Demand
Coal is primarily consumed by utilities to generate electricity. It is also used by steel companies to make steel products and by a variety of industrial users to heat and power foundries, cement plants, paper mills, chemical plants and other manufacturing and processing facilities. In general, coal is characterized by end use as either steam coal or metallurgical coal. Steam coal is used by electricity generators and by industrial facilities to produce steam, electricity or both. Metallurgical coal is refined into coke, which is used in the production of steel.
Steam coal is used by electric utilities throughout the United States to generate power for industrial, commercial and residential consumption. The United States relies on coal for approximately 45% of its power generation, compared to approximately 23% for natural gas. Demand for electricity has historically been driven by U.S. economic growth, but it can fluctuate from year to year depending on weather patterns. In 2009, electricity consumption in the United States decreased approximately 4.0% from 2008, but the average growth rate in the decade prior to 2009 was approximately 0.7% per year according to EIA estimates. Because coal-fired generation is used in most cases to meet base load requirements, coal consumption has generally grown at the pace of electricity demand growth.
The nation’s power generation infrastructure was approximately 44.6% coal-fired, according to the EIA for 2009. Coal has consistently maintained approximately a 45% to 52% market share during the past 10 years, principally because of its relatively low cost, reliability and abundance. Coal is the lowest cost fossil fuel used for base-load electric power generation, being considerably less expensive than natural gas or fuel oil. Coal-fueled generation is also competitive with nuclear power generation on a total cost per megawatt-hour basis.