companies may weigh the costs of any needed investments compared with the benefits of continuing to generate electricity at a particular unit. When the costs outweigh the benefits, a power company may decide to retire a unit rather than continue to operate the unit or install new pollution control equipment.

More specific to Appalachia, the GAO report says:

The changes in coal use may also result in shifts between major coal-producing areas in the United States …  coal production from Appalachia declines, and production from the Western and Interior regions increases through 2035  … According to EIA, in 2010, 31 percent of coal was produced in Appalachia, 14 percent was produced in the Interior region of the United States, and 55 percent was produced in the West … EIA’s reference scenario projects that these production figures will change by 2035, with 24 percent of coal produced in Appalachia, 16 percent produced in the Interior region, and 60 percent produced in the Western region.

Within Appalachia, EIA expects declines to come from the central region, which includes southern West Virginia, Virginia, eastern Kentucky, and northern Tennessee. This expected shift in coal production from the eastern United States to the West represents an industry trend ongoing since the early 1990s that is influenced by each region’s unique set of complex geological, mining, and transportation characteristics. For example, some stakeholders told us that demand for western coal has increased primarily because it is low in sulfur content, and the region’s coal reserves can be mined relatively inexpensively compared with Appalachian and Interior coal reserves, which are often more deeply underground and costlier to access. Available information suggests that these benefits have made western coal economically competitive with coal from the Appalachian and Interior regions, despite western coal’s lower heating value and higher cost to transport to some coal-fueled generating units.