Coal remains the workhorse of the US electricity sector, but its future is murkier than ever.
The industry has been on a campaign for nearly a decade to educate Americans about the extent to which their electricity comes from coal, but have had difficulty turning that into a wider recognition of the contributions comparatively cheap power have made in boosting US economic performance.
Although several high profile mining accidents have played a part in dirtying the coal industry’s image, the availability of cheap natural gas in recent years has also underpinned a perception that the US simply does not need coal-fired generation to the same extent that it did when alternative fossil fuels were much more expensive.
The US mined 1.07 billion tons of coal in 2009, the National Mining Association said, down 100 million tons from 1.17 billion tons produced in 2009. The consumption of coal in the electricity generating sector slipped below 1 billion tons in 2009 for the first time since 2002, due both to stagnant overall demand for power in a struggling economy and the replacement of coal-fired power with natural gas. The remaining coal is inventoried or exported.
Despite assurances from the Obama administration and advocates on Capitol Hill that politicians understand the value of the US coal resource, the US coal industry continues to labor under the shadow of impending federal rules on sulfur dioxide and nitrogen dioxide emissions from power plants that are expected to shutter a host of coal-fired power plants.
Estimates range widely for shut downs of coal fired power plants resulting from the Environmental Protection Agency’s (EPA) Maximum Available Control Technology (MACT) rules, but some estimates from bank analysts range as high as 15% of existing generation and 10% of US coal-fired power generation net of new additions. Given that US coal-fired generation produces roughly half of the country’s electricity, the new rules could plausibly remove roughly 5% of current total US electricity production in the next four years.
Resistance is gathering to implementation of the EPA’s MACT rules on the original timeline of 2015, but investors are prepared for eventual shutdowns that will begin around the existing implementation date. Bank analysts are calling for a “shale gale” of investment by utilities in natural gas-fueled generation, the only kind of electricity capacity that can be built quickly enough and with few enough emissions to meet medium-term demand.
Clean coal technologies, largely based on gasification and subsequent injection of the resulting pollutant slipstreams into the ground in a practice known as carbon sequestration, have gained scientific popularity and could form a long-term option for building emissions-restricted coal-fired power plants. In the meantime, the industry’s safety record and operational standards have to remain top-notch to prevent further supply-side threats that could undo all the work to boost power sector demand for coal.
Few expect coal usage to disappear in the US; the Energy Information Administration forecasts coal production will slip sharply by 2014, falling enough that despite a return to 1.1% annual growth rates the total fails to hit 2008 levels again until after 2025. Much of the increase is based on an expectation coal will eventually be used on a wider basis to make synthetic transportation fuels.
But with natural gas now ready to knock King Coal from its thrown, and research and development focused on lowering the cost and easing the integration of renewable fuels, the industry remains stuck in the defensive for the foreseeable future.
Picture: Recently installed wind turbines generate electricity in the shadow of Drax, Europe’s biggest coal fired power station, on August 24, 2010 in Selby, England. The Rusholme wind farm will create 24 Mega Watts when fully operational in comparison to Drax which creates 3,960 Mega Watts. (Photo by Christopher Furlong/Getty Images)
