Saturday, May 02, 2009

history and possible future of american coal

Uppsala University | Future coal production will not be entirely determined by what is geologically available, but rather by the fraction of that amount that is practically recoverable. Society demands energy, not energy from coal. This means if this energy can be obtained less costly and more practically from other energy sources, potentially nuclear power or wind, those will be favored.

Increased coal prices do not necessarily lead to increased production, increased reserves, and the transformation of resources into reserves. The price development and feasibility of other energy sources must also be considered, since it is the energy that is demanded. Increased coal prices might therefore also be a burden for the industry as investors may move towards cheaper energy sources. Increased concern around CO2 emissions from coal is likely to decrease coal’s price competitiveness, because of the potential from CO2-taxes and increased costs of carbon-capture and storage (CCS). A closer discussion of this is beyond the scope of this study, but has been performed by others (Kavouridis and Koukouzas, 2008).

There is a common belief in some form of self-regulating coal supply cycle (Thielemann et al., 2007), where increased prices and human ingenuity will automatically lead to reserve growth and higher production. Our results suggest that this theory should be reevaluated. The historical evolution of U.S. coal reserves shows a trend towards reduced recoverable reserves. There are a number of different factors causing this, ranging from land-use restrictions to changes in definitions. The historical trend towards reduced recoverable amounts is clear and likely to continue in to the future, with even stricter regulations imposed by increased environmental concern.

A steady decline in the heating value of U.S. coal has also been observed and this can be seen as a sign of the increased depletion and the movement to less optimal seams. This trend is likely to continue in to the future, justified by increased depletion of high energy coals in Appalachia and an overall increased dependence on subbituminous western coals. By 2030 the average calorific value could be slightly above 20 MJ/kg. This also implies that the coal production forecast in the International Energy Outlook (2007) would require the production volumes in 2030 be 70% higher than today. Whether this can be achieved is very questionable as shown by the historical production trends and the depleting reserves in many key producing states.

Using the recoverable reserves as an estimate of what is realistically available for production will yield a coal output of around 1400 Mt by 2030 through the rest of the century. This would require a massive development of the coal reserves in Montana, as they are the largest undeveloped reserves remaining for future exploitation. Unless this happens, US coal production could reach a peak around 2030. The demonstrated reserve base allows a significantly higher production volume to be reached but this should be regarded as unrealistic, as it completely ignores regulations and restrictions. The restrictions have proved to be a key factor for the amount of coal available for production and ignoring restrictions when creating possible future scenarios is a fundamentally flawed approach.

To summarize the geologic amounts of coal are of much less importance to future production than the practically recoverable volumes. The geological coal supply might be vast, but the important question is how large the share that can be extracted under present restrictions are and how those restrictions will develop in the future. Production limitations might therefore appear much sooner than previously expected.