Coal to reclaim top generation spot — at least temporarily

December 6, 2016
Shale Play

By CASEY JUNKINS

Shale Play

WHEELING, W.Va. - Amid President-elect Donald Trump's promises to help get out-of-work miners back on the job, coal will likely reclaim its position as the fuel generating the most electricity wattage in December, U.S. Energy Information administration estimates show.

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Along with the rejuvenated optimism for the coal industry, Sen. Shelley Moore Capito, R-W.Va., is introducing the Creating Opportunities for Rural Economies Act, which she believes will spur an economic renaissance in some of the most distressed areas of Appalachia.

"West Virginia and other states facing severe job losses in the coal industry are in dire need of new economic investment," Capito said. "Our coal communities have lost thousands of jobs due to over regulation and increased competition.

"Yet, coal is and must remain a part of our energy mix to meet the demands of powering the nation. While we continue to fight for critical energy jobs, we must also look for opportunities to diversify and grow the state's economy," she added.

Due to both cheap natural gas and stringent Environmental Protection Agency regulations, demand for coal to generate electricity fell steadily in recent years. Data from the EIA show natural gas initially surpassed coal in generating electricity in April 2015, with coal continuing to lose ground to natural gas this year. During the first six months of 2016, natural gas supplied 36 percent of total U.S. electricity generation compared with 31 percent for coal.

However, the EIA now estimates coal will surpass natural gas as the most common electricity generating fuel for at least December, January and February, largely due to "expected temperatures and market conditions."

According to the administration, the cost of generating a megawatt-hour of electricity with natural gas bottomed out at $16 in March.

At that time, a 1,000 cubic-foot unit of natural gas (Mcf) sold for about $2.40 on the New York Mercantile Exchange.

Conversely, the cost of producing that the same megawatt-hour of electricity with coal has averaged between $21 and $23 during the last two years. As the price of natural gas has steadily recovered throughout 2016, the economics of generating with coal have improved, the EIA states.

Until at least as late as 2008, coal supplied about 50 percent of U.S. electricity generation. However, the EIA cites significant shale natural gas production since 2009 as a primary reason that coal no longer holds such a commanding cost advantage.

Amid EPA regulations such as the Clean Power Plan and the Mercury and Air Toxics Standards, American Electric Power and other generators are beginning to look beyond coal. AEP turned out the lights on 5,535 megawatts of coal-fired power in Appalachia in June 2015, including the former 630-megawatt Kammer Plant in Marshall County.

Furthermore, AEP plans to transition its portion of the Cardinal Plant in Jefferson County to run on natural gas no later than the year 2030, while some generators in Coshocton County will also end coal usage.

Capito believes her legislation will help reinvigorate West Virginia and other areas impacted by the downturn in the coal industry.

She said the act would set aside about $175 million for investments in 12 states that contain counties with significant coal job loss between 2012 and 2015 according to the Mine Safety and Health Administration. These states include Alabama, Colorado, Kentucky, Indiana, Illinois, New Mexico, Ohio, Pennsylvania, Texas, Utah, Virginia and West Virginia.

"The disparity between West Virginia and our neighbors is quite stark. Yet, many of these rural communities have shared the devastation that's resulted from a major downturn in the coal industry," she said.

"Coal communities have powered U.S. economic growth for generations, providing the nation with affordable, reliable energy. But as the nation has transitioned to an all-of-the-above energy policy, much of rural America has been left behind and suffered major job loss."