Annual Energy Outlook 2006 with Projections to 2030 - Usinfo.org

Coal Supply and DemandMarket Share of Western CoalContinues To IncreaseFigure 97. Coal production by region, 1970-2030(million short tons)2,0001,5001,000500HistoryProjections01970 1985 1995 2004 2015 2030TotalWestAppalachiaInteriorU.S. coal production has remained near 1,100 milliontons annually since 1996. In the AEO2006 referencecase, increasing coal use for electricity generation atexisting plants and construction of a few new coalfiredplants lead to annual production increases thataverage 1.1 percent per year from 2004 to 2015, whentotal production is 1,272 million tons. The growth incoal production is even stronger thereafter, averaging2.0 percent per year from 2015 to 2030, as substantialamounts of new coal-fired generating capacity areadded, and several CTL plants are brought on line.Western coal production, which has grown steadilysince 1970, continues to increase through 2030(Figure 97), especially in the Powder River Basin,where vast reserves are contained in thick seamsaccessible to surface mining. Easing of rail transportationbottlenecks will be needed for producers in theWest to exploit the market opportunities presentedby slow growth in Appalachian coal production and bydemand for coal at new power plants built to serveelectricity markets in the Southwest and California.Appalachian coal production remains nearly flat inthe reference case. Although producers in CentralAppalachia are well situated geographically to supplycoal to new generating capacity in the Southeast, theAppalachian basin has been mined extensively, andproduction costs have been increasing more rapidlythan in other regions. The Eastern Interior coal basin(Illinois, Indiana, and western Kentucky), with extensivereserves of mid- and high-sulfur bituminouscoals, does benefit from the new builds of coal-firedgenerating capacity in the Southeast.More Eastern Power PlantsAre Expected To Use Western CoalFigure 98. Distribution of domestic coal by demandand supply region, 2003 and 2030 (million shorttons)Supply regionAppalachiaInteriorWestTotalSupply regionAppalachiaInteriorWestTotalEastern demand regionWestern demand region0 200 400 600 800 1,00020032030In the reference case, low-cost Western coal continuesto gain market share east of the Mississippi River andremains the dominant supplier in markets west of theMississippi River (Figure 98). Use of low-sulfur Westerncoal continues to increase through 2030, eventhough 141 gigawatts of existing coal-fired capacity isretrofitted with flue gas desulfurization equipmentand another 174 gigawatts of new environmentallycompliant coal-fired capacity is built. Even in theabsence of sulfur compliance costs, Western coal isthe lowest cost fuel option for electricity generation inmany areas of the country. As a result, each year typicallysees more coal-fired plants switching to Westerncoal, particularly from the Powder River Basin. In2004, approximately 20 plants, many located east ofthe Mississippi River, used Powder River Basin coalfor the first time.Although two new pieces of environmental legislationenacted in 2005, CAIR and CAMR, will increase thecost of coal-fired generation, they have only minorimpacts on overall coal use in the electric power sectoror regional coal production patterns. As a result of thestricter caps on SO 2 emissions in CAIR, allowanceprices increase substantially, virtually eliminating by2030 the use of medium- and high-sulfur coals (containingmore than 0.6 pounds sulfur per million Btu)at power plants not equipped with scrubbers. In 2004,medium- and high-sulfur coals accounted for about 40percent of the 638 million tons of coal consumed atgenerating units without scrubbers [93]. In 2030,coal-fired power plants without scrubbers consumeonly 233 million tons.98 Energy Information Administration / Annual Energy Outlook 2006