Coal In the Crosshairs

But The Fuel Retains Advantages on Cost and Scale

Coal is facing more regulatory uncertainty than ever before

By Robert Bryce

Renewable energy sources – wind and solar in particular – are the political darlings of the moment.

In June, in his first speech from the Oval Office, President Barack Obama declared that the US has an “addiction to fossil fuels.” The president then went on to use the phrase “clean energy” six times while also giving nods to wind and solar.

Coal was conspicuously absent from the president’s speech. That’s not surprising. You shouldn’t expect to hear Obama – or many other politicians on the national stage – to say anything positive about coal: be it “clean” or any other type, either. But the harsh realities of the world’s enormous energy needs, along with soaring global demand for electricity, assures that the coal business will be around for many decades to come.

That’s not a politically correct statement. Many environmental groups and politicians, both here in the US and abroad, would like to see coal become a thing of the past. They cite the coal sector’s carbon dioxide emissions, the damage done by strip mines, the dangers to miners, coal’s heavy metals content, and many other reasons to cut coal consumption. While those arguments may have some merit, the key issues are obvious: cost and scale. Coal remains the fuel of choice for electricity generation due to its relatively low cost; meanwhile the issue of scale works both to the advantage – and the disadvantage – of the industry.

I will discuss a few cost issues first, and then delve into the blessings and the curses that the coal industry has when it comes to scale.

Thomas Edison used coal to fuel the world’s first centralized power plant, on Pearl Street in lower Manhattan back in 1882, because it provided him with the lowest-cost, most convenient fuel for producing electricity for mass consumption. Today, nearly 120 years after Edison first began lighting the world, coal remains the fuel of choice. Today, nearly half of US electricity, and about 41 percent of the world’s electric power, comes from coal. And that dominance will likely continue because global electricity demand continues to soar. Over the past two decades, electricity use has grown faster than any other type of fuel consumption. Between 1990 and 2007, electricity use increased by about 68 percent. That’s nearly three times as fast as the growth in oil consumption over that time period.ⁱ

And while regulators and politicians in many countries are eager to reduce coal’s role in the electric power sector due to concerns about carbon dioxide emissions, coal-fueled power remains secure because it is so inexpensive. Recent reports from the International Energy Agency, the US Energy Information Administration, and the Massachusetts Institute of Technology, all calculated the levelized cost of electricity from various sources – coal, natural gas, nuclear, wind, solar, etc. – and all three determined that coal-fired electricity production was either the cheapest, or the second-cheapest option.1 (The EIA determined that by 2016, combined-cycle natural gas-fired generation would be cheaper than coal.)²