The outlook for coal-fired power production in the U.S. is not as ominous as most people think. Projections of the death of coal-fired power are based on hype from enthusiastic idealists and unwitting journalists caught in a popular campaign against coal.
The transition to gas-fired generation will continue, which is a good thing. Increasing the use of this nation's large supply of shale gas will lead to fewer emissions, better efficiency and more diversity.
But coal will continue to be the backbone of the nation's power sector because of its reliability and affordability. The natural gas industry, for a number of reasons, is not ready to take the lead in providing most of the nation's power supplies. Most power producers acknowledge this risk. There are too many questions about reserves, pipeline capacity and pricing. What's more, the increasing use of natural gas as a transportation fuel and the opportunity to sell U.S. gas supplies overseas at higher prices creates a large amount of risk, which means power producers will need significant coal capacity to mitigate that risk. After all, the nation's grid was built around coal, which makes coal largely more reliable than gas.
Coal will remain the dominant source of power generation in the U.S. for the next 27 years, according to the Department of Energy's Annual Energy Outlook, which was released last month. Coal will account for 35 percent of the nation's power in 2040, down from 42 percent in 2011, the report showed. Gas will be used to produce 30 percent of the country's power supplies in 2040, up from 24 percent in 2011. The amount of power produced from renewable resources will grow from 13 percent in 2011 to just 16 percent in 2040.
The lion's share of future demand will be met with what is left of the nation's existing fleet of coal-fired plants, upgraded at great cost with emission control technologies.
But it's not enough. In the name of reliability and affordability, power producers should be given the option of building new generation fueled with coal. Right now, they don't have that option. It was eliminated under a new greenhouse gas rule that essentially bars the construction of a coal-fired plant in the U.S. It is one of the most ill-conceived rules ever proposed by the EPA.
But the book on new emission standards for coal-fired plants is still being written. Just last month, the EPA delayed the release of its greenhouse gas standard for new plants. The agency said it needs more time to review more than 2 million comments on the rule. Industry observers say the delay means the agency may revamp the rule in a way that returns to power producers the option of constructing new generation fired by coal.
Given that option, I believe U.S. power producers would bear the added cost of building a coal-fired power plant to mitigate the enormous risk and vulnerability posed by natural gas.
Meanwhile, the market is telling us that coal should play a starring role in this nation's plan to meet demand with reliable and affordable energy.
In March, the use of coal-fired generation was 21 percent higher than the same month last year. The use of gas-fired generation and renewable power fell 11 percent and 14 percent, respectively.
Natural gas prices are rising much faster than coal prices, prompting power producers to use more coal to meet demand. Gas prices have risen 60 percent in the last year, while coal prices have increased just 2 percent during the same period.
Giving power producers the option to pursue new coal projects by establishing a reasonable GHG limit for coal is a compromise that achieves the right balance between environmental concerns and economic concerns. Let's hope the EPA is listening.
If you have a question or a comment, please contact me at firstname.lastname@example.org