The U.S. Energy Information Administration has projected that demand for U.S. coal, 40 percent of which is provided by Wyoming, will fall in the next decade before remaining consistent until about 2050.
According to the EIA’s report released on March 30, U.S. coal consumption and net exports will decline by nearly 30 percent before stabilizing for several decades. With so much of its revenue dependent on coal exports, Wyoming will need to make important decisions in the near future said Dr. Robert Godby, associate professor and director for energy economics & public policies center in UW’s College of Business.
“That’s really the open question: how is the state going to deal with a permanent decline?” Godby said.
At present, coal is facing steep competition from energy sources that are becoming more favorable to producers, Godby said.
“Right now natural gas is so cheap and renewables, in particular—wind is even cheaper than natural gas,” Godby said. “Prices are declining so fast in the renewable sector that basically, in some places, it’s cheaper to build a brand-new renewable energy plant, a wind-farm for example—it’s cheaper to build that and then run it than to run a fully depreciated, entirely paid-off coal-fired power plant, no finance costs or anything like that.”
In this time of shifting prices, companies may give a longer look at making the effort to shift away from coal.
“When you’re in that situation, what that means is a lot of utilities are wondering right now whether it makes sense, for the rate-payers, to continue to operate coal-fired power plants,” Godby said. “If there’s a cheaper alternative out there, don’t they owe it to their customers to actually produce power more cheaply? The question is how quickly that transition happens.”
That transition will be especially impactful for the state of Wyoming, which draws a significant portion of its revenue from the energy industry.
“Energy revenues make up, depending on the year, 60 percent—or 70 percent, even, of our budget,” Godby said. “Because it was less volatile, we have relied on coal to fund services that we need—education, in particular, is really dependent on coal funding. What this means is that if we’re going to maintain the quality of education we have in the state, we’re going to have to find revenue alternatives or cut back on expenditures somewhere else.”
Similar observations were made in a different context at an open meeting for the evaluation of President Laurie Nichols in February, where Dr. Steve Portch, former chancellor of the University System of Georgia, offered his own thoughts about the direction of the university considering its reliance on funding granted by the state—which is in turn reliant on overall state revenue.
“You’re 70 percent dependent on state funding,” Portch said. “Unless you diversify your resource base significantly, you will remain very beholden to the state and state opinions about what you do and don’t do.”
Though Godby holds to his view of coal as an industry in decline, he pointed out that the EIA’s projection is based on assumptions for trends such as technology and the fluctuating costs of producing energy via other means.
Last semester, UW’s School of Energy Resources announced a partnership with Clean Coal Technologies, Inc., in New York to establish a plant in Wyoming as part of efforts to develop improved methods to convert ‘raw’ harvested coal from the Powder River Basin into usable fuel, separating the coal from water and other volatile components. The result would be coal that’s cheaper to convert—and thus more valuable. Director of Emerging Technology at UW’s Energy Innovation Center in the School of Energy Resources Richard Horner said the project is moving forward.
“Shortly, CCTI are expected to announce an agreement to site the pilot plant for long-term and continued operation at a location near Gillette, where they will evaluate performance of their technology on PRB coal,” Horner said. “The School of Energy Resources at UW continues to work with CCTI on understanding the technology performance to beneficiate Wyoming PRB coal.”
