Coal Is Not Cool

This past January, President Obama said in an interview... "You can build a new coal-fired plant if you want to but we will tax you into bankruptcy if you do."

In early 2007, the Sierra Club, an environmental group, began a national campaign to prevent the building of any coal-fired electricity generating plants.

In early 2007, the Energy Information Administration (EIA.org) compiled a list of 151 coal-fired plants in development. Eighty of these plants, representing more than half of the capacity, have been cancelled.

The emotional appeal of global warming, despite its unproven science, is demonizing coal.

Coal produces 50% of America’s electricity and after hydro and nuclear is the cheapest power source. But coal also produces the most carbon dioxide, which, as a greenhouse gas, purportedly contributes to global warming. This schedule illustrates the power sources of our electricity and their production cost in 2007.

Coal carries the heavy load and is the cheapest source in all conditions. Hydro is the absolute cheapest, but a hydroelectric plant needs mountains and rivers and these do not exist in large areas of our country. It supplies just 6% of our power needs. Nuclear power is the next cheapest, but the lead time to bring a nuclear plant online is five to ten years. There are no new nuclear generating plants scheduled to come online until 2016 at the earliest.

In 2005 the Supreme Court opined that carbon dioxide, the air we exhale with every breath, is a pollutant and subject to regulation under the Clean Air Act. The EPA is presently writing regulations to govern the discharge of carbon dioxide.

Coal produces twice as much carbon dioxide as the next fossil fuel, natural gas. It also produces sulphur dioxide and mercury which have been linked to acid rain and health issues. These pollutants can be removed with exiting technology.

Carbon dioxide, on the other hand, cannot be removed. But, eminent scientists opine on opposite sides of whether or not carbon dioxide causes global warming. Or, indeed, whether global warming even exists. There is no conclusive science on this issue.

The coal portion of our electricity generation is declining, down from 55% 20 years ago. And according to the Energy Information Administration’s forecast of electricity supply to 2030, coal-fired plants represent just 18% of the additions to our power generating capacity.

If this forecast comes true our electricity generated from coal will continue to decline. America has more than 100 years of proven reserves of coal, and it is our cheapest source of electricity in all conditions. It is absurd to punish this energy resource and further increase our dependence on foreign energy sources.

Between the snail darter (hydroelectric power), fear of nuclear meltdowns (nuclear power), and global warming hysteria (coal power), we have put severe restraints on all the low cost power sources for electricity generation. This leaves us with natural gas, oil, and renewable sources (solar, biomass, wind and tides) which are all more expensive. And this is why I believe we will experience a slow rise in electricity costs.

Emotional and political resistance to all fossil fueled electricity generation slows down capacity additions and increases the cost to produce electricity. Let’s face it; your electric bills are going up. The sad part is this is not necessary.

May you live long and prosper,

Mike Williams, CFA

(back to portfolio commentary)