U.S. coal production will see a sustained boost over the next two years due to increased use at power plants and a rise in exports, according to the federal government`s latest energy projections.

"U.S. coal production is getting a boost in 2017 from higher coal exports and more coal-fired electricity generation," said Howard Gruenspecht, the Energy Information Administration acting administrator, as he released the agency`s latest short-term energy outlook for the month of August on Tuesday.

"Coal-fired power plants are expected to be the leading source of U.S. electricity for the next two years, as the cost of coal is expected to rise by less than the cost of natural gas and renewable generation continues to grow," he added.

The latest outlook showed coal`s power plant output will rise from comprising 30 percent of the nation`s electricity output last year to nearly 32 percent in the second half of 2017.

That could put coal ahead of natural gas power plants that have dominated the market over coal in the last few years.

The only problem is that electricity demand is expected to drop going for the third year in a row, according to the report. But for now, it looks like natural gas power plants will take the biggest hit from waning demand, mainly because natural gas prices are rising and milder temperatures will reduce the need for electric cooling in the fall compared to a year ago.

"U.S. electricity generation is expected to decline in 2017 for the third year in row, as forecast milder temperatures in the third quarter compared to the same period a year earlier reduces electric cooling demand," said Gruenspecht.

Nevertheless, Gruenspecht is confident that coal production will continue to remain high even with electricity demand dropping. Strong demand for U.S. coal exports overseas has a lot to do with that. Coal exports rose 60 percent in the first five months of 2017.

The rate of exports is supposed to "slow in the coming months," the agency said. But it will still be 17 percent higher than it was in 2016.

"The increase in coal exports contributes to an expected 58 [million short tons (MMst)] (8%) increase in coal production in 2017," according to the EIA short-term outlook. "In 2018, coal production is forecast to increase by 10 MMst," or 1 percent.

Natural gas will also benefit from increased demand for exports over the next two years, the report showed.

"U.S. natural gas production growth is expected to accelerate over the next two years with growth rates over 2% in 2017 and over 5.5% in 2018," said Gruenspecht. "Forecast record natural gas production in 2018 coincides with an expected rise in electricity generation from natural-gas fired power plants and a 23% increase in U.S. natural gas exports."

Meanwhile, renewable energy is also expected to see significant gains. "U.S. wind power, which provided 6% of total U.S. electricity in 2016, is expected to have a 9% generating capacity increase this year and another 16% in 2018," said Gruenspecht.

"Solar power, which provided 1% of total U.S. electric generation in 2016, is expected to see the largest rate of growth in utility-scale electricity generating capacity of any energy source, increasing 36% this year and more than 10% in 2018," he said.

 

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