(As this article demonstrates, the Environmental Protection Agency is targeting the US coal industry for virtual extinction. Thousands of jobs will disappear, and cities throughout the US will be looking for other sources of cheap electricity. Many think a recession will surely follow. -- Michael G. Zey)
After
burning coal to light up Cincinnati for six decades, the Walter C. Beckjord
Generating Station will go dark soon -- a fate that will be shared by dozens of(A
aging coal-fired power plants across the U.S. in coming years.
Their
owners cite a raft of new air-pollution regulations from the Environmental
Protection Agency, including a rule released Wednesday that limits mercury and
other emissions, for the shut-downs.
But energy
experts say there is an even bigger reason coal plants are losing out: cheap
and abundant natural gas, which is booming thanks to a surge in production from
shale-rock formations in the U.S.
"Inexpensive
natural gas is the biggest threat to coal," says Jone-Lin Wang, head of
global power research for IHS CERA, a research company. "Nothing else even
comes close."
For
decades, coal produced more electricity than all other fuels combined, and as
recently as 2003 accounted for almost 51% of net electricity generation,
according to the U.S. Energy Information Administration.
But its
share has dropped sharply in the last couple of years. It fell to 43% for the
first nine months of 2011, as natural gas's share has jumped to almost 25% from
under 17% in 2003. Meanwhile, gas prices, on average, have fallen 37 cents to
$4.02 per million British thermal units so far this year.
Many big
utilities have announced retirements of coal-burning power plants, including
Southern Co., Progress Energy Inc., First Energy Corp., Xcel Energy Inc.,
Ameren Corp. and the Tennessee Valley Authority.
Coal
consumption by the power sector is expected to fall 2% this year and 4% next
year; even small movements are important because utilities burned 92.4% of the
1,071 million tons of coal distributed last year.
Experts
think 10% to 20% of U.S. coal-fired generating capacity will get shut down by 2016.
Some of
the soon-to-be-defunct plants have been operating only sporadically because
they are inefficient and expensive to operate; Duke Energy Corp.'s Beckjord
plant in Ohio, for example, didn't even run three of its six generating units
in 2010.
Market and
regulatory forces are "sounding a death knell for many an older coal-fired
power plant," says Hugh Wynne, senior research analyst for Sanford C.
Bernstein & Co. in New York.
John
Stowell, vice president of energy and environmental policy at Duke, says the
EPA rules are triggering "an aging baby-boomer-type situation," that
will force a record number of retirements -- and soon.
The coal
and mining industries have opposed the new EPA regulations as job-killers,
though some coal companies have job openings they can't fill. The communities
that are home to the closing plants will lose jobs and tax revenues.
Closing
Beckjord, for example, will eliminate as many as 120 jobs at the plant,
according to Duke. The loss of tax revenues will cost the local school district
in New Richmond, Ohio, about $2 million a year, says Teresa Napier, the
district's chief financial officer.
Meanwhile,
natural-gas plants are springing up around the country, from Connecticut to
California. More are expected to crop up along natural-gas pipelines,
especially in places like Texas where demand for power is outstripping
supplies.
Duke, for
example, is building four big power plants. Two, in the Carolinas, will burn
natural gas. One, in Indiana, will convert coal to a cleaner, combustible gas.
Only one, in North Carolina, will burn coal.
Cost is a
big reason for the shift. Coal prices have jumped an average of 6.7% a year for
the past decade, according to the U.S. Energy Information Administration. Coal
cost $12 to $75 per short ton in early December, depending on where it was
mined and how hot it burns.
And with
energy markets flooded with cheap natural gas from shale rock, utilities have
been idling coal capacity and running gas-fired plants harder. Fitch Credit
Ratings estimates this is whittling coal sales by 63 million tons a year,
equivalent to 6% of 2010 U.S. coal consumption. Fitch says the new EPA
regulations could reduce coal sales by another 55 million tons a year, or 5% by
2016, due to plant retirements.
Coal-firm
shares have shown the strain. Peabody Energy Corp.'s stock has dropped by half
since April, to $34.54, and Consol Energy Inc.'s stock is off by a third since
March to $38.38.
But the
new EPA rules are also significant. On Wednesday, the agency released its
latest rule, requiring power plants to slash emissions of mercury, arsenic and
other toxic pollutants within three to four years.
Many state
utility commissioners say they fear the agency's recent rules will push up
electricity prices or could even hurt reliability if too many plants are shut
down.
A senior
EPA official said the agency doesn't order plants to shut down -- they are
fined for noncompliance, instead, when not meeting emissions standards -- so
"making a decision not to retrofit a plant is really a business choice by
the owner."
Credit: By
Rebecca Smith
After
burning coal to light up Cincinnati for six decades, the Walter C. Beckjord
Generating Station will go dark soon -- a fate that will be shared by dozens of(A
aging coal-fired power plants across the U.S. in coming years.
Their
owners cite a raft of new air-pollution regulations from the Environmental
Protection Agency, including a rule released Wednesday that limits mercury and
other emissions, for the shut-downs.
But energy
experts say there is an even bigger reason coal plants are losing out: cheap
and abundant natural gas, which is booming thanks to a surge in production from
shale-rock formations in the U.S.
"Inexpensive
natural gas is the biggest threat to coal," says Jone-Lin Wang, head of
global power research for IHS CERA, a research company. "Nothing else even
comes close."
For
decades, coal produced more electricity than all other fuels combined, and as
recently as 2003 accounted for almost 51% of net electricity generation,
according to the U.S. Energy Information Administration.
But its
share has dropped sharply in the last couple of years. It fell to 43% for the
first nine months of 2011, as natural gas's share has jumped to almost 25% from
under 17% in 2003. Meanwhile, gas prices, on average, have fallen 37 cents to
$4.02 per million British thermal units so far this year.
Many big
utilities have announced retirements of coal-burning power plants, including
Southern Co., Progress Energy Inc., First Energy Corp., Xcel Energy Inc.,
Ameren Corp. and the Tennessee Valley Authority.
Coal
consumption by the power sector is expected to fall 2% this year and 4% next
year; even small movements are important because utilities burned 92.4% of the
1,071 million tons of coal distributed last year.
Experts
think 10% to 20% of U.S. coal-fired generating capacity will get shut down by 2016.
Some of
the soon-to-be-defunct plants have been operating only sporadically because
they are inefficient and expensive to operate; Duke Energy Corp.'s Beckjord
plant in Ohio, for example, didn't even run three of its six generating units
in 2010.
Market and
regulatory forces are "sounding a death knell for many an older coal-fired
power plant," says Hugh Wynne, senior research analyst for Sanford C.
Bernstein & Co. in New York.
John
Stowell, vice president of energy and environmental policy at Duke, says the
EPA rules are triggering "an aging baby-boomer-type situation," that
will force a record number of retirements -- and soon.
The coal
and mining industries have opposed the new EPA regulations as job-killers,
though some coal companies have job openings they can't fill. The communities
that are home to the closing plants will lose jobs and tax revenues.
Closing
Beckjord, for example, will eliminate as many as 120 jobs at the plant,
according to Duke. The loss of tax revenues will cost the local school district
in New Richmond, Ohio, about $2 million a year, says Teresa Napier, the
district's chief financial officer.
Meanwhile,
natural-gas plants are springing up around the country, from Connecticut to
California. More are expected to crop up along natural-gas pipelines,
especially in places like Texas where demand for power is outstripping
supplies.
Duke, for
example, is building four big power plants. Two, in the Carolinas, will burn
natural gas. One, in Indiana, will convert coal to a cleaner, combustible gas.
Only one, in North Carolina, will burn coal.
Cost is a
big reason for the shift. Coal prices have jumped an average of 6.7% a year for
the past decade, according to the U.S. Energy Information Administration. Coal
cost $12 to $75 per short ton in early December, depending on where it was
mined and how hot it burns.
And with
energy markets flooded with cheap natural gas from shale rock, utilities have
been idling coal capacity and running gas-fired plants harder. Fitch Credit
Ratings estimates this is whittling coal sales by 63 million tons a year,
equivalent to 6% of 2010 U.S. coal consumption. Fitch says the new EPA
regulations could reduce coal sales by another 55 million tons a year, or 5% by
2016, due to plant retirements.
Coal-firm
shares have shown the strain. Peabody Energy Corp.'s stock has dropped by half
since April, to $34.54, and Consol Energy Inc.'s stock is off by a third since
March to $38.38.
But the
new EPA rules are also significant. On Wednesday, the agency released its
latest rule, requiring power plants to slash emissions of mercury, arsenic and
other toxic pollutants within three to four years.
Many state
utility commissioners say they fear the agency's recent rules will push up
electricity prices or could even hurt reliability if too many plants are shut
down.
A senior
EPA official said the agency doesn't order plants to shut down -- they are
fined for noncompliance, instead, when not meeting emissions standards -- so
"making a decision not to retrofit a plant is really a business choice by
the owner."
Credit: By
Rebecca Smith
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