Newswise — MORGANTOWN, W.Va.—Despite recent export-driven gains, the state’s coal output is expected to plateau during the next two years before seeing persistent production declines over the next two decades, according to the latest long-term coal forecast from West Virginia University.

WVU’s Bureau of Business and Economic Research released “Coal Production in West Virginia: 2018-2040” on Thursday (Aug. 16). The study, produced within the College of Business and Economics, forecasts that coal production will drop by about 5 million tons in the next two years, and fall back below the 80-million-ton mark by the mid-2020s.

Brian Lego, co-author of the study and a research assistant professor at WVU, said, “Output is expected to fall by more than 12 million short tons between 2020 and 2030, with an additional loss of 7 million tons by 2040. Domestic shipments of thermal coal are expected to wane over the next decade as aging coal-fired generators in the Eastern U.S. face a high likelihood of retirement amid rising maintenance costs and increased competition from natural gas and, in some regions, renewables.”

After an expected production level of approximately 91 million short tons in 2018, Lego said, overall state output is expected to contract about 3 percent per year in 2019 and 2020, leaving production at just over 85 million tons by the end of the decade.

“Moderating export demand will likely drive much of the anticipated drop in production during the next couple of years, but the domestic power market remains a negative as several gigawatts worth of coal-fired generating capacity that sources coal from West Virginia mines will either be retired or converted (partially or totally) to other fuel sources,” he said.

West Virginia’s coal markets have historically been divided into northern and southern regions, as they produce different types of coal that depend on different types of customer demand. The report indicated that the southern region would initially fare better during the outlook period, before recording sharper declines in output largely as a result of resource depletion.

“Both of the state’s producing regions will be hurt by weakening domestic demand, but Northern West Virginia faces greater market risk since most of the region’s coal is consumed by U.S. power plants. Southern West Virginia’s production should be buoyed to some extent by export demand, but output is expected to trend lower during the outlook as a growing portion of the region’s reserves become too expensive to recover,” Lego said.

In addition to the baseline forecast, the report also analyzes the impacts on future coal production created by: changes in expectations for natural gas use in the domestic industrial and electric power sectors as well as internationally via natural gas exports; the implementation of a national tax on carbon dioxide emissions; and higher or lower coal export demand.

“In a scenario characterized by stronger natural gas use in both domestic and international markets, coal output would slip below 80 million short tons within a couple of years and sink below 70 million short tons by the mid-2020s,” the study said. By contrast, should natural gas utilization be much weaker than expected going forward, coal production in this scenario would decline overall but by a smaller amount compared to the baseline forecast. Northern West Virginia’s coal production exhibits the largest sensitivity to future changes in natural gas utilization.

The report includes a scenario that examines the impact of a $15 per ton tax assessed on CO2 emissions from industrial facilities and power plants. This policy change would lead to a drop of an estimated 20 million short tons in statewide coal production between 2023 and 2030. Output is expected to decline an additional 10 million short tons over the remaining outlook period, leaving West Virginia coal production in 2040 at 43 million short tons, or just over half of 2016 levels.

“The impacts of stronger and weaker export demand on statewide coal production were also assessed. For example, higher-than-expected global demand for coal would cause mined tonnage to remain around 90 million short tons through 2030 before falling to 79 million tons by the end of the (next) decade,” the study read. “In an environment of appreciably weaker export demand, whether due to more aggressive reductions in coal use or some other underlying cause, production would plunge to 65 million short tons by the mid-2020s and roughly 53 million short tons by 2040.” 

The full report is available for reading and download.

 

-WVU-

 

pg/08/16/18

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