Outlook for coal and electricity

1. Outlook for coal and electricity for National Coal Council November 1, 2013 | Washington, DC by Howard Gruenspecht, Deputy Administrator

2. Coal accounted for 20% of the domestic energy supplied in 2011; almost all of it was used to generate electricity Source: EIA, Annual Energy Review 2011 Howard Gruenspecht, National Coal Council November 1, 2013

3. In 2012, U.S. electricity generation was 69% fossil fuels, 19% nuclear, and 12% renewables January – December 2012 net generation: 4,054 billion kWh January – December 2012 non-hydro renewable net generation: 219 billion kWh Other gases 0.3% Conventional hydroelectric 6.8% Nuclear 19.0% Wind: 3.5% Natural gas 30.4% Other renewable 5.4% Solar thermal and PV: 0.1% Wood and wood-derived fuels: 0.9% Geothermal: 0.4% Coal 37.4% Other biomass: 0.5% Petroleum 0.6% Source: EIA, Electric Power Monthly, February 2013 Howard Gruenspecht, National Coal Council November 1, 2013

4. Spot natural gas prices vary significantly across global markets since 2008 global spot natural gas, crude oil, and LNG prices U.S. dollars per million British thermal unit Source: Derived from Bloomberg, L.P. 2005 2006 2007 2008 2009 2010 2011 2012 2013 Howard Gruenspecht, National Coal Council November 1, 2013

5. U.S. electricity output from natural gas and coal gigawatthours Source: EIA, Electric Power Monthly Howard Gruenspecht, National Coal Council November 1, 2013

6. Growth in electricity use slows, but still increases by 28% from 2012 to 2040 Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2011 0.9 2012-2040 0.9 U.S. electricity use percent growth (3-year rolling average) Source: EIA, Annual Energy Outlook 2013 History 2011 Projections structural change in economy - higher prices - standards - improved efficiency Howard Gruenspecht, National Coal Council November 1, 2013

7. The average delivered price of coal to electricity generators varies widely across U.S. regions – transport costs are a key reason 2011 delivered coal prices, $ per million Btu Source: EIA, Annual Energy Outlook 2013 $3.76 $2.39 $3.16 $2.39 N/A $1.74 $1.67 N/A $2.77 $3.18 $2.10 $1.79 $1.65 1.90 $2.58 $4.07 $1.94 $2.35 $1.96 $3.41 $2.00 $3.99 Howard Gruenspecht, National Coal Council November 1, 2013

8. The fuel mix for electricity generation varies widely across U.S. regions (2011) Share of Generation by Fuel, 2011 Source: EIA, Annual Energy Outlook 2013, based on Form EIA-923 Howard Gruenspecht, National Coal Council November 1, 2013

9. Coal regains some competitive advantage relative to natural gas over time on a national average basis ratio of natural gas price to steam coal price Source: EIA, Annual Energy Outlook 2013 energy prices to the electric power sector 2011 dollars per Btu 2011 History 2011 Projections natural gas coal competitive parity Projections History Howard Gruenspecht, National Coal Council November 1, 2013

10. The U.S. electricity mix in EIA’s reference case gradually shifts to lower-carbon options, led by growth in gas and renewable generation U.S. electricity net generation trillion kilowatthours Source: EIA, Annual Energy Outlook 2013 Projections History 1993 2011 30% Natural gas 25% 16% Renewables 13% 13% 11% 17% 19% Nuclear 19% 53% 42% 35% Coal Oil and other liquids 4% 1% 1% Howard Gruenspecht, National Coal Council November 1, 2013

11. The projected fuel mix for electricity generation by region (2040) Share of Generation by Fuel, 2040 Source: EIA, Annual Energy Outlook 2013 Howard Gruenspecht, National Coal Council November 1, 2013

12. With lower natural gas prices in the High Oil and Gas Resource Case, coal is permanently displaced as the leading generation source in the near future electricity net generation billion kilowatthours Source: EIA, Annual Energy Outlook 2013 Projections 2011 Coal Natural gas Howard Gruenspecht, National Coal Council November 1, 2013

13. Coal generation in alternative electricity sector CO2 fee cases billion kilowatthours Source: EIA, Annual Energy Outlook 2013 History 2011 Projections Reference $10 fee at 5% $10 fee at 7.5% $20 fee $30 fee Howard Gruenspecht, National Coal Council November 1, 2013

14. Projected electricity generation shares of different fuels are sensitive to fuel prices and policy developments percent Source: EIA, Annual Energy Outlook 2013 Higher / Lower Natural Gas Prices Higher / Lower Electricity Demand Higher / Lower Coal Prices GHG Cases renewables nuclear natural gas coal Howard Gruenspecht, National Coal Council November 1, 2013

15. U.S. coal production is very sensitive to both markets and policies million short tons Source: EIA, Annual Energy Outlook 2013 Low Coal Cost Low Oil and Gas Resource Reference High Oil and Gas Resource High Coal Cost GHG15 2040 2011 2020 Howard Gruenspecht, National Coal Council November 1, 2013

16. Total U.S. natural gas production, consumption, and net imports in the Reference case, 1990-2040 natural gas supply and consumption trillion cubic feet Source: EIA, Annual Energy Outlook 2013 Projections History 2011 Net exports, 2040 (12%) Net imports, 2011 (8%) Total consumption Total production Net imports Howard Gruenspecht, National Coal Council November 1, 2013

17. U.S. continues to be a net exporter of coal million short tons Source: EIA, Annual Energy Outlook 2013 2011 Projections History Domestic Supply Consumption Net imports Howard Gruenspecht, National Coal Council November 1, 2013

18. Renewable energy and nuclear power are the fastest growing sources of energy to 2040, but fossil fuels continue as the dominant fuels world energy consumption by fuel quadrillion Btu Source: EIA, International Energy Outlook 2013 History 2010 Projections 28% 27% 23% 34% share of world total 28% 15% 22% 11% 7% 5% Howard Gruenspecht, National Coal Council November 1, 2013

19. For more information U.S. Energy Information Administration home page | www.eia.gov Annual Energy Outlook | www.eia.gov/forecasts/aeo Short-Term Energy Outlook | www.eia.gov/forecasts/steo International Energy Outlook | www.eia.gov/forecasts/ieo Today In Energy | www.eia.gov/todayinenergy Monthly Energy Review | www.eia.gov/totalenergy/data/monthly Annual Energy Review | www.eia.gov/totalenergy/data/annual State Energy Portal | http://www.eia.gov/state/ Howard Gruenspecht, National Coal Council November 1, 2013

20. Operating costs: existing plants with and without a value on carbon Fuel cost for existing coal and combined cycle natural gas units with a value placed on carbon dioxide emissions • The “crossover point” for least-cost dispatch of coal and natural gas capacity depends on both fuel prices and the carbon value. At lower natural gas prices, the “crossover” occurs at a lower carbon value. • Environmental operating costs and retrofit costs for pollution controls at existing coal-fired plants can “raise the bar” for their continued operation. • For retrofit decisions, the unit’s perceived “useful life,” which plays a critical role, can be affected by views regarding future climate policies 2010 dollars per megawatthour coal at $3 coal at $2 natural gas CC at $7 natural gas CC at $4 natural gas CC at $3 Howard Gruenspecht, National Coal Council November 1, 2013