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Coal Supply Module

This Stochastic Energy Deployment System (SEDS) module is a single-region representation of the U.S. coal supply. The module provides a reasonable estimate of annual average sector prices in ($/Joule) for coal given a level of demand specified in watts for the same sectors.

The coal market in SEDS is broken up into two sectors: an industrial sector and an electric utility sector. The module uses an algorithm based on time-dependent price supply curves to determine an average price for the total annual nationwide demand of coal at a given timestep. Separate equations are used to calculate industrial and electric utility sector prices based on the average price for coal. The sector demand for coal is provided to the coal module by other SEDS models.

Focus of Analyses

The effect of demand on the price of coal is the primary focus of this module. The relationship of demand to price for coal is pre-defined by an input set of year specific price versus supply curves, which were developed based on National Energy Modeling System (NEMS) Annual Energy Outlook (AEO) 2008 model runs.

Limitations of Analyses

Regional, sector, transportation, and coal rank effects cannot be evaluated because the model is based on an annual nationwide value of average coal price. Sector prices are determined simply by applying the forecast average coal price to regression equations designed to capture the changing relation of each sector price to the average coal price. The complexity of the method needed to handle conversion of average price to sector price is exacerbated by the inclusion of a future growth in coal to liquids (CTL) in the industrial sector. This increases the relative amount of lower rank coal used in the industrial sector as time goes on. This changes the relative cost of both industrial and electrical coal to average coal price.

A primary limitation of the model is its inability to handle resource development and depletion. The basic price versus supply curves are fixed at the beginning of the simulation and are not affected by the SEDS projection of demand as the simulation progresses. In reality, a high demand will spur development, which increases the future supply available at a given price. Later on, this high production rate will potentially bring about an earlier depletion of the resource. A low demand for coal will discourage mining and lessen the ability to immediately respond to a future higher demand.

Technologies of Interest to U.S. Department of Energy

Most U.S. Department of Energy (DOE) research is focused on technologies used to create fuel and electricity from coal. There is very little research being performed on coal resource and supply. There is no representation of DOE coal technology in this supply model.

Overview of Methodology

For a given timestep, the first step of the model is to read in the two coal sector demands from SEDS and aggregate them into a single value of coal demand, which is converted from power in watts to tons of coal. Using a table lookup procedure on a timestep specific table of price versus supply, we determine an estimate of average coal price. After converting this price from $/short ton to $/joule, the price is entered into two separate regression equations to determine an estimate of industrial and electric utility sector prices. The timestep specific table of price versus supply was developed by interpolating and extrapolating a six-step input table of price and supply for years 2005-2030.

Major Assumptions

The current version of the coal supply module is dependent on a set of price-supply versus time data used to define the demand versus price relationship. These curves originated as the forecasts from a set of NEMS runs from the 2008 AEO. The NEMS runs used were the reference case, the high energy price case, the high macroeconomic case, the low energy price case, and the low macroeconomic case.

Since these different scenarios did not involve changes to the NEMS coal module itself, and forecast five different estimates of coal usage with time, we used them to define the steps of the time-dependent price supply curves required as input to the coal supply module. This is not a good situation as we are using forecasts from NEMS as inputs to the SEDS coal supply module.

This version of the model is seen only as a substitute until some type of resource-based model can be developed for SEDS heavy.

Portfolio Decision Support Inputs

At the present time, there are no plans for including portfolio decision support inputs in the coal supply module.

Stochastic Inputs

At present, the coal module has only one stochastic input. That input is a price multiplier designed to add an element of uncertainty to the forecast coal price.

Key Inputs from Other Modules

  • Industrial sector coal demand (watts)
  • Electric utility sector coal demand (watts)

Key Outputs to Other Modules

  • Industrial sector coal price ($/J)
  • Electric utility sector coal price ($/J)

Attachments

SEDS Coal and Gas Sectors Modules - May 2009

Authors

Donald Remson, National Energy Technology Laboratory