Surviving U.S. power plants will help keep coal demand steady through 2016

If you thought that a record loss of U.S. coal-fired power generation means less of the climate-changing fuel will be burned, think again.

Power plants with 23 gigawatts of coal-burning capacity will close this year as utilities strive to meet U.S. Environmental Protection Agency limits on mercury and other air toxins, according to Bloomberg New Energy Finance. The retirements are the most in a single year, according to the U.S. Energy Information Administration.

Still, America will use 773 million tons of coal in 2016, the same as this year, as plants that survive the regulatory shakeout use more of the fuel, the EIA said in its Short-Term Energy Outlook Tuesday.

A “popular misconception” is that coal has relinquished its title as the primary source of electricity, said Ted O’Brien, chief executive officer of Doyle Trading Consultants, a Grand Junction, Colorado-based analytical firm. “One of the biggest things that flies under the radar is the coal plants that survive,” run continuously.

Gas at or below $3 per million British thermal units for most of 2015 has helped it top coal as the primary fuel for power generation for three months this year. Cheap gas and tighter environmental regulations led coal use to plummet 9.2 percent from 2014 to 2015. Coal use reached a record 1.05 billion tons in 2007.

When burned, coal emits almost twice as much carbon dioxide, a pollutant blamed for global warming, as gas, according to EIA. Prices for coal used in power generation are expected to be little changed in 2016 from 2015, according to the EIA.

Stable Demand

The cleaner-burning fuel may average $3.09 in 2016, about 12 percent more than the forecast for this year on higher demand from the fertilizer and chemicals industries. That will make coal more attractive to power producers. Gas averaged $4.52 in 2014.

“Higher forecast natural gas prices in 2016 are expected to contribute to higher utilization rates among the remaining coal-fired power plants, which partially offsets the effect of coal-plant retirements,” the EIA said.

Coal will account for 34 percent of power consumption in 2016, little changed from this year, compared with 31 percent for gas, EIA forecasts.

“You’ve got this big wave of retirements that you don’t get for the rest of the decade,” James Stevenson, director of North American Coal at IHS Inc. in Houston, said by phone on Nov. 11. “That means after this, coal demand is pretty stable.”•

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