Dive Brief:
- U.S. coal production has reached its lowest levels since 1987 and absent increased demand this summer could be heading lower, according to an analyst for the U.S. Energy Information Administration.
- According to EIA's Short Term Energy Outlook, lower coal demand will contribute to decline of about 75 million short tons for 2015 and levels will remain flat next year.
- Moderate weather and low gas prices are to blame, and neither seems likely to change in the near-term; the energy agency is predicting coal production will decline in all three producing regions this year.
Dive Insight:
Coal production is declining in all regions in reaction to decreased demand, and stockpiles are building up with utilities. According to data from the EIA, electric power sector stockpiles increased to 168 MMst in April, almost 40 MMst higher than last year.
A coal analyst for the EIA, Elias Johnson, told Platts that if demand doesn't return soon “because of a warm summer, we could see consumption go even lower and that could lead to production going down.
Johnson co-authored EIA's most recent Short-Term Energy Outlook.
Production in all three coal-producing regions is expected to decline relative to 2014, though they are not uniform reductions. Appalachian production will decline more than 12% this year, EIA predicts, while Western coal production will decline 6.9% and Interior production just 2.7%.
Retirements related to the government's Mercury and Air Toxics Standards, which was recently struck down, had less of an impact this year but will tick upwards next year.
“The full effect of the coal plant retirements on capacity resulting from MATS, which the Supreme Court recently sent back to the Court of Appeals for the D.C. Circuit for further review, will occur in 2016,” according to the EIA's report. “However, projected rising electricity demand and higher natural gas prices are expected to contribute to higher utilization rates among the remaining coal-fired fleet.”
EIA said that even with continued MATS implementation, coal consumption in the electric power sector is forecast to increase 1.3% in 2016.