Executive Briefings

New President, Same Story: Coal Is Losing Out to Natural Gas

Just a day after federal regulators nixed a major Trump administration proposal to shore up the struggling coal industry, the nation’s top energy forecaster predicted continuing, slow declines in U.S. coal production and in the burning of coal for electricity in 2018 and 2019, thanks to cheap natural gas and coal plant retirements.

The U.S. Energy Information Administration’s monthly short-term energy outlook, the first to include predictions for 2019, projected that coal production will decline from 773 million short tons last year to 759 million in 2018 and 741 million in 2019. The burning of coal for electricity — its chief use in the United States — also will decline steadily.

By 2019, the report forecasts, natural gas will provide 34 percent of U.S. electricity and coal 28 percent — leaving gas as the top fuel for U.S. electricity generation, a role held by coal as recently as 2015. In 2003, coal provided 51 percent of U.S. electricity and natural gas just 17 percent, which gives some sense of the magnitude and the rapidity of the change.

The report offers the latest evidence that while the Trump administration’s focus on energy production may advantage some fossil fuels — the report also predicts a record U.S. crude oil production of 10.3 million barrels a day in 2018, followed by 10.8 million in 2019 — it’s proving more difficult to change the trajectory for coal. That’s because it’s a carbon-intensive fuel that faces not only adverse policies but also market forces, such as the booming production of natural gas thanks to fracking.

“I think what the administration is not realizing is it’s not really regulation that’s killing coal; it’s cheap natural gas,” said Christopher Knittel, a professor of applied economics at MIT, in response to the EIA findings. He said studies have shown that as much as 70 percent or 80 percent of the decline in coal is the result of competition from cheaply priced natural gas.

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The U.S. Energy Information Administration’s monthly short-term energy outlook, the first to include predictions for 2019, projected that coal production will decline from 773 million short tons last year to 759 million in 2018 and 741 million in 2019. The burning of coal for electricity — its chief use in the United States — also will decline steadily.

By 2019, the report forecasts, natural gas will provide 34 percent of U.S. electricity and coal 28 percent — leaving gas as the top fuel for U.S. electricity generation, a role held by coal as recently as 2015. In 2003, coal provided 51 percent of U.S. electricity and natural gas just 17 percent, which gives some sense of the magnitude and the rapidity of the change.

The report offers the latest evidence that while the Trump administration’s focus on energy production may advantage some fossil fuels — the report also predicts a record U.S. crude oil production of 10.3 million barrels a day in 2018, followed by 10.8 million in 2019 — it’s proving more difficult to change the trajectory for coal. That’s because it’s a carbon-intensive fuel that faces not only adverse policies but also market forces, such as the booming production of natural gas thanks to fracking.

“I think what the administration is not realizing is it’s not really regulation that’s killing coal; it’s cheap natural gas,” said Christopher Knittel, a professor of applied economics at MIT, in response to the EIA findings. He said studies have shown that as much as 70 percent or 80 percent of the decline in coal is the result of competition from cheaply priced natural gas.

Read Full Article