Coal And The Economy

Reliable, low cost energy can be a competitive advantage in attracting capital investment to a community. Energy availability is key to the economic growth and prosperity of both our communities and our nation. So much so, that ensuring an uninterrupted supply of energy can easily be (and is) viewed as a matter of national security.

I recently attended the Inaugural National Coal Conference hosted by the Nemacolin Energy Institute to learn more about the role coal plays in our nation’s energy portfolio. I was interested in the topic for three specific reasons: 1) I am a founding Board member of the NEI and believe in the organization’s objective of catalyzing a comprehensive national energy policy 2) I have a passion for helping strengthen the economic prosperity of communities in Appalachia and coal is an important industry for the region, and 3) I believe low cost energy is and needs to continue being a global competitive advantage for Brand America.

Over the last few years, I have learned a lot about the growing importance of natural gas from researching the emerging impact of shale energy. Given the historical and continuing importance of coal as an energy source, I was eager to continue my education.

What I Learned About Coal

The program featured talks by leading coal executives, industry association presidents and elected officials. I was impressed with the commitment to ensure the security of our nation’s energy supply and the reported track record of success in improving the environmental friendliness of coal-fired energy.

I was also concerned by the expectations established by new and pending federal regulations that will result in the decommissioning of existing plants and an increase in the cost of coal as an energy source. It was reported the average cost of coal-fired electricity has been $0.04 per kilowatt hour. This compares to $0.22 per kilowatt hour for solar and wind, both of which enjoy a $24 per kilowatt hour federal subsidy.

Increased regulation is conservatively projected to result in the loss of 50,000 to 80,000 megawatts of coal-fired generation by 2020 – 2025. Demand for electricity is not expected to decline, so the gap will need to be made up by other energy sources.

I was shocked to hear that families with an income < $50,000 will pay 12% of their after-tax dollars for energy (includes gas for automobiles as well as energy for heat, etc.). Families with an income < $10,000 will pay 78% of their after-tax dollars for energy. Families in this bracket include seniors on fixed incomes who will have real difficulty responding to increased energy costs. Obviously this is an untenable situation and a challenge that needs to be addressed.

In addition to the impact of rising energy costs on the senior and poor populations, there is also an impact on the ability of American businesses to compete. Manufacturing companies in particular will have their margins eroded and lose pricing flexibility if low cost fuel sources are taken offline and replaced by higher prices sources.

To better understand the magnitude of the challenge, I pulled some data on the energy sources used to create electricity. Fossil fuel sourced electricity represents two-thirds of the electricity consumed in the U.S.. When you look at the numbers, it is hard to see how a dramatic drop in coal-fired electricity can be realistically made up by other sources. Even with the potential of shale energy as a new energy source, based on the numbers I believe replacing the loss of coal-fired electricity will be very challenging.

U.S. Electrical power energy consumption

Additional Factoids

93% of the coal consumed in the U.S. is used for electricity.

The U.S. has more coal reserves than any other country in the world.

The energy potential of American coal exceeds that of all the oil in the Middle East.

Coal must be part of a comprehensive national energy policy .

Research and technological innovation is making coal a more environmentally friendly energy source.

There is no practical way to meet America’s increasing energy requirements without coal.

Discussion

I learned a lot about coal at this conference and am looking forward to continuing my education about all energy sources. Just like my on-going experience with natural gas company executives, I was very impressed with commitment of the coal company executives to ensure that the current and future energy demands of our nation are safely and confidently met. There is no doubt in my mind that low cost energy is key to America’s economic prosperity. The need for a comprehensive national energy policy to ensure sustainability seems clear.

I am looking forward to learning more about all sources of energy. If you have any good links that I can read to deepen my knowledge, please share them.  Thanks in advance for your help, it is greatly appreciated.

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