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Coal is the redheaded stepchild of the American energy business. Yes, coal is dirtier than the other fossil fuels. Yes, it pollutes the air and emits more carbon dioxide per unit of energy than oil or natural gas. And of course, coal mining is a dirty business that scars the earth.

But the U.S. has a surfeit of coal. On a percentage basis, the U.S. has more coal than Saudi Arabia has oil. The U.S. sits atop some 242 billion tons of coal, about 28.6 percent of the world’s coal. At current rates of extraction, the U.S. supply could last 234 years. Saudi Arabia, meanwhile, sits astride a mere 21.3 percent of the world’s oil, and at current rates of extraction will run out in about 69 years. Energy Tribune - Editorial by Robert Bryce - Saturday, November 8, 2008

Coal is the redheaded stepchild of the American energy business. Yes, coal is dirtier than the other fossil fuels. Yes, it pollutes the air and emits more carbon dioxide per unit of energy than oil or natural gas. And of course, coal mining is a dirty business that scars the earth.

But the U.S. has a surfeit of coal. On a percentage basis, the U.S. has more coal than Saudi Arabia has oil. The U.S. sits atop some 242 billion tons of coal, about 28.6 percent of the world’s coal. At current rates of extraction, the U.S. supply could last 234 years. Saudi Arabia, meanwhile, sits astride a mere 21.3 percent of the world’s oil, and at current rates of extraction will run out in about 69 years.

Despite increasing rhetoric about the need for “energy independence” and the rush to build more electric cars in order to fight the scourge of foreign oil, regulators at the state and federal level have imposed a neartotal ban on new coalfired power plants in the U.S. And they are doing so despite steadily increasing electricity demand. In 2007, electricity consumption grew by 2.3 percent over 2006 levels and that rate of growth has been fairly consistent over the past decade.

Coalfired power plants now provide almost half of this country’s electricity. From a cost perspective, it would make sense for the U.S. to continue building more coal plants, particularly if they have scrubbers to reduce their emissions of mercury, sulfur compounds, and other pollutants. But concerns about global warming have largely derailed coal plants. All of which raises the obvious question: If not coal, then what?

Over the coming decade, the North American Electric Reliability Council expects demand to continue growing, with the U.S. needing an additional 135,000 megawatts of new generation capacity. But the Council projects that resources committed to meeting that demand are only expected to “increase by roughly 8.5 percent 77,000 MW.” The report goes on to warn that unless new power plants are built, or demand reductions are put in place, “California, the Rocky Mountain states, New England, Texas, the Southwest and the Midwest could fall below their target capacity margins within two or three years.”

Put another way, the U.S. is facing a generating capacity shortfall of some 58,000 MW. To put that in perspective, the Three Mile Island Generating Station in Pennsylvania – the most famous nuclear power plant in America – operates one nuclear reactor that produces 850 MW of electricity. Thus, the looming electricity shortfall in the U.S. is equal to the output of 68 nuclear reactors.

Although Al Gore and others continue to push for more use of renewable energy, sources like solar and wind are unlikely to be more than niche players in the overall electricity mix in the coming decades for a simple reason: they are incurably intermittent. Barring a major breakthrough in largescale electricity storage technology, solar plants and wind turbines will have to be paired with conventional power plants to ensure reliable electric power to consumers. And those conventional sources are natural gas, nuclear, and coal.

The U.S. is adding more gasfired electricity. Since 1998, natural gas demand in the power sector has increased by about 50 percent. During that same time frame, gas prices have nearly quadrupled. Fortunately, U.S. gas production has soared, growing by some 9 percent between the first quarter of 2007 and the first quarter of 2008. But will the U.S. be able to continue producing enough natural gas to meet the demand from power generators and do so at a reasonable cost? No one knows. As for nuclear, the laborious permitting and construction process will likely take a decade or more before any new plants come online.

That takes us back to coal. According to the Energy Information Administration, the average fuel cost for a coalfired power plant is about $1.69 per million Btu. Costs for a natural gasfired plant are about $6.94 per MMBtu. Of course, coal and natural gas prices have fluctuated since then, but it’s apparent that coal is by far the cheapest source of fossilfuel electricity. And that’s a key fact to keep in mind. In early July, the E.I.A. projected that residential electricity prices will increase 5.2 percent this year and 9.8 percent next year.

Coal may be dirty. It’s certainly not sexy. But with big price hikes underway at the gas pump and the supermarket, consumers are taking a beating. If coal continues to be locked out of the energy mix, Americans may be forced to endure big hikes in their electric bills – and perhaps even blackouts – due to insufficient power generation capacity. If that happens, coal may regain a bit of its appeal.

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