Despite EPA Rules, Coal Keeps Dominance
by William O'Keefe
July 18, 2011
Policymakers have debated the future of coal for decades, mainly because of environmental concerns. Those concerns continue. This EPA seems determined to make regulations affecting the fuel’s use ever more stringent. And yet, coal remains the largest source of electricity generation in the United States.
In its most recent energy outlook, EIA projects generation from coal increases by 25% between 2009 and 2035, even though:
EIA projects few new central-station coal-fired power plants ... beyond those already under construction or supported by clean coal incentives. Generation from coal increases ... as a result of increased use of existing capacity.
None the less coal's share of the generation mix fall from 45 to 43 percent as a result of shifts to natural gas.
If EPA regulations become even more stringent, the percentage of electricity from coal could drop even more. But coal would still remain our primary source of electricity because of existing capacity and its cost advantage.
If the Federal government decides that a "smaller carbon footprint" is needed, there are only two ways to achieve it. The first involves policies that increase the percentage of generation from natural gas. Accelerating the turn over of older capital stock would do that. The second requires a breakthrough in clean coal technology. Research on clean coal technologies has been going on for decades, but the cost of power using these remains too high.
Reducing the footprint by nuclear or renewables does not seem likely. The cost of nuclear power is too high, in large measure because the cost of capital contains a large risk premium. Additionally, resolving the impasse over Yucca Mountain appears a mountain too high to climb. The renewables panacea is like the horizon, it recedes as you approach it. Hype not withstanding, wind and solar will remain niche sources of electric power for decades to come.
The Federal government—as well as states—needs to take a clear-headed look at our electric power needs and the realistic ways of meeting them. As our economy continues its shift from manufacturing to service and as population continues to grow, our electric power needs will as well. As an input to economic output, electric power should be abundant and affordable.
Policies that attempt to "wean" the nation off of coal will make electric power less abundant and more expensive. Those would be wrong headed policies. Advances in technologies can further improve energy efficiency and cost-effectively reduce emissions. But those take time and, all too often, government is impatient and tries to force technology. That rarely works.
Exaggerated environmental impacts, especially those related to CO2, do more harm than good. Consumers and the economy would benefit from a realistic assessment of risks and cost-effective policies to address them. That is unlikely to happen. But hope springs eternal.