The Outlook for Coal: A case of muddling through

The Obama Administration doesn’t like fossil energy but it has few real options for backing them out of the economy. Coal is the predominant source of electrical power and will remain so until coal fired units are replaced by natural gas or a viable clean coal technology. The turnover of capital stock is slow and attempts to accelerate that turnover or replace coal with “alternatives” will drive up costs and threaten the reliability of the grid.

According to Professor Massoud Amin, a grid expert at the University of Minnesota, “we are operating the overall system closer to the edge.” Focusing on carbon emissions from power plants instead of modernizing and strengthening the grid is a clear case of misplaced priorities.

The President continues to adhere to the climate orthodoxy in spite of the fact that its underlying theory has unraveled. The fact that global temperatures have not risen in 16 years clearly demonstrates that the simplistic assumption that CO2 emission increases lead to temperature increases is just that, simplistic.

The output of climate models has gotten worse not better. If the President continues to base his energy policies on a flawed theory, the policies will continue to fail waste scarce resources, and inflict unnecessary harm on the economy.

Political pandering and posturing creates unnecessary uncertainty but in the end won’t trump economic, energy, and technological realities. The President’s goal is to reduce carbon emissions 17% below the 2005 level by 2020. That means taking them back to the level of the early 1980s. At that time, the US population stood at about 225 million and real GDP at about $5.8 billion. Today, the population is over 310 million and GDP is close to $14 billion. By 2020, GDP should exceed $15 billion and our population is projected to exceed 330 million.

These statistics might seem mind numbing but they explain why the President’s goal is “mission Impossible.” A growing population and growing economy require more energy not less. As our economy continues it shift to be service based that energy will increasingly be from electricity. If EPA issues regulations similar to the legally suspect Utility MACT, it will force the shuttering of coal fired units and make it difficult to simultaneously replace them with natural gas and to expand the output of electrical power.

Nuclear facilities are being shut down and at best wind and solar are niche sources that can make only trivial contributions to meeting our near term needs.  At some point, the President should explain how he will reconcile the incompatibility between his goal of fewer emissions and more energy to power the economy. There is no technology available to fill the power gap that he is about to create, if he actually follows through on his rhetoric. Utilities have been searching for “clean coal” solutions for decades without finding any that are commercially viable. At best, the President’s program will just make electrical power more expensive. Anyone who doubts this should take a serious look at what similar policies have produced in the EU.

The developing world might give lip service to reducing emissions and an off coal agenda but it will just be rhetoric. China, India, and other developing countries want higher standards of living and strong economic growth. They will not sacrifice those at the altar of climate orthodoxy. The President’s trip to Africa should have exposed him to the plight of people who do not have access to commercial energy, potable water, adequate diets or health care. Lifting them from the depths of despair will require affordable and abundant energy.  Coal will be used in many areas because of infrastructure constraints and lack of capacity for more advanced technologies.

Several years ago, an MIT study-The Future of Coal– led by the current secretary of Energy and former CIA director laid out the challenges of constraining carbon emissions from coal. The technologies to do so are not yet commercially viable and may not be so by 2020. Instead of issuing unrealistic proclamations, the President would better serve the needs of our economy and the globe’s by working to get utility incentives right and by supporting a well thought out public-private R&D program for coal.

This article appeared in the National Journal’s Insiders Energy weblog athttp://www.nationaljournal.com/insiders/energy/coal-s-crystal-ball-bright-muddled-or-bleak-20130708#comment-955563092

Partner & Fellow Blogs