U.S. Coal Producers May Have to Seek Markets Overseas

Things aren’t going well for U.S. coal producers these days. The sharp drop in the price of natural gas, combined with newly proposed federal emissions standards is making the construction of any new coal-fired plants nearly impossible. A report published by Bloomberg Government this month predicts their ultimate demise. Bloomberg News also recently reported on the coal industry’s attempts to reverse this trend with an expensive, and expansive, public relations campaign — using everything from Nascar to good old-fashioned D.C. lobbyists.
The report, entitled “The Twilight of Coal-Fired Power?” says the EPA’s new emission requirements, which would require expensive upgrades, would make coal too costly to generate electricity. The EPA’s new regulations have the goal of reducing harmful greenhouse gases. And natural gas burns a lot cleaner than coal. But the study, authored by energy analyst Rob Barnett, says even without these new EPA rules, the record low price for natural gas, in part spurred on by the shale boom, is making coal uncompetitive as a power generator. In other words, the rotten remains of the Stegosaurus trapped in shale rock are making dinosaurs out of the coal industry.
New natural gas plants already meet the EPA’s current emission standards. But traditional coal plants emit on average twice as much as the proposed limit, according to Bloomberg Government.

“Conventional coal plants have an average emission rate of just below 2,000 pounds of CO2 per MWh, which means new conventional plants would effectively be banned under the proposed 1,000-pound standard. The rule would also prohibit the construction of new baseload oil-fired power plants. On the other hand, a typical new natural gas plant is capable of meeting the standard; a natural gas combined-cycle power plant has an emission rate just below 800 pounds of CO2 per MWh, or about 60 percent below coal.”

But wait, what about carbon sequestration, or “clean coal,” which former Governor Ed Rendell was so keen on, before he became enamored with Marcellus Shale. The report says that carbon capture and storage would cost too much without federal subsidies. And the EPA can only issue regulations, they can’t give out money.

“According to Energy Information Administration estimates, electricity generated from coal with CCS is almost 50 percent more expensive than energy generated from conventional coal, and about twice as expensive as natural gas-generated electricity. Essentially, a natural gas plant can comply with the EPA’s proposed standard at a much lower cost, which begs the question of why investors would choose to build coal with CCS.”

Although natural gas prices are expected to increase, the Bloomberg report says they would have to rise by a factor of five, to reach a level of competition with coal. So the report concludes that current economics makes the EPA’s rulemaking on emissions moot for King Coal’s fate. Exports of U.S. coal are on the rise, almost doubling in the last five years. China and India are hungry for more power, and may provide new markets. The Pittsburgh Post-Gazette recently reported on how Consul was able to re-open coal mines to serve an overseas demand.

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