Coal: More upside than down
February 28, 2014 | By
Barbara Vergetis Lundin
ICF International is forecasting an end to the decline in U.S. coal production, and contends that 2014 will be the lowest point for producers, and that both domestic and foreign demand will pick up steam to stabilize the business.
ICF is also forecasting that demand over the next decade should average ~1,000 million short tons per year. Two of the biggest drivers of coal production contraction -- low natural gas prices driving coal-to-gas switching and EPA CO2 emissions regulations -- are less of a threat to the coal sector moving forward. Domestic production over the next decade should average about 1 billion short tons per year, ICF predicts. ICF says it sees "more upside than downside" to its forecast in the out years. For example, U.S. coal from the Pacific Basin can compete in international markets and provide a secure source of fuel for foreign generators and utilities. New and planned expansions of coal export terminals in the Pacific Northwest and Gulf Coast (projected primarily to export U.S. thermal coal) total 197.7 million short tons per year of export capacity, split about ¾ export capacity in the Pacific Northwest and ¼ export capacity in the Gulf Coast. If all of the Pacific Northwest and Gulf Coast export terminals are built or expanded, a plausible scenario according to ICF, annual coal export capacity has the potential to reach more than 320 million short tons. Permitting and foreign competition, however, will likely limit the maximum export expansion level, ICF expects. Record 2012 exports (thermal and metallurgical coal) plus potential coal export terminals totals 323.4 million short tons per year of export capacity. Yearly coal exports in the next decade will likely be less than 323.4 million tons because of international competition as well as infrastructure permitting, according to ICF. Downside risk to coal consumption from persistently low natural gas prices is low, ICF contends, because if gas generation displaces existing coal generators, it will be limited to brief episodes of low prices caused by unusually mild winter weather. Further, ICF expects EPA NSPS emissions standards to be set in a way that provides sufficient flexibility for adoption by states -- limiting the number of new coal plant retirements. Any affects will be limited to modest, near-term impacts, with sufficient state-level regulation flexibility, ICF said. For more:
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