There is no denial that the stricter regulatory measures to control pollution will have an adverse impact on the unrestricted use of steam coal for power production. Having said that, coal still holds an advantageous position due to its wide availability and lower cost compared to other fossil fuels and renewable sources of energy. Importantly, the Congress resulting from the recent mid-term elections is expected to be a lot more sympathetic to the industry than it had been previously.
Per a report from World Coal Association, we currently have 860 billion tons of proven coal reserves worldwide. This means that there is enough coal to last nearly 118 years at current rates of production. In comparison to this, proven oil and gas reserves are equivalent to around 46 and 59 years, respectively, at current production levels. Proven reserves are considered economically recoverable at any given time, taking into account available mining technology and costs.
So, as per the above data, the current availability of coal outpaces the combined oil and gas proven reserves.
Per a U.S. Energy Information Administration (EIA) report, coal production in the first nine months of 2014 was 742 million short tons (MMst), down 0.4% from the year-ago period. However, EIA projects fourth-quarter U.S. production to improve and overall 2014 production to go up 1.4% in 2014 to 998 MMst. Production is further expected to increase 0.4% year over year to 1,002 MMst in 2015.
What keeps the coal industry rolling amid rising competition from other fuel sources and a stringent regulatory climate? We have tried to address these factors below.
Coal Dominates U.S. Power Generation: Coal as a major source of generating fuel dominates the utility industry. Coal is used to generate near about 40% of the electricity consumed in the U.S. Electricity generation absorbs about 93% of total U.S. coal consumption. The reason is simple: coal is by far the least expensive and most abundant fossil fuel in the country. The worst of the regulatory overhang is likely behind us as well, particularly following the mid-term elections.