Time again for your Friday Energy Facts: this week, is the historic shift from coal to natural gas in the U.S. electric power sector stalling out?
According to the latest projections from the U.S. Energy Information Administration (EIA), coal consumption in the United States electric power sector is expected to rise 52.2 million short tons (MMst) in 2013 and 9.2 MMst in 2014, eroding some of the historic declines in coal use experienced over the last two years.
U.S. coal consumption, 2011-2014 (Source: US EIA)
Total U.S. coal consumption fell by 114 MMSt in 2012, an 11.3 percent annual decline, driven by an 11.6-percent decline in coal use for electricity generation. That followed a 42.6 MMst decline in power sector coal consumption in 2011.
Low-cost natural gas was largely responsible
for the decline in power sector coal use, as natural gas-fired power plants increased their output by 217 terrawatt-hours (TWh) and coal output declined 216 TWh from 2011 to 2012.
As gas prices rebound
in 2013, some of those gains are about to be reversed.
EIA analysts “expect consumption in the electric power sector to increase over the forecast period as a result of higher electricity demand and higher natural gas prices, but remain below 900 MMst.”
In other words, projected increases in 2013 and 2014 are more than enough to take back the declines in coal consumption experienced in 2011. However, the sharp declines experienced in 2012 remain largely untouched, leaving projected coal consumption in 2014 well below 2011 levels.
In total, projected 2013 and 2014 increases in coal consumption will take back 39 percent of the cumulative declines experienced in 2011 and 2012.
In the longer term, EIA’s current business-as-usual projections indicate that natural gas’s inrodes into the electric power sector may be stalling out, with projected power sector coal consumption roughly flat by 2014.
Historic coal stockpiles mute impact on mining
Interestingly, U.S. coal production (e.g. mining) is not expected to rise anywhere near as much as consumption next year. EIA forecasts coal production will rise by only 8 MMst in 2013 and 13.6 MMst in 2014.
U.S. coal production, 2011-2014 (Source: US EIA)
The reason: the U.S. power sector now has record quantities of coal stocked up for future use.
The power sector currently has about 186 MMst of coal in stock, which is about 19% of total annual power sector coal consumption
in 2011. In other words, they have more than 2 months of coal in stock.
The increase in 2013 power sector consumption is projected to be 52.2 million short tons, so the power sector could meet that increase entirely with just 28% of their existing stocks, which would bring down stocks back into the middle of the normal historic range.
As a result, the projected increase in power sector coal consumption will have a muted effect on U.S. coal production.
U.S. power sector coal stocks, 2006-2013 (Source: US EIA)
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