Coal faces more uncertainty than any other base-load generating source. Two new factors, hitherto irrelevant to the U.S. industry, will shape future generation investment—imports of liquefied...
Coal: Inconvenient Truths
The current coal bust might lead to a future boom.
In addition to cost pressures, coal faces challenges on the demand side in the form of environmental regulation of power plants and competition from other sources of electric power. Coal remains far cheaper than natural gas on a delivered basis, even with current environmental costs factored in. Alternatives to coal-fired power each come with a set of advantages and disadvantages.
There are 104 operating nuclear units in the U.S. today, which account for 21 percent of U.S. electric power generation. Utilization is high at 90 percent, which means that nuclear power will not increase its market share without new plant construction. Nuclear fuel is currently cheap but prices are expected to increase (see “Nuclear Fuel Future,” p.26) , and waste disposal is an ongoing and long-term expense. Efforts to add capacity with new plants face long lead times and public opposition, but several are making progress (see “ Financing New Nukes ”).
Gas-fired capacity is the largest of any other single U.S. power source, at 475 GW. New plant construction surged in the late 1990s and early 2000s in response to the promise of low gas prices, inexpensive plant construction costs, and increasing government and public scrutiny regarding emissions in recent years. Despite plant utilization of just under 20 percent, natural gas-fired plants contribute 20 percent to total U.S. generation. High fuel costs and volatility likely will keep utilization levels low, but another 60 GW are on the drawing board nonetheless.
Hydropower’s percentage of electrical output has ranged from 11 percent to 7 percent over the past 10 years, much of which is attributable to fluctuations in regional precipitation levels. There is an increasing awareness of some of the negative environmental impacts associated with dams ( e.g., ecosystem alteration, fish migration interference, etc.). Several regions are in the midst of droughts that are lowering output and new, large scale capacity additions are virtually out of the question in the United States.
Renewable energy’s contribution to electricity output is barely 2 percent and remains relatively insignificant. In 2006, wind accounted for 0.61 percent of all electric production in the United States. Wind’s contribution will grow as long as subsidies last, but output intermittency and transmission remain sizeable obstacles (see “ Taming the Wind ”). Renewable portfolio standards and carbon regulation will lend support for greater deployment.
Since 1990, net SO 2 and NO x emissions at coal burning plants have fallen by 31.3 percent and 33.1 percent, respectively, while the amount of coal burned has increased from 783 million tons a year to 1,015 million tons a year. Nonetheless, utilities continue facing close scrutiny to reduce their emission exposure, which has helped contribute to coal’s decreasing role in U.S. electricity supply—displaced primarily by gas. Investments in emissions-control systems have resulted in 121 GW of coal-fired capacity that currently has SO 2 controls and 306 GW with some form of NO x controls. New emissions limits under the Clean Air Interstate Rule (CAIR) and Clean Air Mercury Rule (CAMR) have spurred a further boom in emissions