Despite the fact that U.S. coal consumption has increased steadily since it became an important fuel source in the U.S. in the mid 1800s, coal consumption in the U.S. is expected to decline over the next several decades. The IEA predicts that U.S. coal consumption will fall from 697 million tonnes in 2011 to 600 million tonnes in 2017 in its Medium Term Coal Market Report. The reason for this projected decrease in U.S. coal consumption is two-fold. First, the glut of cheap, domestic natural gas has created a tough competitor for coal in the power generation sector (where approximately 90% of U.S. coal is consumed). Furthermore, new combined cycle natural gas power plants are much more efficient than tradition coal-fired generation facilities. Second, energy policy in the U.S. is pushing for cleaner fuels and decreases in greenhouse gas (GHG) emissions. This makes it difficult for coal to compete with cleaner fuels, such as natural gas. These factors have created a negative outlook for the future of the U.S. coal mining industry.
However, the U.S. coal mining industry may still have hope. While the U.S. is trying to clean up its act and decrease coal consumption, many parts of the world (most notably China and India) are drastically increasing their consumption of the relatively cheap energy source. In its Medium Term Coal Market Report, The IEA predicts that world coal consumption will nearly equal world oil consumption by 2017. They predict that coal consumption will reach 4.3 billion tonnes of oil equivalent, while petroleum consumption will reach 4.4 billion tonnes. This represents a projected 39% increase in world coal consumption by 2017. While countries like China and India continue to ramp up their coal consumption (both for industrial uses and power generation), their domestic production capacities will continue to lag behind. They will both, therefore, continue to import increasing quantities of coal. According to Platts, China currently imports most of its coal from Indonesia (33.05%) and Australia (38.08%). Only 4.24% of its coal imports are from the U.S. India’s coal imports come from similar locales, except with a larger amount coming from South Africa. However, with projected decreases U.S. coal consumption and the construction of new export facilities on the west coast, The United States will begin shipping much larger volumes of coal to Asia. The question is whether or not these increases in coal exports will be enough to offset the decreases in domestic coal consumption. The IEA predicts that they will not be enough in the short to medium term, estimating that U.S. coal production will fall to 697 million tonnes in 2017, from 771 tonnes in 2011. However, over a longer period of time U.S. coal production volumes may recover, as the U.S. Energy Information Administration (EIA) predicts in its 2012 Annual Energy Outlook (AEO). Their predictions are presented in the figure below.
The coal mining industry has long been an important one in the U.S., and its dynamics are currently shifting. Decreasing domestic consumption and increasing global consumption are presenting the industry with new challenges. Appalachian coal will become less important as reserves diminish and the eastern coal market becomes saturated. However, U.S. exports to Asia will provide western states with large coal reserves more opportunity to increase production.