Energy Policy:

Lawmakers, analysts debate the changing dynamics of coal markets in the U.S.

As the United States' most abundant source of energy, what role will coal play as the United States moves toward a clean energy future? Is coal still a stable investment for utilities? Can clean coal and coal-to-liquids save the industry? During E&ETV's Special Report, "Debating the Future of Coal," lawmakers and analysts discuss the shifting economics of coal. Interviewed experts include Steve Miller of the American Coalition for Clean Coal Electricity; Bill McCollum of the Tennessee Valley Authority; Sen. John Barrasso (R-Wyo.); Reps. Colleen Hanabusa (D-Hawaii), Bill Johnson (R-Ohio) and Joe Barton (R-Texas); Jeff Holmstead of Bracewell & Giuliani; David Hawkins of the Natural Resources Defense Council; and Christine Tezak of Robert W. Baird & Co.

Transcript

Sen. John Barrasso: Coal continues to be the most available, affordable, reliable and secure source of energy we have in the United States and we have a lot of it. It's going to continue to play a very, very important role in our energy mix.

Steve Miller: I view the future of coal-based electricity as one of limitless possibilities.

Bill McCollum: Coal is challenged today, there are more concerns about the environmental impacts of coal, particularly regulated emissions and the need to put environmental controls on our existing coal plants over the next several years if we're going to continue to operate those.

Jeff Holmstead: Energy policy in the U.S. is determined almost entirely by EPA and the environmental community and we've seen over the last couple of years that there's a real sense that at least the Obama administration doesn't want any more coal.

David Hawkins: Coal is very dirty in many respects, starting from when it's mined to how it's used and how the ash is disposed of. So it's a fuel that needs to clean up its act and why does it need to clean up its act as opposed to we should just stop using it? Well, coal is very abundant.

Monica Trauzzi: With Washington debating the long-term prospects for coal, is it still a stable investment for utilities?

Jeff Holmstead: The uncertainty created, especially by the new permitting process for CO2, makes it very difficult to permit new plants. So a part of what EPA has done, which is the regulation of greenhouse gases under this permitting program, has created just a lot of uncertainty. It's very hard to get people to invest really in anything, but coal in particular.

Bill McCollum: There are cost challenges in the electric generation business, just as there are in any business these days. But there are also opportunities to look at the energy mix that we have, the energy portfolio that we use in this country to generate electricity, and to make the right sort of economic choices going forward. The potential of having to put controls on all of the existing coal-fired generation or make decisions to retire some of those, certainly creates cost pressure. TVA will spend $3 to $5 billion on clean-air controls for our fleet going forward and for alternative generation. And so that's an important factor to look at as we go forward and consider how to best manage our energy mix.

David Hawkins: Oh, there are very definitely financial risks, I think that's why you see essentially no new coal plants being proposed today in the United States. Wall Street understands that's a terribly bad bet financially and it will continue to be a bad bet as long as there's policy uncertainty about what happens with global warming policy. Coal use is not going to disappear overnight. What's going to happen is that the growth in coal use is going to stop and it's going to start losing market share. That is not going to put the coal industry out of business, but it is going to mean fewer and fewer growth prospects for coal.

Steve Miller: But we're seeing major utilities like American Electric Power, like Southern Company, rural electric cooperatives around the country who are still making and proceeding with their investments in clean coal technology and in new coal plants.

Monica Trauzzi: Can clean coal, CCS and coal to liquids save the industry?

Christine Tezak: Well, certainly clean coal is in the eye of the beholder. I don't think to certain environmental organizations there is such a thing and I would say that there is definitely a constituency that believes that we really have missed an opportunity as a country to not more robustly pursue supercritical coal, which has much lower emission rates on conventional pollution like NOX and SO2, plus about 15 to 20 percent less carbon intensity.

Jeff Holmstead: I think people in the energy business would say, you know, when you achieve these very low emission rates because you have an ultra-supercritical boiler, so you minimize your CO2 emissions as much as possible, you have a scrubber, you have an FCR, you have a bag house or some combination of those controls, that that really is as clean as you can make coal today.

Christine Tezak: I think the biggest challenge for the coal sector is this perception that it's irredeemably dirty.

Colleen Hanabusa: To me, if you call anything a clean coal it's got to be something that has no negative adverse effects. It isn't something that if you weigh a cost-benefit analysis on something that you say, well, it seems to me that the benefits may outweigh the costs, whatever that cost may be.

David Hawkins: We try very hard not to use the term clean coal, because it just doesn't accurately describe any coal use anywhere in the world. There is no such thing as clean coal.

David Hawkins: Well, NRDC has been very active and proud to be active in fighting new coal plant proposals in the United States and we have worked for 40 years to clean up or shut down coal plants that are dirty, polluting coal plants in the United States. So the efforts to do one or the other, clean up or shut down, are far from symbolic. They are critical to delivering public health benefits to American people.

Christine Tezak: Even when we've brought substantially cleaner plants to market that are dramatically better than what we have in place, there's a resistance to bringing a cleaner coal plant to market instead of a recognition that we'd be better off replacing an older plant.

Rep. Bill Johnson: We've got lots of coal in this country and one of the problems that we have is the administration's reluctance to go after our own natural resources. I think we need to explore more coal liquefaction. If we can determine how to turn coal into refinery grade crude, we solve a lot of problems.

Sen. John Barrasso: We all want energy to be as clean as we can, as fast as we can. That's why I've introduced some bipartisan legislation. There are advanced technologies. You know, Wyoming's coal is low-sulfur coal, clean coal efforts to go with technology to go, you know, coal to gas, coal to liquid.

Steve Miller: We're very interested in the legislation that's being pushed by Senators Bingaman, Murkowski, Rockefeller, Barrasso on carbon capture and storage technologies and ways to advance that.

Jeff Holmstead: I don't know anybody on the industry side who believes that renewables will be able to take up a big chunk of the slack for many, many years. So if we can get to seven, eight -- I mean DOE has a very ambitious proposal that says we could get to 20 percent renewables. But that still leaves 80 percent that needs to be produced by something that's more reliable like coal or gas or nuclear.

David Hawkins: Renewable energy is a tremendous opportunity and we can have renewable energy that is also firmed up with cleaner fuels like natural gas. And I think anyone who follows this issue realizes that a lot of existing coal plants are going to get replaced with natural gas plants and that will be a cleaner use of that electricity resource.

Steve Miller: We're concerned as a coal centric organization about significant efforts to force or induce fuel switching to natural gas. Natural gas historically has been an extremely volatile fuel in terms of price and no one is certain right now whether the promise of shale gas will really prove to be one that can be relied on for any kind of significant fuel switching going forward.

Bill McCollum: Overall I think you'll begin to see our electric generating mix shift a bit toward a lower percentage of coal, while it will still be significant, and a higher percentage of gas-fired generation, nuclear and some of these other sources.

Monica Trauzzi: The Tennessee Valley Authority, a federally owned power company, recently reached a settlement with U.S. EPA to shutter 18 of its poorest performing coal-fired power plants.

Rep. Bill Johnson: You know, 18 plants, those are a lot of plants. I can't speak for TVA, but I can tell you that that's not something that the coal industry is excited about.

Bill McCollum: We set out a vision for the next 10 years which includes keeping our rights affordable, our reliability high and being very responsible in the way that we generate and deliver our electricity and that we also are shifting our portfolio to a different mix of sources which will be cleaner and more appropriate for the future.

Rep. Joe Barton: TVA is just kind of accepting the reality that some of the older coal plants, they're not very efficient, need to be shut down.

Monica Trauzzi: As coal plants shut down, what impact do the closures have on the U.S. economy?

Sen. John Barrasso: With coal being the most available, affordable, reliable and secure source of energy we have in our country, anything we can do to continue to use coal in a responsible way I think is going to be better for our economy long-term.

Rep. Joe Barton: I think that America has got the world's greatest economy because we've had a free-market energy policy and a cornerstone of that policy has been the use of coal and it's a strategic asset and an economic asset and I think one that can continue to be used in a way that benefits the economic prosperity for every American.

Bill McCollum: Coal prices have spiked. They've come back down and moderated a bit now, but foreign demand for coal is much higher than it used to be and that has put pressure on market prices. So we've seen roughly a doubling in some of the coal prices and there doesn't appear to be a let up in the foreign demand for coal. So I think the economics of coal have shifted somewhat from the way they were traditionally viewed decades ago.

Jeff Holmstead: If all we do is succeed in increasing the energy costs here, we're not going to do anything to deal with climate change because the Chinese and the Indians and the Indonesians and around the world, they have not only I think a political imperative, but a moral imperative to provide power for billions of people. And until we can-until someone can help them provide that power in a way that doesn't involve the combustion of coal, people will continue to use coal all over the world, regardless of how many coal-fired power plants Sierra Clubs manages to shut down in the United States.

Sen. John Barrasso: For me coal is freedom.

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