NewEnergyNews: TODAY’S STUDY: COAL COSTS UP, UP, UP

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    Wednesday, November 21, 2012

    TODAY’S STUDY: COAL COSTS UP, UP, UP

    Trends in U.S. Delivered Coal Costs: 2004-2011

    Teresa Foster, William Briggs and Leslie Glustrom, July 2012 (Clean Energy Action)

    Introduction

    Since 2004, U.S. delivered coal costs have begun increasing substantially. The data and graphs in this short report are intended to help increase awareness of these recent increases in the cost of coal.

    The data used in this report come from the Energy Information Administration in the U.S. Department of Energy. Delivered coal costs are reported in the EIA’s Electric Power Monthly Table 4.10B available from http://www.eia.gov/electricity/monthly/index.cfm. Year-end data for any given year are typically found in the March or April Electric Power Monthly for the following year.

    There are some minor inconsistencies in coal costs reported in different years for the same state. For complete accuracy, please refer to the original source data for the state of interest. These inconsistencies are usually a matter of pennies and are not expected to have a significant impact on the trends shown in the graphs in this report.

    Coal costs can be reported in $/ton or in $/MMBTU. Costs reported in $/MMBTU are usually preferred as they account for differences in the heat content (i.e. BTUs—or British Thermal Units) of the coal.

    From Figure 1 on the next page, it can be seen that 2004 was a pivotal year with respect to U.S. coal costs. The cost/MMBTU for coal was falling during the 1990’s due in large part to the increased use of lower cost coal from large western surface mines with lower production costs than the older underground mines of the east. This trend began reversing around 2004 and coal costs started on an upward trend that can be tracked for the state of your choice using the data and graphs in this report.

    Coal cost for 2004 and 2011 as well as the percentage increase per year over that period by state can be found in Table 1 on pages 10 and 11. Graphs of coal costs from 2004 to 2011 for each state that uses coal can be found in alphabetical order starting on page 12. Data by state and for each year from 2004 to 2011 can be found in Appendix A starting on page 51.

    From Figure 1, it can be seen that U.S. coal costs began a steady upward trend in 2004. While the cost of any fossil fuel is the result of complex forces of supply and demand, it appears that the recent rises in the cost of coal are largely due to the following three key factors:

    • Increased Production Costs

    • Increased Transportation Costs

    • Increased Export Pressure

    Production costs for mining coal are increasing as coal companies have to move increasing amounts of dirt (and in some cases whole mountain tops) to access the coal. The easily accessible coal has already been mined and burned. Now reaching the remaining coal is becoming increasingly difficult and expensive. These increasing production costs are one factor that is driving U.S. coal costs upward.

    Transportation costs for coal are also increasing as the cost for diesel fuel that runs the trains that transport most U.S. coal is rising. These increased transportation costs are a second factor that is driving U.S. coal costs upward.

    Export pressure is another factor that can increase coal costs. Countries in Europe, South America and Asia are often willing to pay more for coal as they experience increasingly serious coal supply constraints. Export pressure is a third factor that is driving U.S. coal costs upward.

    No one can predict how the complex forces of supply and demand will affect future prices of coal, but it appears that production costs, transportation costs and export pressure will tend to drive U.S. coal costs generally upward in the coming years. Citizens and decision-makers are encouraged to begin monitoring coal costs for their state using the publicly available data from the Energy Information Administration.

    To track current coal and fuel costs for individual power plants in your state, refer to the Energy Information Administration “923/423” database [where you]...can download the spreadsheet and search it for the power plants in your state.

    From data available on recent wind and solar bids in the western United States, it is becoming clear that once coal costs rise above about $1.50 per MMBTU, it can no longer be assumed that coal is the lowest cost way to generate electricity—even without consideration of the climate change impacts and the other external environmental and health costs of coal. When reviewing cost comparisons for your state, check to see whether your utility is discounting future fuel costs—a practice that can greatly diminish the impact of future fuel costs in any comparison.

    Citizens and decision-makers in every state are encouraged to start asking questions about coal costs, the future of the mines that are providing coal to your state and the possibility that your state will be better off investing its energy dollars in fuel-free renewable resources rather than in upgrades to aging coal plants.

    For background information on U.S. coal supplies, refer to Coal: Cheap and Abundant…, Or Is It? Why Americans Should Stop Assuming that the U.S. has a 200 Year Supply of Coal. from Clean Energy Action...

    For information on the amount of money many states are spending to import coal into their state, see Burning Coal, Burning Cash by the Union of Concerned Scientists available from the link below. Compare the amount of money (often hundreds of millions of dollars or more) spent on coal in your state in 2008 with the increase in the average cost of coal between 2008 and 2011. The amount of money spent on coal will have gone up quite dramatically. This is money that is literally “going up the stack” rather than being invested in clean, fuel-free resources that will help to stabilize future utility bills.

    The environmental and health costs of coal have been written about extensively. The reader is referred to the following for more information.

    • The Physicians for Social Responsibility report “Coal’s Assault on Human Health” available at http://www.psr.org/assets/pdfs/psr-coal-fullreport.pdf

    • The Harvard Study “Full Cost Accounting for the Life Cycle of Coal” available from http://onlinelibrary.wiley.com/doi/10.1111/j.1749-6632.2010.05890.x/full .

    • The U.S. Global Change Research Program report “Global Climate Change Impacts in the United States,” available from http://downloads.globalchange.gov/usimpacts/pdfs/climate-impacts-report.pdf .

    After reviewing the information on the cost of coal as well as the serious environmental and health impacts of coal burning, citizens and decision makers are encouraged to raise the question of whether your state will be best served by spending money on aging coal plants or finding a cleaner, fuel-free path to the future that will begin to stabilize utility bills.

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