Earlier this week, a column from the Public Utilities Fortnightly Spark website got me thinking about an issue I haven't focused on in a while -- the role of natural gas prices in shaping the economics of coal-fired power generation.  I’ll chalk it up to my lack of focus being preoccupied with trying to figure out CSAPR; our ever-morphing friendly ghost. But the upward pressures on natural gas prices -- which largely determines the financial performance of coal-fired generation in wholesale power markets -- combined with a variety of other emerging developments, suggests that coal will continue to play a vital role in our country's energy future.
The observation on natural gas prices that caught my eyes was:

“Even with recent large natural gas discoveries, significant technology advances, and higher-than-average inventories, the supply of natural gas is not elastic enough to handle the price impact of significant demand increases. As a result, as natural gas prices rise, the economics of environmental compliance investments for coal plants will also change. The result will be to push coal back into the money despite very high costs for compliance with potential EPA carbon emissions limitations and requirements. In any event, the prospects for increased natural gas consumption in the utility sector are enough to indicate that gas prices likely will rise in the short term. The real questions everyone should be asking are how high and how fast?”

There are several additional factors working against the demise of coal-fired generation. For one thing, constraints in both electricity transmission and natural gas transportation infrastructure are limiting how much coal-fired capacity can be retired and replaced with gas.  In the last two years, several requests to retired older medium-sized coal units have been rejected by their respective ISO's on the basis or reliability and grid stability concerns.  Moreover, much of the transmission capacity available for wind farms that are already being  developed are now being employed to move the tremendous amount of new wind generation from the rural areas where this resource is viable to the urban locations comprising the greatest source of electricity demand.  

Since I’m on the topic of wind, I can't help but to digress and note the tremendous number of new wind turbines that have sprouted up along the rural landscape since I last traversed the state of Iowa via Interstate 80. Literally hundreds of them, for as far as the eye can see. While farming is still the mainstay in this part of our country called the "Breadbasket of America" it appears that much of what is being farmed is wind power; and a large proportion of the "bread" now takes the form of royalties that traditional farmers are deriving from the electricity being generated on their land.

Of course the additional demands placed on our bulk power transmission system by wind power pale in comparison  with the vastly increased wholesale power trading that has characterized US bulk power markets since the passage of the Energy Policy Act of 1992. Our incredibly capital-intensive historical electricity infrastructure was developed largely on the premise of vertically integrated regulated utilities serving their own retail customers with interconnections existing primarily to deal with power reliability contingencies.  This same system is now being used to support extensive and far-flung wholesale power trading both within and between the major wholesale markets. And expanding on this system would be both enormously costly and institutionally difficult.    All of these factors serve to increase our dependence on coal-fired generation.  This being said, both existing and potential new plants still no doubt face difficult challenges.  These include:

•    no end in sight of more stringent limits on NOx and SO2,
•    the traditional "criterion pollutants" (e.g. the CSAPR program slated to start in less than two months);
•    renewed emphasis on regulation of mercury and other hazardous pollutants;
•    and continued uncertainty about when and how CO2 emissions will be regulated in the US.  

In my view, however, coal-fired generation's will likely continue playing a strong role in our near- and medium-term future (I define "medium-term" as the next 15-20 years). In addition to likely natural gas price increases and reliability constraints, two additional reasons why coal-fired generation will remain vital to the US energy picture include:  

1.    Even the most optimistic projections for renewables will make for marginal contributions, and while they create new challenges for base-load generation they cannot replace it; and
2.    The electrification of the US transportation sector with its large demands for battery charging predominantly at night will not only increase overall demand, but also bring former base-load coal plants that are now cycling back to base-load, and make coal-fired plants that are still base-loaded even more financially attractive.  

These developments, combined with the ongoing progress of clean coal technologies such as multi-pollutant removal systems, biological processes for controlling CO2, commercialization of large scale carbon capture and sequestration (CCS) technologies, and new ultra-supercritical boilers create the potential for a vibrant future where we maintain energy security through using our most abundant domestic energy resource while meeting both existing and emerging environmental challenges.  

I predict that coal will be a necessary part of the U.S. generation mix in the foreseeable future; but that we must diligently work together to ensure that this generation resource be employed in the cleanest and most efficient manner possible.

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