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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Coal companies face declining demand for their product from U.S. Power companies, but rising demand for coal in China and India will offset declining demand for coal among U.S. electric generators, speakers told a webcast on the "Future of Coal Generation" on April 21.
Coal's fortunes in the U.S. could brighten if natural gas prices rise to about $6 per million British thermal units (MMBtu) from its current level of about $4.50, Mark Griffith, managing director for the power market analysis practice at Black & Veatch (Overland Park, Kansas), told the attendees. "Natural gas prices are surprisingly influential on the 'retire or retrofit' decisions being made by utility companies," he said. "Gas in the $4 range will drive retirements of more coal-fired power plants, but $6 gas tips the scale back to coal for base-load generation."
Aside from the scope of new rules from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.), Griffith said that the two most significant drivers in the "retire or retrofit" decision are the size and age of the coal-fired generator. "Larger coal-fired plants can reap the benefits of scaling pollution control equipment."
"New coal plants are almost impossible to permit and finance today," observed Doug Egan, chairman and chief executive at Competitive Power Ventures Incorporated (Silver Spring, Maryland), an independent power developer. "Utilities have announced the retirement of 12 gigawatts (GW) of coal-fired generating capacity in recent years, and consulting firms estimate somewhere between 30 and 70 GW of U.S. coal-fired generation will be retired because of environmental regulations."
Egan, whose firm develops natural gas and wind power projects, noted that coal's share of the U.S. electricity mix has fallen from about 52% in 1990 to about 45% in 2008, according to data compiled by the Energy Information Administration (EIA), the statistical and analytic branch of the U.S. Department of Energy (DoE) (Washington, D.C.). During that same period, natural gas' share of the electricity mix has more than doubled, from 11% to 25%.
Looking forward, B&V's Griffith told the webcast that 40% of U.S. electricity will come from natural gas in 2035, while coal's share of the electric market will drop to about 21% by that date. Nuclear power will rise slightly, to 21% from 20% today, while non-hydro renewables will increase to 11% from 4% today.
The speakers discussed the bevy of draft environmental regulations facing the coal and Power industries, including:
"The timing and degree of future environmental regulations will be at least partly affected by the results of the 2012 presidential elections," Egan predicted. Not all planned EPA actions affecting the power industry will be made before that election, he said. For more on recent U.S. environmental regulations affecting coal, see April 13, 2011, article - Regulatory Clarity Still Elusive for Utility, Despite Flurry of EPA Draft Rules and its March 18, 2011, article - EPA Releases Draft Rule on Mercury Emissions, New Source Performance Standards.
Citing the large gap in capital costs between building a natural gas-fired combined-cycle generator, at about $700 per kilowatt (kW) of installed capacity, and supercritical coal-fired capacity with carbon capture and sequestration (CCS), at an estimated $3,800 per kW, Egan said, "the market will make the economically and environmentally rational decision" and continue the trend toward constructing more gas-fired electric generation.
"In the U.S. and Europe today, you're pretty much not allowed to build a new coal-fired power plant without some type of CCS," Egan said. New-build nuclear power costs an estimated $5,000 per kW, he continued, adding: "I never bought into the idea that there would be a rebirth of nuclear power in this country. The economics don't work. Before you even put a shovel into the ground you'll be spending a billion dollars, and that doesn't work here." For more on that issue, see Industrial Info's April 22, 2011, article - NRG Energy Writes Off its Investment in South Texas Project Units 3 & 4.
Echoing the webcast's other speakers, Kenneth Green, resident scholar at the American Enterprise Institute (AEI) (Washington, D.C.), said: "Coal's share of the U.S. electric market will shrink considerably over the next 20 years, but that doesn't mean the overall fortunes of coal companies will decline. In fact, there will be a lot of coal mined in the U.S. and shipped to Asia, which will drive the environmentalists nuts.
"People won't leave vast sums of wealth underground. It will be pulled out and burned somewhere," Green continued. Mining and exporting U.S. coal to India, China and other fast-growing nations will preserve governmental mining lease revenue. "The American consumer is not really interested on doing anything on climate change that will cost them anything," he asserted, noting the diminished support for greenhouse gas (GHG) legislation or regulation compared to two years ago.
Green also said that U.S. consumers are less concerned about any form of pollution--including what he derided as "carbon pollution"--emitted overseas or that was not visible. He contrasted broad public support for regulation of particulates and visibility with declining support for regulation of carbon dioxide emissions.
"The U.S. government seems committed to jacking up the price of energy and reducing its availability," concluded Green, who advocated removing all government subsidies on energy and letting the market decide which types of generation to build.
The AEI resident scholar said he doubted that new federal energy taxes would be enacted given the Republican Party's control of the House of Representatives. But he said that if energy taxes were to be enacted, "a carbon tax would be preferable to cap & trade, which would be preferable to EPA regulation. But that's like saying that losing your finger is preferable to losing your hand to losing your arm. It may be true, but that doesn't make it good."
Readers can track the development of projects in the Power and the Metals & Minerals industries, including coal export terminals, using IIR's databases, which are updated daily by hundreds of researchers working on five continents around the world.
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Coal's fortunes in the U.S. could brighten if natural gas prices rise to about $6 per million British thermal units (MMBtu) from its current level of about $4.50, Mark Griffith, managing director for the power market analysis practice at Black & Veatch (Overland Park, Kansas), told the attendees. "Natural gas prices are surprisingly influential on the 'retire or retrofit' decisions being made by utility companies," he said. "Gas in the $4 range will drive retirements of more coal-fired power plants, but $6 gas tips the scale back to coal for base-load generation."
Aside from the scope of new rules from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.), Griffith said that the two most significant drivers in the "retire or retrofit" decision are the size and age of the coal-fired generator. "Larger coal-fired plants can reap the benefits of scaling pollution control equipment."
"New coal plants are almost impossible to permit and finance today," observed Doug Egan, chairman and chief executive at Competitive Power Ventures Incorporated (Silver Spring, Maryland), an independent power developer. "Utilities have announced the retirement of 12 gigawatts (GW) of coal-fired generating capacity in recent years, and consulting firms estimate somewhere between 30 and 70 GW of U.S. coal-fired generation will be retired because of environmental regulations."
Egan, whose firm develops natural gas and wind power projects, noted that coal's share of the U.S. electricity mix has fallen from about 52% in 1990 to about 45% in 2008, according to data compiled by the Energy Information Administration (EIA), the statistical and analytic branch of the U.S. Department of Energy (DoE) (Washington, D.C.). During that same period, natural gas' share of the electricity mix has more than doubled, from 11% to 25%.
Looking forward, B&V's Griffith told the webcast that 40% of U.S. electricity will come from natural gas in 2035, while coal's share of the electric market will drop to about 21% by that date. Nuclear power will rise slightly, to 21% from 20% today, while non-hydro renewables will increase to 11% from 4% today.
The speakers discussed the bevy of draft environmental regulations facing the coal and Power industries, including:
- Utility boiler MACT
- Regional Haze
- New Source Review
- Clean Air Transport Rule
- Clean Water Act section 316(b)
- Solid Waste Disposal
"The timing and degree of future environmental regulations will be at least partly affected by the results of the 2012 presidential elections," Egan predicted. Not all planned EPA actions affecting the power industry will be made before that election, he said. For more on recent U.S. environmental regulations affecting coal, see April 13, 2011, article - Regulatory Clarity Still Elusive for Utility, Despite Flurry of EPA Draft Rules and its March 18, 2011, article - EPA Releases Draft Rule on Mercury Emissions, New Source Performance Standards.
Citing the large gap in capital costs between building a natural gas-fired combined-cycle generator, at about $700 per kilowatt (kW) of installed capacity, and supercritical coal-fired capacity with carbon capture and sequestration (CCS), at an estimated $3,800 per kW, Egan said, "the market will make the economically and environmentally rational decision" and continue the trend toward constructing more gas-fired electric generation.
"In the U.S. and Europe today, you're pretty much not allowed to build a new coal-fired power plant without some type of CCS," Egan said. New-build nuclear power costs an estimated $5,000 per kW, he continued, adding: "I never bought into the idea that there would be a rebirth of nuclear power in this country. The economics don't work. Before you even put a shovel into the ground you'll be spending a billion dollars, and that doesn't work here." For more on that issue, see Industrial Info's April 22, 2011, article - NRG Energy Writes Off its Investment in South Texas Project Units 3 & 4.
Echoing the webcast's other speakers, Kenneth Green, resident scholar at the American Enterprise Institute (AEI) (Washington, D.C.), said: "Coal's share of the U.S. electric market will shrink considerably over the next 20 years, but that doesn't mean the overall fortunes of coal companies will decline. In fact, there will be a lot of coal mined in the U.S. and shipped to Asia, which will drive the environmentalists nuts.
"People won't leave vast sums of wealth underground. It will be pulled out and burned somewhere," Green continued. Mining and exporting U.S. coal to India, China and other fast-growing nations will preserve governmental mining lease revenue. "The American consumer is not really interested on doing anything on climate change that will cost them anything," he asserted, noting the diminished support for greenhouse gas (GHG) legislation or regulation compared to two years ago.
Green also said that U.S. consumers are less concerned about any form of pollution--including what he derided as "carbon pollution"--emitted overseas or that was not visible. He contrasted broad public support for regulation of particulates and visibility with declining support for regulation of carbon dioxide emissions.
"The U.S. government seems committed to jacking up the price of energy and reducing its availability," concluded Green, who advocated removing all government subsidies on energy and letting the market decide which types of generation to build.
The AEI resident scholar said he doubted that new federal energy taxes would be enacted given the Republican Party's control of the House of Representatives. But he said that if energy taxes were to be enacted, "a carbon tax would be preferable to cap & trade, which would be preferable to EPA regulation. But that's like saying that losing your finger is preferable to losing your hand to losing your arm. It may be true, but that doesn't make it good."
Readers can track the development of projects in the Power and the Metals & Minerals industries, including coal export terminals, using IIR's databases, which are updated daily by hundreds of researchers working on five continents around the world.
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
