that the current short-term U.S. coal production capacity is roughly 15–20 percent greater than output, which reflects the fact that the most critical short-term constraints on increased coal use are in the demand sector.13
In 1977, coal provided about 14 quads (or 18.4 percent) of the 76.6 quads of energy consumed in the United States. Electric utility boilers consumed 10.7 quads, or about 77 percent of total coal consumption; about 13 percent, or 1.7 quads, was consumed in the manufacture of coke for steel; and other industries consumed 1.4 quads, or 10 percent, primarily as boiler fuel. Less than one fifth of a quad was distributed at retail, primarily as a commercial and residential fuel.14 In the utility market, coal competes with oil, natural gas, and nuclear power; in the industrial boiler market, it competes with oil and natural gas.
The expansion of coal consumption is and will continue to be limited by constraints on demand. Under the National Energy Plan (NEP) of 1977, which called for a near doubling of coal use by 1985, industrial coal consumption was projected to increase at nearly 12 percent annually, and electric utility coal consumption at about 6 percent.15 The nation’s utilities may be able to meet the forecast rate of increase, because under the Powerplant and Industrial Fuel Use Act of 1978 (Public Law 95–620) they are limited almost entirely to coal and nuclear power for new base-load generating capacity. The industrial projections of the NEP appear optimistic, however, given the small scale of many industrial installations now using oil and gas, and the consequently large investments required in new coal-handling facilities, expensive exhaust-gas scrubbers, and the like, (It should be noted that Congress failed to enact some of the plan’s key coal-use incentives.)
In addition, rapid changes in the regulation of coal mining and combustion render the future economics of coal use rather uncertain. New surface-mining legislation, for example, will no doubt decrease somewhat the current cost advantage enjoyed by surface-mined coal over deep-mined coal. Newly proposed air pollution regulations, which would require all new large coal-fired units to install desulfurization equipment, will raise the cost of burning coal and reduce the economic advantage of low-sulfur western coal as a means of meeting air quality requirements. Until the economic implications of these and other regulatory actions are fully understood, coal will not find ready acceptance in many applications, especially in smaller industrial applications, where the costs per unit of heat tend to be greater than in larger operations such as utilities and large industrial establishments.