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DOE tapped consultant to coal sector for study of current jobs picture, forecast

SNL Image

U.S. Department of Energy Secretary Rick Perry holds up a piece of coal mounted as a plaque that was presented to him during a visit to the National Energy Technology Laboratory Pittsburgh site in July 2017. A new report produced for the DOE forecasts a range of scenarios for an improving coal outlook.
Source: Associated Press

The U.S. Department of Energy tapped a consulting firm that has worked extensively with the coal industry to study the potential economic and jobs benefits of U.S. coal offering a sharp contrast to forecasts for a decline in the sector.

The study was requested by the Office of Fossil Energy to understand potential future trends in coal production and jobs, including the potential benefits of a successful DOE coal research and development program. The author of the study, Management Information Services Inc.'s President Roger Bezdek, is scheduled to present his findings in early March at the American Coal Council's Spring Coal Forum in Clearwater Beach, Fla. during a presentation titled "The Real Story, the Real Potential – the Economic and Job Benefits of U.S. Coal."

His finding that coal jobs have decreased in recent years will not surprise many, Bezdek said in an interview, but he also reports finding a "serious undercounting of coal mining jobs" due to not including contractors in federal data totals and a potential for significant job creation from new policies and economic growth. In some states, Bezdek wrote, the loss of coal jobs "has meant the difference between prosperity and severe recession."

The study models what Bezdek says coal's future could look like under a number of scenarios involving assumptions about economic growth, new technologies, tax credits and research and development efforts at the Department of Energy. For example, Bezdek's paper points to a potential "3.2 million coal-generated jobs" just from the White House's goal of achieving 3% gross domestic product growth.

The study projects that a higher level of economic growth will increase demand for electricity and therefore increase demand for coal and applies a multiplier for indirect coal jobs created alongside those directly in the industry.

Bezdek points out the U.S. Energy Information Administration assumptions he used for his reference case assumes there are no new coal plants constructed through 2050. However, in differing scenarios forecasted by Bezdek, he sees growth for coal after modeling in a boost in annual economic growth, additional tax credits for carbon capture technology, natural gas prices that more than triple by 2050 and various combinations of those factors.

Bezdek's assorted tweaks to the reference case result in coal production rising from between 7% and 16% by 2030. The models also predict coal production growth of between 9% and 76% by 2050.

The report says its findings "break new ground" and "contradict current thinking" on the future of coal. It also acknowledged further study is needed as to how many coal jobs could "realistically be expected to come back" in the face of competition from natural gas and on the drivers of coal job losses to "allow a more robust analysis of the jobs that can reasonably be gained in the future."

Bezdek's outlook contrasts sharply from recent industry forecasts, including the EIA's. The group's most recent energy outlook shows coal consumption declining by 8.3% from 2016 to 2050, even after the agency recently slowed the projected rate of coal plant retirements. In the past several years, the EIA's forecasts have underestimated the expansion of renewable energy and missed a rapid decline in coal generation.

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Corsa Coal Corp. CEO George Dethlefsen speaks to workers at a new Corsa coal mine in Friedens, Pa., on June 2017. New mines have been relatively rare in recent years, though metallurgical coal projects such as Corsa's have surfaced in recent months as international demand for the steelmaking coal has improved.
Source: Associated Press

A recent report by Matthew Gray, senior analyst for utilities and power with Carbon Tracker Initiative, suggested fixed costs and low capacity utilization has been devastating for coal power plants. He wrote that by the early 2020s, the cost to operate coal could be higher than the cost to build new onshore and solar energy projects. Abundant natural gas, Gray wrote, has made coal "increasingly superfluous" as fuel to generate power.

High projections for any sort of growth in domestic U.S. coal production may be difficult for many to imagine in a market environment where coal producers are indicating they do not expect much growth in production, particularly for domestic power use. Utilities have continued to shutter coal plants, and new projects are not replacing them as they go offline, leaving coal companies with increasingly fewer places to sell coal.

"It's not only the current regulations they are worried about, but future regulations over the life of the coal plant which could be 40 or 50 years," Bezdek acknowledged in an interview.

The DOE, which paid $120,000 for the study, is not currently conducting a follow-up analysis based on the recommendations Bezdek made in the report.

The study is an update to a report done by Bezdek's firm on potential return on investment from coal technologies in the U.S. published in the journal Energy Policy in 2013. That study, supported by the American Coalition for Clean Coal Electricity, or ACCCE, was later cited in DOE presentations, including one on meeting climate goals with technology given in 2014 during the Obama administration.

The ACCCE has promoted Bezdek's work, such as a study he released called "The Social Costs of Carbon? No, the Social Benefits of Carbon" released in early 2014 concluding the benefits of carbon dioxide emissions were up to 50 to 500 times greater than its costs. Environmentalists criticized the report, claiming it conflated the benefits of electricity with fossil fuels and ignored coal's costs.

According to the Management Information Services' website, the firm's clients have included entities with coal or electricity generation interests such as Peabody Energy Corp., the Edison Electric Institute, ACCCE and American Electric Power Co. Inc.