WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

May 21, 2019

MEMORANDUM FOR: Stephen K. Nalley

Acting Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Electricity, Coal, Nuclear, and Renewables Analysis

SUBJECT: Summary of First AEO2020 Coal Working Group held on April 9, 2019

The working group presentation included a summary of the AEO2019 projections and a discussion of the 

data, assumptions, model updates, and improvements expected for the AEO2020 development cycle. 

Stakeholders were encouraged to discuss the information provided in the presentation, EIA’s coal 

modeling methodology, and other issues facing coal supply and use. The EIA presentation is provided as 

a separate document. EIA staff encouraged participants and other stakeholders to contact Greg Adams 

(Greg.Adams@eia.gov) or David Fritsch (David.Fritsch@eia.gov) with follow-up questions or comments.

Overview

At the beginning of the meeting, EIA staff provided an overview of the plan for AEO2020. EIA will use the 

flip-book format again, and AEO2020 will include the Reference case and the six core side cases 

(High/Low Macro, High/Low Oil Price, and High/Low Oil and Gas Resource and Technology cases). EIA

will also produce Issues in Focus articles, along with the related side cases, and will update the 

accompanying assumptions and model documentation.

Assumptions and Model Updates

Legislation and Regulation

EIA staff provided an in-depth review of legislation and regulations affecting coal, including how 

AEO2019 modeled these rules, standards, and programs and how AEO2020 models may change. The 

U.S. Environmental Protection Agency (EPA) has recently proposed several rules that were not part of

AEO2019, but AEO2020 may include these rules if they are completed during the AEO development 

cycle in 2019. 

In August 2018, the EPA proposed the Affordable Clean Energy (ACE) rule, which revises the best system 

of emission reduction (BSER) finding for greenhouse gas (GHG) emissions from existing power plants to 

include only heat-rate efficiency improvements. The ACE rule would replace the 2015 Clean Power Plan.

The EPA also proposed the following revisions:

• Eliminate the Carbon Capture and Sequestration (CCS) compliance requirement 

• Eliminate specified CO2 emission rates—
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o 2,000 lb CO2/MWh-gross for large units (super-critical)

o 1,900 lb CO2/MWh-gross for small units (sub-critical)

o 2,200 lb CO2/MWh-gross for new coal refuse-fired units

• Change how rules apply to modified units

All cases, for both AEO2019 and AEO2020, include a 3% adder on the cost of financing that applies to

new coal investments in facilities that do not achieve 90% carbon sequestration.

EPA’s Mercury and Air Toxics Standards (MATS) and the Cross-State Air Pollution Rule (CSAPR), both 

reflected in AEO2019, will remain in AEO2020. As in AEO2019, other EPA regulations on regional haze, 

coal combustion residuals, cooling water intakes, and effluent limitation guidelines will be reflected in 

AEO2020 as coal plant operators report resulting capacity changes on survey Form EIA-860. The working 

group also discussed the status of other federal regulations and the implications stemming from 

potential legal actions that could affect coal mining.

We will include key elements of the 45Q tax credit for CCS, although it was not included in AEO2019. 

These changes affect the Electricity Market Module (EMM); the Capture, Transport, Utilization and 

Storage Module (CTUS); and the Oil and Gas Supply Module (OGSM). However, we don’t expect any

direct changes to the Coal Market Module (CMM) because 45Q would only affect coal use indirectly.

At the forefront of controlling GHG emissions from fossil power generation, we will incorporate state 

actions into AEO2020 as related rules are finalized. The AEO2019 included existing California regulations

and the Northeast’s Regional Greenhouse Gas Initiative (RGGI), Renewable Portfolio Standards (RPS),

and Zero Emission Credit (ZEC) programs. 

Since the AEO2019 release, New Mexico, Hawaii, and the District of Columbia have passed legislation

similar to California’s, which requires them to achieve carbon-free electricity generation by about 2045, 

with a dozen more states considering similar regulations. Any state initiatives completed during 2019 

consistent with EIA’s model development deadlines will be included in AEO2020. One participant 

pointed out that Colorado has proposed a GHG bill (House bill 1261), adding it to the list of states with 

proposed regulations already being followed by EIA staff. EIA also expects to reflect New Jersey’s plans 

to participate in RGGI and the newly implemented ZEC programs in Connecticut. AEO2019 included ZEC 

programs in Illinois, New York, and New Jersey.
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Assumptions and Trends

The meeting included a review of assumptions and trends affecting the AEO2019 projections. EIA staff 

highlighted three key assumptions affecting the Reference case coal projection:

• Coal mine labor productivity by region

• Global seaborne coal trade demand

• Capital costs for adding new coal-fired electric generation relative to renewables and natural gas

EIA staff also noted key trends affecting the coal projections:

• Relatively low electricity demand growth

• Increasing cost competiveness of electricity generated by renewable sources

• Modestly increasing projected real prices for natural gas, which are influenced by the natural 

gas supply/demand balance

AEO2019 Results

EIA staff highlighted the results for the AEO2019 Reference case for coal demand and supply and 

demonstrated how the coal generation and capacity projections are sensitive to changes in natural gas 

prices. Additional coal plant retirements in 2018 combined with planned retirements result in 151 GW of 

coal-fired generating capacity in operation in 2050. This capacity is 30 GW lower than in AEO2018. The 

results showed how the decline in coal-fired electric generating capacity is projected to be offset by 

increasing capacity factors for the remaining coal fleet, resulting in a projection of flat coal-fired 

electricity generation and coal production after the initial decline from losses associated with retired 

coal capacity. EIA staff also presented coal production trends by region, with Eastern Interior production 

from the Illinois Basin showing modest gains relative to the other regions, partly because of differences 

in projected labor productivity trends. Employment and mine-mouth coal price projections reflect the 

general decline in labor productivity in an environment of flat production. Export demand for coking and 

steam coal is projected to peak in about 2020 then stabilize between 80 million and 100 million tons of 

coal exports per year. 

AEO2020

Looking forward, EIA staff highlighted development initiatives for AEO2020 and beyond. EIA plans to roll 

forward the base year to 2018 in the Coal Market Module (CMM), which will include updates to 

production and prices, coal transportation rates between regions, and coal export upper and lower 

bounds by region and coal type. EIA will also review firm coal contracts between electric generators and 

coal producers.

Model development items include: 

• Implementing a revised approach to modeling seaborne coal shipping costs for AEO2020

• Evaluating a revised approach to escalate real domestic coal transportation rates (These rates 

are currently estimated for completion by AEO2021, but they may be completed for AEO2020.) 

• Developing a revised approach for modeling international coal supply curves (ICSC) in the CMM 

for AEO2021
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EIA staff discussed each development item in greater detail during the last part of the meeting in 

separate subsections in the presentation.

Ongoing efforts for the International Energy Outlook (IEO) will include developing an International Coal 

Market Module (ICMM) in the World Energy Projections System Plus (WEPS+). EIA is studying a linear 

programming-based approach as part of the IEO2020 cycle using EIA’s Global Hydrocarbon Supply 

Model (GHySMo) platform and the efforts discussed above to improve the modeling of ICSC and 

seaborne coal shipping costs.

The Electricity Market Module (EMM) plans to change the electricity region mapping to better match

ISO regions and will update capital costs and performance characteristics for various generation 

technologies, including 

• Ultra-supercritical coal with zero, 30%, and 90% CCS

• Combustion turbines and combined-cycle units

• Advanced nuclear and small nuclear reactors (SMR)

Short-Term Coal Projections

The coal team is initiating plans for a Short-Term Energy Outlook (STEO) coal forecasting working group 

in the summer of 2019. Please contact Bonnie West (Bonnie.West@eia.gov) or Elias Johnson 

(Elias.Johnson@eia.gov) if you want to join this group.

Discussion

Attendees asked questions during the legislation and regulations part of the meeting. One commenter 

noted that EIA should address the implications of the International Marine Organization’s 2020 

requirements to reduce sulfur emissions from ocean vessels in its modeling of seaborne coal freight 

rates. EIA staff agreed to research the issue and address this concern in the model assumptions. 

Questions and comments from participants mainly revolved around the proposed approach for the 

model changes. One commenter suggested that, with respect to the coal transportation rate escalation, 

it might be better to include fewer representative variables than a broad range of variables. Several 

participants also requested access to the unpublished reports by Hellerworx, Inc. on seaborne coal 

transportation rates and domestic coal transportation rate escalation. EIA will provide the reports, on 

request, to members of the coal working group.

Please contact Greg Adams (Greg.Adams@eia.gov) or David Fritsch (David.Fritsch@eia.gov) if you want 

to join this group or if you have questions or comments to include in these minutes.
WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

Attendees

Name Affiliation

Guests (in person)

José Benitez Deloitte

Guests (WebEx/phone)

Natalie Biggs Woodmac

Jamie Heller HELLERWORX, INC

Osmond Lindo U.S. Department of Labor, MSHA

Carl Lundgren U.S. Department of Labor, MSHA

Greg Moxness U.S. Department of Labor, MSHA

Paul Pierce USGS

Joshua Rockwell OSMRE

Craig Romer Xcel Energy

Cynthia Simpson U.S. Department of Labor, OCFO

William Wolf JT Boyd

Thomas Wos Tri-State G&T

EIA attendees (in person)

Greg Adams EIA

Kien Chau EIA

Kenneth Dubin EIA

Jim Diefenderfer EIA

David Fritsch EIA

Thad Huetteman EIA

Elias Johnson EIA

Chris Namovicz EIA 

Terry Yen EIA

EIA attendees (WebEx/phone)

Beth May EIA

Bonnie West EIA