Friday, June 03, 2016

COTW: Coal Consumption is Down Since 2007

More:  Predictably, the Donald said in his first major energy speech since clinching the nomination that he would be the savior of the coal industry.  At the same time he promised to reduce regulations on fracking.  Besides being warmed-over conservative pablum, his statements show just how mindless his rhetoric is, is.  Coal is declining in use as a fuel primarily because of increased natural gas production related to the shale oil has boomed.  As one industry observer put it, "natural gas is eating coal's lunch in the United States".  Even a coal industry CEO told him that he could not bring back coal mines simply by more deregulation. What deregulation will get you is what happened at Massey's Upper Big Branch mine in West Virginia where 29 miners were killed in a natural gas-coal dust explosion in 2010.  The Massey mine had a history of bad safety compliance, and CEO Don Blankenship made it clear in his communications the only thing that mattered to him was profit.   He thought it was cheaper to pay fines than follow safety rules. He recently plead guilty to a single misdemeanor related to the disaster. Donald, if you insist on rabble-rousing at least get your energy facts straight.  Both Democrats are espousing a shift to renewable energy to replace coal, although US Person believes Bernie Sanders would be more likely to walk the talk.  Hillary Clinton has taken so much money from big oil, she would be disinclined to actually bite the hand that feeds her.

Every state except Nebraska and Alaska showed decrease in the amount of coal consumed to generate power [chart above].  Ninety-seven percent of coal burned to create steam is used for electric power generation according to the Department of Energy, so a decrease in coal consumption given a flat demand curve means coal is loosing its share of power generation to other types such as conservation, combined cycle and natural gas plants, and renewable energy.

Renewable energy portfolios are playing a significant role in reducing the price of electricity and carbon emissions.  The Northeast has the highest per kilowatt electricity costs in the nation, but the price of electricity there has dropped.  A recent independent analysis released at a conference of National Association of   Regulatory Utility Commissioners says the Regional Greenhouse Gas Initiative ("Reggie") has resulted in $460 million in savings for retail customers as well as decreasing emissions by 15% and adding $1.3 billion in economic activity to nine northeastern states involved in the plan.  Under the plan, producers are required to buy credits for every ton of carbon they emit.  A limited number of carbon credits are auctioned every quarter and the nine states* use the money to invest in further carbon reduction projects such as subsidizing alternative energy development and energy efficiency retrofitting.  Fifty-nine percent of the revenue has been spend on energy efficiency projects.

Most economists agree that putting a price on carbon is the most efficient way to regulate carbon emissions.  Carbon credit auctions achieve a price determination using a market mechanism.  The program is so successful the participating states agreed to lower the overall carbon emission cap for their region in 2011.  Throughout the United States the amount of carbon emission are going down.  Forty-two states have reduced carbon emissions which reflects the increase use of cleaner fuels and more efficiency as fossil-era plants are replaced. The average reduction is 18%. Reggie states reduced their emissions by 40% during the same time period. 

EPA is set to release its Clean Power Plan next month which will require the states to adopt their own means of meeting national carbon emission targets.  Electricity generation accounts for a third of all carbon emissions, primarily due to coal fired generation. Despite all the positive evidence that pricing carbon works, green energy portfolios are embroiled in partisan politics.  Governor Christie (R) took New Jersey out of the Reggie program in 2011 after initially participating.  Recently Maryland's Governor Larry Hogan (R) vetoed expanding the state's popular renewable energy portfolio standard.  Maryland, a coastal state, is eleventh among the states in installed solar energy capacity, and has more people working in the solar energy industry than it does in its iconic crabbing industry. Hogan's own administration says solar will employ 3500 by 2020 and create about $6.5 billion in economic output.  Fortunately the bill passed the state's legislature with enough votes to override the Governor's socially backward behavior.

*Maryland, Delaware, Connecticut, Maine, New York, Massachusetts, New Hampshire, Vermont and Rhode Island. Putting a price on carbon is just one option available to the states as they adopt their own or a regional program to reduce carbon emissions.