Fereidoon P. Sioshansi
Editor & Publisher, EEnergy Informer
(Walnut Creek, California)
Coal: Falling Out of Favor in the USA
(Reprinted from EEnergy Informer, March 2012, Vol. 22, No 3, with permission.)
Fereidoon P. Sioshansi, PhD
Editor and Publisher, EEnergy Informer
1925 Nero Court
Walnut Creek, CA 94598, USA
It should come as no surprise that coal’s fortunes within the OECD countries are on the decline – to be followed, eventually, in developing countries. Recent projections by BP, ExxonMobil and the International Energy Agency (IEA) are consistent in showing that coal’s use has already peaked in rich countries and its consumption globally will peak somewhere in the 2020-30 time frame, gradually declining thereafter (Fig 1).
In January 2012, the Energy Information Administration (EIA), in its latest version of the Annual Energy Outlook 2012, shows how fast the decline is likely to be in the US, which has traditionally relied on coal for roughly half of its electricity generation.
Under its reference case, which assumes no major policy changes, not even the recent restrictions imposed by the Environmental Protection Agency (EPA), from the status quo, EIA reckons electricity consumption in the US will grow from 3,879 billion kWh in 2010 to 4,775 billion kWh in 2035, an average annual rate of 0.8%. Assuming more stringent appliance standards, building codes and higher energy efficiency spending will dampen this growth – potentially flattening it – or conceivably decreasing the overall consumption level as has been suggested by the Institute for Electric Efficiency (IEE), as shown in Fig 2.
The real surprise, to the extent that there are any, is the rather dramatic demise of coal in the US over a relatively short period. The EIA says the combination of “slow growth in electricity demand, competitively priced natural gas, programs encouraging renewable fuel use, and the implementation of new environmental rules” will result in significant decline in use of coal going forward, from a historic high of 50+% to 45% in 2010 and 39% by 2035 (See Fig. 3).
That may not seem like a lot but for an economy as large as the US, it is simply stunning, and happening at a stunningly rapid pace. Adding other EPA restrictions proposed and pending may make it even worse for coal.
Not surprisingly, the energy-related component of US CO2 emissions are projected to be virtually flat through 2035, and lower than their 2005 peak. This despite the assumed increase in total generation – a net projected gain of 896 billion kWh by 2035.
The EIA projects total US coal-fired generation capacity to fall from 318 GW in 2010 to 301 GW in 2035. It is a matter of the total pie growing while coal stays put. The relative loss of coal’s market share is picked up by natural gas and renewables, both of which are projected to play a more prominent role by 2035.
Nuclear generation, which has held steady at roughly 20% of total generation, is projected to drop to around 18% – that simply confirms that not many more reactors are expected to be built between now and 2035.
EIA reckons nuclear capacity will increase from 101 GW in 2010 to a high of 115 GW in 2025, after which a few retirements result in a decline to 112 GW by 2035. Nuclear generation is projected to grow marginally to 894 billion kWh in 2035 from 807 in 2010.
The US nuclear picture is not particularly rosy. Roughly 10 GW of new nuclear is assumed to be added by 2035 plus an increase of 7 GW from uprates or improvements at existing units while 6 GW is expected to retire. China, by comparison, is projected to add 200 GW of new nuclear capacity by 2030.
Non-hydro renewables will account for 33% of overall growth in electricity generation from 2010 to 2035, assuming continued federal tax credits and state-level policies, such as renewable portfolio standards (RPS). The fate of federal tax credits, however, cannot be assured given the current US fiscal problems.
There are other promising signs, unless your business model is to sell more. For example, total US energy consumption will barely reach its pre-recession peak, and grow modestly after that, certainly by historical standards. Use of oil and other liquid fuels, excluding liquid bio-fuels, will continue to decline, albeit at an imperceptible rate. (See Fig. 4.)
The explanation? Higher oil prices, steady decline in energy intensity – which includes changes in the composition of the US economy away from energy-intensive industries. Per capita energy consumption is projected to keep on falling, consistent with trends across all OECD countries.
Other signs of a maturing economy abound in EIA’s latest projections, even if they are not necessarily highlighted or explained. One look at Fig. 5 is worth more than a thousand words. The seemingly endless thirst for oil in the fabulously inefficient US transportation sector shows signs of approaching a plateau – no doubt affected by high oil and gasoline prices, with little prospect of easing.
Growth of demand in the industrial sector also appears to become less robust towards the end of the projection period, while energy demand in residential sector remains virtually flat and barely growing in the commercial sector.
The percentage of imported oil, a measure of the elusive US energy independence since the 1970s, as high as 60% in 2005, has fallen to 49% and is projected to drop to 36% by 2035 (Fig. 6). Who would have thought that would ever happen?
In contrast, Europe will remain heavily dependent on oil imports while China’s dependence will increase significantly. There are clear economic as well as energy security issues in these trends.
And let’s not forget that these significant changes are projected to happen under the status quo scenario – i.e., no major energy or environmental policy or regulatory changes, no carbon taxes, no further increases in car mileage standards, building codes, appliance or lighting improvements – other than what is already on the books. If, for example, the price of oil were to surge, it will further reduce demand for liquid fuels within the US.
Needless to say, a lot more can – and there are many who believe – should be done. Perhaps we have to wait until the US economy comes out of the recession before an intelligent debate about what can, or should, be done can begin.