Update on U.S. Coal Production and Coal-Fired Electric Generation

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated, Houston, Texas). Recent industry forecasts paint a bright short-term future for U.S. coal production. The National Mining Association recently forecast that U.S. coal production is expected to total 1,115 million tons in 2004. The Energy Information Agency predicts that U.S. coal production will increase to 1,137 million short tons in 2005, compared to 1,117 million tons in 1998, and an all time high of 1,127 million tons in 2001. These figures indicate that annual coal production is essentially static during the past few years with periods of increases (2001) and decreases (2003). However, there is considerable change taking place in coal production within geographic areas. It can be seen that Appalachian and Interior production are slowly declining while western production is growing.

Using these same baseline years, production by area is shown in the graph to the right. Click for larger view.

There are several factors contributing to the growth of Western coal production. Production costs of coal in the Powder River Basin are in the $6 to $7 per ton range. Western coal deposits have very little over burden and mining is done with huge strip shovels. Another advantage of western coal is its low sulfur content, an average of 1.6% in comparison for 2-3% in Interior and Appalachian coal. Customers of western coal can more easily meet environmental emission standards with low sulfur coal. A further characteristic of Western coal is its low heat (BTU) content. This is a disadvantage to customers, but an advantage to the producer in that more coal is burned to provide the same amount of electricity in comparison with high-BTU coal.

The Western coal producers have the advantage of economy of scale. The largest western coal mine is Peabody Energy's North Antelope/Rochelle mine in Gillette, Wyoming, which shipped a record 80.1 million tons of coal in 2003. In comparison, the largest mine east of the Mississippi is currently less than ten million tons a year. Delivery of Western coal is done in full trainloads, which allows delivered cost of the coal to be below that of Interior and Appalachian coals (also taking into account the low production costs). The Energy Information Agency reports that the average delivered price for all coal deliveries to electric utilities in 2002 was $24.84 per ton. Figures show, for instance, that at an Illinois power plant that uses both Illinois and Western coal, that the price was $25.66 for Illinois coal and $19.35 for Western coal.

The Interior and Appalachian coal producers are not standing still in efforts to compete with Western coal. Longwall mining technology has been adopted to replace pillar and post mining. Consol Energy recently spent $180 million to add a second longwall mining system, and new coal preparation plant at its McElroy mine (Plant 1042580). The project will expand capacity from seven million tons a year up to twelve million tons a year. Also, development of mine mouth power plants is an attractive alternative to reduce transportation costs. In a further effort to reduce transportation cost, states are being petitioned to allow greater weights of coal to be carried by trucks on state highways.

Industrialinfo.com is currently tracking 287 major operational coal mines and/or preparation plants in the U.S. Most of these mines produce over 500,000 tons of coal annually and represent about 85% of the U.S. coal production. It's estimated that there are about 600 smaller mines, which produce the remaining 15%. Twenty-six mines have closed in the last two years. Meanwhile, only seven new mines started up operations, supporting the fact that the number of mines is shrinking in the U.S. The existing mines are becoming more productive, producing more coal with fewer operations.

Almost 92 percent of all coal consumed in the United States is in the electric power sector, the driving force for all coal consumption. Other uses are for metallurgical coke plants, industrial plants such as cement kilns, cogeneration plants, and exports.

Generation of electricity by type of production is summarized in the table above. The same base years are used as in the table for coal production.

It can be seen in the above table that about one half of electric generation is accounted for by coal-fired plants. Also the chart shows that while natural gas fired plants account for 14% of electric production in 1998, this will grow to 17% in 2005. Looking back to 1991, only 381 million megawatt hours were generated by natural gas, in comparison with 683 million megawatts expected in 2005. This is a growth of 80% in 14 years.

Natural gas fired plants have accounted for nearly all electric capacity growth in recent years, either combined cycle or single cycle. This is mainly due to the fact that these gas turbine plants cost less than half to build than coal-fired plants for the same generating capacity. Moreover, it is not economical to build a coal-fired plant with a capacity less than 500 MW, whereas small gas turbine plants can be economically built in much smaller sizes to fit market conditions. During much of the past 15 years natural gas was priced at $2 to $3 per million cubic feet, which led to further attractive economics. This is in comparison to $5 to $7 per mm cubic feet at present.

The rising cost of natural gas has caused electric utilities to take a second look at building coal-fired plants. At the present time, Industrialinfo.com is tracking fifty-six new coal-fired power plants that are in various stages of development and scheduled to come online between 2005 & 2012.

Industrialinfo.com can provide additional current information on coal mining and coal-fired electricity production. Immediately available on these subjects (selective list) are:

* Complete list of about 287 coal mines and over 500 coal-fired power plants, including operating personnel

* Description of capital projects by coal mining companies, including project managers

* Description of coal-fired power plants now being built, or being planned.

* 2004 U.S. Coal-Fired Power Plants and Coal Mines wallmap. Contact Industrialinfo.com's Member Center at 1-800-762-3361 and pre-order your copy today!