On October 29^th the Government Accountability Office (GAO) released their report analyzing the future of coal production and use in America. The report finds that coal, while susceptible to change and decline, is likely to remain a key fuel source.

Coal, primarily due to its low consumption cost and abundance in America, has traditionally been a favorite energy resource. Advancements in coal production have increased the production capacity greatly. The report notes that “In 2011, half as many workers produced 24 percent more coal than in 1985.”

In terms of use, the amount of coal produced in America has steadily increased since the 1960’s. Additionally, the share of coal as a percentage of electricity production (coal’s primary use in America) has fluctuated since the 1960’s.

The report finds however, that since 2008, coal production has been in decline. This is due to market factors such as the lowered costs of natural gas and recent environmental regulations.

The Energy Information Agency (EIA)  predicts that the amount of electricity generated by coal will remain stable through the coming two decades, but that coal’s share of total electricity production is likely to decline from the current 42% in 2011 to around 30-40% in 2035, depending on the price of other electricity fuel sources.

The report notes that regulations on coal pollution have forced coal producers to retire and construct new coal plants, or to adapt existing installations to meet the regulations.  These regulations stem from Environmental Protection Agency (EPA) efforts to reduce the risks to public health and environmental safety from coal-fired power plants.

The coal industry is undergoing a period of modernization, in which older plants are being retired, while newer plants are upgraded with pollution control technologies. The result will be an industry that shrinks in size but produces less pollution.

As noted previously, while these regulations are inflicting some pain on the coal industry, a larger driver of coal retirements in recent years has been the rapid decline in the price for natural gas, which was echoed by the GAO report. Natural gas and alternative renewable sources are likely to continue to capture market share from the coal industry.

Despite all this, coal is seeing a growing presence as an export commodity. In 2011, coal exports were up 31% from the previous year. These exports are fueled by growing demand in Europe and Asia.

Coal will remain a key source of America’s electricity future. However, cheaper and cleaner natural gas and renewable energy along with environmental regulations will force coal into a period of gradual decline.

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