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's Black Future
Turbulent politics and market trends cloud prospects for coal-fired power.
proportional to their historical emissions, only stepped down gradually in proportion to the national cap, then the burden will be fairly limited. In effect, the rest of the economy will subsidize the transition to non-coal generation by purchasing allowances from the departing coal plants. However, if the cap-and-trade is not economy-wide, or if the allocations largely are auctioned off, then the burden will fall directly on the coal-heavy regions. And the resulting price fly-up likely will cause a vigorous push-back from both households and businesses in the affected areas. This is not an unlikely scenario and strengthens the resilience of traditional coal—changing the game.
National security also may raise a whole different political issue. On one hand, increasing LNG imports would make the United States’ economy—and the larger world economy—ever more dependent on uninterrupted supplies from some of the world’s most politically unstable regions. On the other hand, the United States and the world already depend on the same regions for exports of petroleum liquids, so how much additional risk do LNG imports really impose?
Additionally, these projections anticipate business as usual largely will continue in both commerce and politics. That could change. If the intertwined issues of energy affordability, energy security and climate change achieve enough political salience, the federal government (and others) might commit large-scale resources to advancing the relevant technologies rapidly. Breakthroughs in the separation of greenhouse gases, or catalyzed coal gasification, could re-arrange the playing field quickly.
If and when GHG restrictions materialize, there’s little doubt that much of the burden will fall on coal-fired generation. With today’s prices and technologies, that would lead to substantial shrinkage of the coal-fired power fleet over the next two decades. Non-traditional gasification and CCS technologies hold promise for altering that path, but so do reinvigorating nuclear development, expanding renewables and intensifying demand management. The main dilemma for most utilities and generation developers is handicapping this technology race, as well as the associated politics. In short, it’s easier to envision the world of electricity generation after 2030 than to find a satisfactory strategy to get there.