WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

June 14, 2018

MEMORANDUM FOR: Ian Mead

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

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

SUBJECT: Summary of AEO2019 Coal Working Group held on May 17, 2018

The working group presentation provided a summary of the AEO2018 projections, as well as the data, 

assumptions, and model updates and improvements expected during the AEO2109 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. Participants and other stakeholders were encouraged to contact Greg Adams 

(Greg.Adams@eia.gov) or David Fritsch (David.Fritsch@eia.gov) if they had any follow up questions or 

comments.

Background

At the outset, EIA staff mentioned that AEO2019 will be a short AEO cycle and will include the 6 core 

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

along with the Reference case.

EIA staff explained that the first working group meeting was being held earlier in the development cycle 

than in the past to discuss the results in the recently-released AEO2018 and solicit stakeholder feedback 

for consideration in future modeling efforts at an earlier stage in the development cycle. The first 

working group meeting also provides an opportunity to identify issues or topics that might be better 

addressed through smaller, targeted working group discussions.

Results (AEO2018)

The meeting began with a review of assumptions and trends affecting the AEO2018 projections. The 

discussion of current laws and regulations highlighted that the AEO2018 did not include EPA’s Clean 

Power Plan, but that all cases assume EPA’s New Source Performance Standards limits for CO2 emissions 

from new plants. The assumptions associated with other existing federal and state regulations were 

discussed, along with the status of other potential actions previously proposed by other federal 

agencies.

Staff from National Energy Technology Laboratory was invited to comment on their efforts to assess 

methods for addressing regulatory uncertainty in energy modeling systems such as National Energy 

Modeling System in relation to EIA’s continued inclusion in the AEO2018 of a 3% cost of capital adder on 

new coal-fired generating units or upgrades at existing coal facilities not achieving 90% carbon capture 

and sequestration (CCS). 
WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

EIA staff highlighted three key assumptions affecting the Reference case coal projection—coal mine 

labor productivity by region, global seaborne coal trade demand, and capital costs for adding new coalfired electric generation relative to renewables and natural gas. Three key trends affecting the coal 

projections were also noted—relatively flat electricity demand growth, increasing electricity generation 

from renewables, and only modestly increasing projected real prices for natural gas, which is influenced 

by the natural gas supply and demand balance. 

EIA staff highlighted the results for the AEO2018 Reference case, while demonstrating the sensitivity of 

the coal generation and capacity projections to changes in natural gas prices. In particular, the results 

showed how the decline in coal electric generating capacity retirements is projected to be generally 

offset by increasing capacity factors for the remaining coal fleet in the Reference case, resulting in a 

projection of flat coal-fired electricity generation and coal production.

Coal production trends by region were also presented, with Eastern Interior production from the Illinois 

Basin showing modest gains relative to the other regions due in part to 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. Coal export demand is projected to grow 

modestly by 2040 and stabilize thereafter. 

Model updates (AEO2019)

Looking forward, EIA staff highlighted development initiatives for AEO2019 and beyond. In addition to 

the normal base year updates to the coal model, updates for AEO2019 include the Tax Cuts and Jobs Act 

of 2017, the Section 45Q tax credit for CCS, updating the coal supply curves in the model, and enhancing

reporting capabilities. Preliminary results of a study by Sargent and Lundy for EIA on costs of O&M at 

aging electric generating units and evolving efforts to address coal and nuclear generation at risk were 

also discussed, along with the planned update to the capital cost study for new generating units. EIA 

requested that participants consider these efforts and provide any suggestions they may have with 

respect to technologies to be evaluated or comments on resilience, reliability, and fuel diversity. Work 

on a new International Coal Market Module (ICMM) has also been delayed. 

EIA also sought feedback from participants on formation of a new working group to provide guidance on 

Short Term Coal Projections. Please contact Greg Adams (Greg.Adams@eia.gov), David Fritsch 

(David.Fritsch@eia.gov), or Elias Johnson (Elias.Johnson@eia.gov) if you want to join this group.

Discussion

Questions and comments from participants mainly revolved around the topics of model assumptions, 

fuel diversity, and the impact of renewables.

Model Assumptions

One participant indicated that EIA should review the impact of EPA’s Effluent Limitation Guidelines 

(ELGs) as they affect retirement decisions for coal plants. In their Integrated Resource Plans, some 

electric utilities have cited cost of compliance with ELGs as a major consideration in plant retirement 

decisions.
WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

Another participant submitted comments following the meeting, with respect to Eastern Interior coal 

labor productivity trending upward in EIA’s projections. That participant felt that the shift in the mix of 

mines by equipment and size is probably the biggest driver of productivity changes, as opportunities for

new technological changes until the U.S. starts using autonomous or remote equipment may be limited. 

However, at some point the mix is likely to stabilize due to low demand and, therefore, productivity for 

the region would not necessarily show an overall increase in labor productivity in the longer-term. 

One participant inquired whether a clean coal-fired generating technology without CCS could be 

included as a technology type. EIA staff indicated that a clean coal-fired generating technology without 

CCS could potentially be incorporated into a future side case, but not likely for AEO2019. EIA plans to 

run only major side cases for AEO2019 and, given current laws and regulations, each case assumes that 

111(b) will remain in effect. Such technologies would only be included in AEO2019 to the extent that 

EPA completes a rulemaking repealing 111(b) prior to the completion of EIA’s model development 

efforts. EIA will study the technology and could possibly include an option for a clean coal-fired 

generating technology without CCS in the future if reliable costs and performance characteristics can be 

developed for that technology.

Fuel Diversity

One participant commented that in addition to costs and profitability, coal plant retirement decisions

may depend on plant ownership—for example, Investor Owned Utilities want certainty in cost recovery, 

and cooperatives and municipal utilities look at the impact on customer’s rates, while IPPs make 

decisions purely on operating cost or profit margins. Mixed co-ownership of plants means that decisions 

to retire a plant may be dynamic between ownership groups.

This participant also commented on the issue of resiliency, noting that fuel security is a main driver, and 

is more important than operating flexibility. Coal plants, even after modifications to improve ramp rates, 

will not compare favorably to the flexibility of natural gas plants. One advantage of coal plants is they

do not depend on the natural gas grid for fuel supply being available in times of cold weather, or in the 

instance of a natural gas transmission system bottleneck, many plants using gas have limited liquid fuel 

backup on site. Therefore, fuel security may result in some coal plants being kept in service longer than 

expected.

Another participant inquired as to whether DOE’s Office of Fossil Energy could review a copy of the 

Sargent & Lundy study on coal fleet aging mentioned by EIA staff. This participant also asked if the 

report examines the cumulative impacts of operating a plant in a non-baseload manner like cycling, and 

if EIA plans to publish its methodology for identifying plants at risk to the extent a framework is put into 

place.

EIA staff indicated that it would publish a hyperlink on the EIA website to the Sargent and Lundy report 

once the report is finalized by the contractor and summarized by EIA staff. EIA further noted that the 

Electricity Market Module includes a feature to adjust the generating unit heat rate depending on the 

mode of unit operation. EIA staff also noted that any changes to proposed methods associated with 

“plants at risk” would certainly be discussed at the coal and electricity working groups, and documented 

in the AEO assumptions and model documentation.
WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

Impact of Renewables

A participant inquired whether the reserve margin algorithm has been modified given the increased 

penetration of renewables. EIA staff responded that an algorithm to calculate spinning reserves was

added three years ago, which includes a placeholder parameter for wind and solar. Variable generation 

sources like wind and solar do not contribute to spinning reserves, but they may increase the need for 

spinning reserves.

EIA staff also indicated that they are reviewing literature to help determine what the parameter should 

be, but it was not updated in AEO2018. ForAEO2019, EIA staff indicated that the time slices will be 

changed to 24/12 for the renewable dispatch algorithm, which should improve the representation of 

capacity credits for renewables and the dispatch for all generation types, including renewables.

Another participant asked about the impacts of the tax credits on renewable capacity additions. EIA staff 

responded by referring the participant to the recently-released AEO2018 Issues in Focus article on 

“Alternative Policies in Power Generation and Energy Demand Markets.” 

Attendees

Guests (in person)

 Name Affiliation

José Benitez Energy Ventures Analysis

Mark Gehlhar U.S. Department of Interior, OSRME

Jordan Kislear U.S. Department of Energy

Guests (WebEx/phone)

 Name Affiliation

Frank Benevidas Alliance Energy

Jen Digiantommaso U.S. Dept. of Labor, OFCO

Carolyn Evans Norfolk Southern

Jerry Eyster GE Energy Financial Services

Brian Fisher U.S. EPA

Philip Graeter Energy Ventures Analysis

Jamie Heller HELLERWORX, INC

Whitney Herndon Rhodium

Lauren Khair National Rural Electric Cooperative Association

Catie Kuester Union Pacific

Michael Leitman National Rural Electric Cooperative Association

Carl Lundgren U.S. Department of Labor, MSHA

Emily Medine Energy Ventures Analysis

Greg Moxness U.S. Department of Labor, MSHA

Naomi Ondrich U.S. Department of Labor

Joshua Rockwell U.S. Department of Interior, OSMRE
WORKING GROP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

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

Robert Schultz LEENA Laboratories

Frances Wood OnLocation

Thomas Wos Tri-State G&T

Charles Zelek U.S. Department of Energy, NETL

EIA attendees (in person)

 Name

Greg Adams

David Daniels

Jim Diefenderfer

David Fritsch

Tyler Hodge

Thad Huetteman

Augustine Kwon

Laura Martin

Ian Mead

Chris Namovicz