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7/27/2019 A Risky Proposition Report
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7/27/2019 A Risky Proposition Report
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Barbara Freese
Steve Clemmer
Claudio Martinez
Alan Nogee
Union of Concerned Scientists
M A R C H 2 0 1 1
A RiskyProposition
The Financial Hazards ofNew Investments in Coal Plants
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ii U N I O N O F C O N C E R N E D S C I E N T I S T S
2011 Union of Concerned Scientists
All rights reserved
Barbara Freese is a senior policy analyst/advocate with the
UCS Climate and Energy Program.
Steve Clemmer is director of energy research and analysis for
the UCS Climate and Energy Program.
Claudio Martinez is a risk analyst with the UCS Climate and
Energy Program.
Alan Nogee is the director of climate and energy strategy and
policy for the UCS Climate and Energy Program.
The Union of Concerned Scientists (UCS) is the leading
science-based nonprot working for a healthy environment
and a safer world.
More information about UCS and the Climate and Energy
Program is available on the UCS website at www.ucsusa.org.
This report is available on the UCS website (www.ucsusa.org/
publications) or may be obtained from:
UCS Publications
2 Brattle Square
Cambridge, MA 02138-3780
Or, emailpubs@ucsusa.org or call (617) 547-5552.
Printed on recycled paper
Design: Mary Zyskowski
Front cover photo: iStockphoto.com/mbbirdy
Back cover photo: Zen Suther land Photography
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S iii
Contents
v FIGURES AND TABLES
vi ACKNOWLEDGMENTS
vii EXECUTIVE SUMMARY
PART ONE
1 Background: The Changing Outlook for Coal
1 TeNeedforUrgentActiontoAddressClimateChangeIsNowIndisputable
2 DeepEmissionsCutsAreRequiredfromtheCoalSector
2 FederalProjectionsofNewCoalPlantsPlummet
3 WidespreadRetirementsExpectedamongExistingPlants
6 ExcessGeneratingCapacityFacilitatesCoalPlantRetirements
7 GrowingOppositiontoCoal
PART TWO
8 Eroding Markets for Coal Power: The Impacts of Energy Eciency,Renewable Power, and Natural Gas
8 EnergyEciency
9 RenewablePower
11 CompetitionfromNaturalGas
PART THREE
13 Fuel Prices at Risk
13 TeTreattoU.S.CoalPricesfromVolatileGlobalMarkets
15 NewDoubtsabouttheSizesofU.S.andGlobalCoalReserves
18 OtherProduction-CostIncreasesAhead
PART FOUR
19 Carbon Risk: A Costly Problem in a Warming World
19 TeImpactofaCarbonCostonCoalGeneration
20 CarbonPricesStillontheHorizon
22 UncertaintiesaroundCarbon-CaptureRetrots
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S v
FIGURES
viii FigureES.1.U.S.CO2EmissionsfromEnergyUsebySource,2009
x FigureES.2.DecliningFederalProjectionsofNewCoalPlantsthrough2030
xi FigureES.3.WindPowerGrowingatRecordPace
xii FigureES.4.AverageWeeklyCoalSpotPrices
xiv FigureES.5.LevelizedCostofElectricityforVariousechnologies
3 Figure1.U.S.CO2EmissionsfromEnergyUsebySource,2009
4 Figure2.DecliningFederalProjectionsofNewCoalPlantsthrough2030
5 Figure3.U.S.ElectricGeneratingCapacitybyIn-ServiceYear
10 Figure4.WindPowerGrowingatRecordPace
14 Figure5.AverageWeeklyCoalSpotPrices
15 Figure6.U.S.CoalProduction
17 Figure7.ChangesinU.S.CoalMineLaborProductivity
22 Figure8.CO2AllowancePriceForecastsComparedwithPreviouslyModeledScenarios23 Figure9.RelativeCostIncreasesfromAddingCarbonCapturetoCoal-FiredPowerPlants
34 Figure10.PowerPlantConstructionCosts
35 Figure11.PulverizedCoalPlantCapitalCosts:ActualProjectsvs.Studies
40 Figure12.IncreasingLevelizedCostofElectricityfromNewPulverizedCoalin2015
41 Figure13.LevelizedCostofElectricityforVariousechnologies
43 Figure14.FuturePowerGenerationunderUCSBlueprint
44 Figure15.FuturePowerGenerationunderEPRIModel
TABLES
6 able1.CoalPlantRetirementProjections
27 able2.SelectedAirPollutionControlCosts
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vi UN I O N O F CO N CERN ED SCI EN T I ST S
Tisreportwasmadepossibleinpartthroughthegenerous
supportofOakFoundation.
Wewouldliketothankthefollowingindividualsfortheir
insightfulcommentsonourdraftreport:AbigailDillen,Lisa
Evans,LeslieGlustrom,LisaHamilton,RichardHeinberg,
LucyJohnston,NancyLange,BruceNilles,CarlPope,David
Schlissel,ReedSuper,andRobertUkeiley.
TeauthorswouldalsoliketothankUCSstamembersfor
theirhelpfulcontributionstothereport,includingRachel
Cleetus,JeDeyette,BrendaEkwurzel,ElizabethMartin,Lon
Peters,JulieRinger,JohnRogers,andLexiSchultz.Wegive
specialthankstoEthanDavisforhisworkonthereports
quantitativecostanalysesandgures.
WethankStevenMarcusformakingthereportmorereadable,
MaryZyskowskifortheattractivedesignandlayout,and
BryanWadsworthandHeatheruttleforoverseeingthe
reportsproduction.
Teopinionsandinformationexpressedhereinarethesole
responsibilityoftheauthors.
Acknowledgments
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S vii
childrensbraindevelopment;theycreatevastquantitiesof
toxicash,whichrequirecarefulhandlinginordertoprevent
leakage;andtheirhugecooling-waterwithdrawalsstrainour
increasinglyvulnerablewaterbodies.Expectedregulations
wouldreducemanyofthesecostlyharms,butasseveralrecent
nancialanalysespointout,muchofthenationscoaleetis
alreadyold,inecient,andripeforretirement.Ratherthan
retrotthem,itmakesgreatereconomicsensetoclosethem. Finally,thereistheunavoidablenancialriskassociated
withcoalscriticalroleindestabilizingtheglobalclimate.
Giventheincreasinglydirenatureofglobalwarming,climate
legislationisstillwidelyexpectedintheyearsahead,with
inevitablecostimplicationsforcoalplants.
Combined,thesetrendsanddevelopmentscreaterisksthat
nooneconsideringalong-terminvestmentinneworexisting
coalplantscanaordtoignore.Teyalsocreateuniqueoppor-
tunitiestoinvestinsteadinthecleanertechnologiesthatwill
beingrowingdemandaswetransitiontowardamoremodern,
exible,diversied,andsustainableenergysystem.
The need for urgent action to address climate change is now
indisputable. Tiswarningwaspartofa2009jointstatement
bytheU.S.NationalAcademyofSciencesanditscounterpart
academiesfrom12othernations,urgingworldleaderstotake
actiontoslowglobalwarming(NAS2009).Already,thecli-
mateischanging,bothfasterandinmoredangerouswaysthan
computermodelshadprojected,andmuchworseliesahead
ifwefailtomakedeepcutsinourglobalwarmingemissions
(NRC2010a).
Deep emissions cuts are needed from coal plants.Coalpoweris
thenationslargestsourceofCO2,emittingmorethanallofour
cars,trucks,andothermodesofsurfacetransportationcombined
(FigureES.1,p.viii).Asthesourceofone-thirdofenergy-related
CO2emissions,coalplantsmustbeaprimarysourceofthe
reductionsweneedtoprotecttheclimate.Indeed,reducingemis-
sionsfromcoalplantsisaparticularlycost-eectiveapproachto
climateprotection(Cleetus,Clemmer,andFriedman2010).
AcrosstheUnitedStates,theelectricpowersectoris
placingnewbetsonanoldtechnologycoal-red
powerplants.Utilitiesandotherelectricityproduc-
ersarepoisedtoinvestheavilyinretrottingtheir
oldplantsorinbuildingnewones.Eachmajorretrotornew
plantrepresentsanenormouslong-termnancialcommitment
tocoalpower.Butasdiscussedinthisreport,currenteconomic,
technological,andpolicytrendsmakesuchcommitmentsexceedinglyrisky.
Demandforcoalpowerisbeingsteadilyerodedbycompe-
titionfromenergyeciencyandrenewableenergy,whichare
benetingfromrisingpolicysupport,growingpublicinvest-
ment,advancingtechnologies,andoften-fallingprices.Coal
poweralsofacesmuchstrongercompetitionbothfromnew
andexisting(thoughunderutilized)naturalgasplants,which
cantakeadvantageoftodaysrelativelylowgasprices.
Coalprices,bycontrast,areontherise.Havingspiked
in2008inresponsetoglobalcoaldemand,theyareclimb-
ingagainwiththeglobaleconomicrecovery.Tereisgrowingconcern,moreover,thattheycouldbedrivenmuchhigherby
soaringdemandfromChinaandIndia,aswellasbyfalling
productivityacrossallU.S.coaleldsandbyshrinkingreserve
estimates.Constructioncostsforcoalplants,whichskyrocketed
intheyearspriorto2008,remainhigh,andalltheserisksmake
thenancingoflong-termcoalinvestmentsbothharderand
costlier.Coalplants,newandold,arelosingthecostadvantages
theyoncehad,andtheylacktheoperationalexibilitythatwill
beincreasinglyvaluableasthepowergridevolvestointegrate
moresourcesofcleanbutvariablerenewablepower.
Inadditiontotheseongoingstructuralchanges,whicharemakingcoalpowerincreasinglycostlyandlesscompetitive,coal
powerfacesthenancialrisksposedbyitsmanyenvironmental
impacts.Tecontinuingdamagesthatcoalpowerposestoour
air,land,andwaterandourhealthareamajornancial
liabilitythatremainsunresolved.Coalplantsemitairpollutants
thatstillkillthousandsofpeopleyearly,costingsocietyover
$100billionperyear,byoneestimate(CAF2010).Tese
plantsarealsoaleadingsourceofmercury,whichthreatens
Executive Summary
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viii UN I O N O F CO N CERN ED SCI EN T I ST S
arestillnocoal-redpowerplantsusingCCSonacommercial
scale.DesignestimatesindicatethatCCScouldincreasethe
costofenergyfromanewpulverizedcoalplantby78percent,
andcostswouldbeevengreaterifCCSwereaddedasaretrot(IFCCS2010).Itisalwayspossiblethatfutureadvances
inCCStechnologywilldrivesuchcostsdownsubstantially,
buttheCCSprojectsunderdevelopmenttodayhavefaced
seriouscostoverrunsanddelays.Moreover,thefallinnatural
gasprices,concernoverfuturecoalsuppliesandprices,and
thefailureofthe111thCongresstopassclimatelegislation
whichwouldhaveputapriceoncarbonandestablishedmas-
sivesubsidiesforCCSmayfurtherdelayCCSdevelopment.
Many of the nations coal plants are old, inecient, and ripe
for retirement. Seventy-twopercentofpresentU.S.coalcapac-ityisalreadyolderthan30yearstheoperatinglifetimefor
whichcoalplantsweretypicallydesignedand34percentof
thenationscoalcapacityismorethan40yearsold(Bradley
etal.2010).Olderplantsbecomeincreasinglyinecientand
unreliable,andtheyfacehighmaintenanceandcapitalcostsif
theyaretocontinueoperatingeconomically.Andbecausethey
werebuiltbeforemodernpollutioncontrolswererequiredand
overthedecadesmanyhaveavoidedaddingthosecontrols,
A future price on carbon still threatens coal investments.
Te111thCongressfailedtopassacomprehensiveclimate
bill,andthe112thCongressisevenmoredeeplydividedon
theissue,therebyperpetuatinguncertaintyoverthetimingandnatureoffutureclimatepoliciesandtheirimpactsoncoal
plants.However,thegrowingurgencyofglobalwarmingmeans
thatCongresswillfacesustainedpressuretotackletheprob-
lemagain,perhapsrepeatedlyovertheyears,untilthenation
isothedangerouspathitiscurrentlytraveling(unlessother
factors,suchasasteepdeclineincoalusedrivenbytheother
risksdiscussedinthisreport,succeedinslashingourcarbon
emissions).Becauseapriceoncarbonwouldhelptostimulate
private-sectorinnovation,itremainsalikelyelementofsuch
futureclimatepolicies;andasthesourceofpowerthathasthe
highestcarbonemissions,coalwouldtherebybedisadvantagedcomparedwithcleanertechnologies.
Carbon-capture retrots cannot be counted on to cut emis-
sions aordably.Whileprojectstodemonstratethepotentialof
carboncaptureandstorage(CCS)areimportant,itwouldbe
nanciallyrecklesstomakecoal-plantinvestmentsbasedonthe
assumptionthatCCSretrotswillprovideanaordableway
forthoseplantstoavoidafuturepriceonCO2emissions.Tere
Figure ES.1. U.S. CO2
EMISSIONS FROM ENERGY USE BY SOURCE, 2009
Coal Plants
33.2%
Other Electricity Generation 5. 0%
Residential 6.2%
Commercial 3.9%
Industrial 15.4%
Surface Transportation 32.9%
Aviation3.3%
More CO2
is emitted from coal plants than from any
other technology or sector, including all modes
of surface transportation combined (EIA 2011a).
(Power plant emissions are presented under coal
plants and other electricity generation, rather than
under the residential, commercial, and industrial
sectors where the power is consumed.)
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S ix
costs,butitisstartingtoreecttheeconomicrealitiesthathave
alreadyledtotherecentcancellationorrejectionofabout150coalplantproposalsnationwideandthatthreatentheremaining
coalplantproposalsaswell.
Demand for coal power will continue to fall as the nation turns to
cleaner options.Coalprovidedalmost53percentofU.S.power
demandin1997,butmarketsharedroppedtolessthan46per-
centinthersthalfof2010.Giventhestronggrowthofcompet-
ingcleanertechnologies,thisdecreaseislikelytocontinue.
Energy eciencyhasenormouspotentialtocutpower
demandby23percentbelowprojectedlevelsby2020and byevenmoreifthetechnologyisassumedtoadvance
(Goldstein2010;Granadeetal.2009).Tatpotentialis
beginningtoberealized,as27statesatpresentdouble
thenumberin2006haveadoptedorhavependingenergy
eciencyresourcestandardsthatovertimecangreatly
reduceelectricdemand(ACEEE2010a).Statespendingon
ratepayer-fundedelectricity-andgas-eciencyprograms
nearlydoubledbetween2007and2009,risingfrom
$2.5billionto$4.3billion(ACEEE2010a).Andnewfederal
appliancestandardsformorethan20consumerproducts
willhelpreduceconsumerdemandforyearstocome.
Renewable poweriscapturingagrowingshareofthe
marketfromcoal,andithasthepotentialtogomuch
further.Whilenon-hydrorenewablepowerprovided
3.6percentofU.S.generationin2009,theEIAprojects
thatitwillincreaseto11.7percentby2030,primarily
becauseofexistingstatepoliciesandfederalincentives(EIA
2010a).Federalresearchalsoconcludesthatwecouldmeet
nearlyaquarterofourpowerneedswithrenewablepower
by2025withnosignicantimpactonconsumerprices
atthenationallevel(Sullivanetal.2009).Windalone couldmeet20percentofdemandby2030(EERE2008),
olderplantsaregenerallyfarmorepollutingthannewonesand
facesignicantretrotcostsasaresult.
Coalplantoperatorsinvariouspartsofthecountry
includingColorado,Delaware,Georgia,Illinois,Indiana,
Minnesota,NorthCarolina,Ohio,andPennsylvaniahave
alreadyannouncedtheretirementofdozensoftheiroldest
plants(Bradleyetal.2010).ByDecember2010,12gigawatts(GW)ofcoalplantretirementshadalreadybeenannounced
(Salisburyetal.2010).Financialandindustryanalystsexpect
thewaveofretirementstogrow.InthewordsofaCredit
Suisseanalyst,alargechunkoftheU.S.coaleetisvulner-
abletoclosuresimplyduetocrummyeconomics(Eggerset
al.2010).Inannouncingtheclosureofthreeofitsoldercoal
units,ExelonCorp.noted,theseagingunitsarenolonger
ecientenoughtocompetewithnewresources(Power-Gen
Worldwide2009).
Excess generating capacity in the United States will facilitatecoal retirements. Tenationcurrentlyhasamplegenerat-
ingcapacity,whichcanhelpitaccommodatetheprojected
coalplantretirementsandstillmaintainthereliabilityofthe
powersystem(Bradleyetal.2010;ShavelandGibbs2010).
Onerecentanalysisfoundthatthepowersectorisexpected
tohaveover100GWofsurplusgeneratingcapacityin2013
(Bradleyetal.2010).
New coal plants are not economic, even under current policies.
Teeconomicoutlookfornewcoalplantsisverydierent
fromwhatitwasjustafewyearsago.1Whenmostnewplantprojectsinthepipelinetodaywereannounced,theU.S.Energy
InformationAdministration(EIA)computermodelpredicteda
largeamountofnewcoalplantconstructionintheyearsahead
(FigureES.2,p.x).Butnowthesamemodelnolongerprojects
anynewcoalplantswithoutCCScomingonlinethrough2030
(apartfrom11.5GWofnewcoalplantsthattheEIAcounts
asalreadyunderconstructionandassumeswillbecompleted).
TeEIAsmodelinghashistoricallyunderestimatedcoalplant
1 While many of the new coal plants announced over the last few years were
subsequently cancelled or blocked (largely as a result of the economic and policy
trends discussed in this report), dozens of proposals are still on the table. The
Sierra Club maintains a database of coal-red power plant proposals around
the country. As of January 2011, it lists 149 coal projects as recently cancelled or
rejected, 50 plants as active or upcoming, 26 plants as progressing (some of which
have been completed), and 18 plants with uncertain status (Sierra Club 2011).
Coal is no longer a reliably low-cost fuel, in
part because it is increasingly vulnerable to
volatile global markets.
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S xi
arecurrentlylessexposedtoglobalmarkets,butthepricefor
aone-monthcontractforPowderRiverBasincoalstillrose
67percentbetweenOctober2009andOctober2010(Jae
2010).Moreover,PowderRiverBasincoalproducersareseek-
ingtobuildtransportationinfrastructuretoexpandtheirreach
toAsianmarkets,potentiallysubjectingWesterncoaltoprice
spikessimilartothoseexperiencedintheeasternUnitedStates.
Chineseocialshaveannouncedplanstocaptheirowncoal
production,puttingevengreaterupwardpressureonglobal
andU.S.coalprices(Reuters2010a).
Newquestionsarealsobeingraisedaboutjusthowmucheconomicallyrecoverablecoalexists,bothintheUnited
Statesandelsewhere.Ocialreserveestimatesarebasedon
decades-olddataandmethods.Moremodernassessmentsare
ndinglesseconomicallyrecoverablecoalthanwascommonly
thought,includinginWyomingsimportantGillettecoaleld
(Luppensetal.2008).TefactthatproductivityatU.S.mines
hasbeendroppingforyears,notonlyinthemorematureand
depletedeasterncoaleldsbutalsointhenewerminesofthe
gasplantscouldbebuiltatarelativelylowcostandexisting
coalplantscouldberepoweredtoburnnaturalgas.While
environmentalconcernsorotherfactorsmaydrivegas
pricesbackup,would-becoalinvestorscannotignorethe
competitivethreatfromgas.Coalislosingitsadvantage
incrementallytogas,agasanalystwithBarclaysCapital
recentlytoldtheNew York Times,andanenergyanalyst
withCreditSuissesaidthattheshiftfromcoaltogashas
thepotentialtoreshapeenergyconsumptionintheUnited
Statessignicantlyandpermanently(Krauss2010).
U.S. coal prices are rising and could be driven much higher
by soaring global demand and shrinking reserves. Coalisno
longerareliablylow-costfuel,inpartbecauseitisincreasingly
vulnerabletovolatileglobalmarkets.EasternU.S.coalspot
pricesspikedin2008(FigureES.4,p.xii),mainlyinresponse
totherisingpriceofcoalininternationaltrade,andprices
areclimbingagainasrapidlyrisingcoaldemandinChina
pushesglobalcoalpriceshigher.WesternU.S.coalproducers
Figure ES.3. WIND POWE R GROWING AT RECORD PACE
U.S. wind power capacity expanded by over 50 percent in 2008 alone and continued to expand in 2009 despite the recession (Wiser and
Bolinger 2010).
40
35
30
25
20
15
10
5
0
ANNUALC
APACITY
(GW)
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
CUMULATIVE
CAPACITY
(GW)
12
10
8
6
4
2
0
Annual U.S. Capacity
Cumulative U.S. Capacity
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xii UN I O N O F CO N CERN ED SCI EN T I ST S
courtordersrequiringittoimplementexistingstatutorystan-
dards).Plantsfacecostsassociatedwith:
Preventing thousands of deaths from heart and lung disease.
Coalpowerisamajorsourceofsulfurdioxide(SO2)and
nitrogenoxide(NOX)emissions,whicharetransported
downwindandcauseozoneandparticulatepollutionthat
shortenthelivesofthousandsofAmericansyearly;these
emissionshavebeenestimatedtoimposeannualcostson
societyofmorethan$100billion(CAF2010).TeEPAs
proposedCleanAirransportRulewouldpreventmanyof
theseprematuredeaths,asoldanduncontrolledplants
wouldnallyberequiredtoinstallcontrolsonSO2andNOX.
Protecting childrens brains from impairment.Coalpower
isthesourceofatleasthalfofU.S.emissionsofmercury,a
west,pointstolikelyhighercoalproductioncostsaheadin
contrasttothelowerproductioncostsexpectedfornaturalgas.Newstudiesthatprojectfuturecoalproduction,includ-
ingsomethatmakeprojectionsbyttingabellcurvetopast
productionlevels(ananalyticmethodthatremainscontrover-
sial),predictthatwearemuchnearertopeakcoalproduction
thantraditionalreserveestimatessuggest(HeinbergandFridley
2010;PatzekandCroft2010;Rutledge2010;EWG2007).
Coalpricesinsomemarketsmayalsoriseinresponsetoeorts
toreducethedamagecausedbymountaintop-removalmining.
Coal plants also face costs associated with reducing their non-
climate environmental impacts.Becausecoalplants,especiallyolderones,causegraveharmtotheenvironmentandpublic
health,theU.S.EnvironmentalProtectionAgency(EPA)is
developingmoreprotectiveregulations(largelyinresponseto
Figure ES.4. AVERAGE WEEKLY COAL SPOT PRI CES
Coal prices spiked dramatically in 2008, largely in response to the inuence of global coal demand on U.S. coal markets, particularly in
Appalachia (EIA 2010e). Prices in most basins are rising again with the economic recovery.
$160
$150
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
D
OLLARSPER
SHORTTON
30Mar07
10Jun07
21Aug07
1Nov07
12Jan08
24Mar08
4Jun08
15Aug08
6Jan09
19Mar09
30May09
10Aug09
21Oct09
1Jan10
14Mar10
25May10
5Aug10
15Oct10
27Dec10
nCentral Appalachia
nNorthern Appalachia
n Illinois Basin
nPowder River Basin
nUinta Basin
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S xiii
reboundedquickly,andexpertsprojectthattheywillremain
highbyhistoricalstandards(IMF2010).
Coal project nancing may be harder to obtain and may cost
more. Tetrendsdiscussedaboveincreasetheriskthatcoal
investmentprojectswillfailtoobtainthenancingtheyneed
orthattheywillhavetopaymoreforitthanplanned.Te
nancialcommunityisbecomingincreasinglywaryoftherisks
associatedwithnewinvestmentsincoal.Aseriesofutilities
andotherpowerproducershaveseentheircreditratingsand
outlooksdowngraded,inpartbecauseoftheratingsagencies
concernsaboutcoalconstructionorretrotcosts.
New coal plants cost more than cleaner options. Tetradi-
tionalcostadvantagethatcoalpowerenjoyedovercleaner
energyhaslargelydisappearedwithrespecttonewplants.
FigureES.5(p.xiv)comparesthelevelizedcostsofelectric-
ity2fromnewcoalplantstothoseofothernewsourcesof
power,bothwithandwithoutincentivesandusingarangeof
assumptionsdescribedinPart8(andinAppendixA,which
isavailableonline).Powerfromnewcoalplantsclearlycosts
morethanpowerfromnewgasplants,windfacilities,and
thebestgeothermalsites,andmuchmorethaninvestingin
energyeciency.Wheneithercarbonpricesorincentivesarefactoredin,powerfromnewcoalplants(withorwith-
outCCS)becomesevenlesscompetitive,costingmorethan
powerfrombiomassfacilitiesorfromthebestsolarthermal
andsolarphotovoltaicsites.Tesecomparisonsreectarange
ofcoalprices(butdonotfullyrepresenttheriskthatcoal
pricescouldrisesteeplyduetovolatileglobalmarketsand
othercauses)andtheyincorporateconservativeassumptions
aboutfallingpricesofrenewabletechnology.
Inadditiontolosingtheircostadvantage,coalplantsrela-
tivelackofoperationalexibilitymakesthempoorlysuitedfor
thegridoftomorrow,whichwillsurelyincludegreaterquanti-tiesofvariablesourceswindandsolarpower,forexample
andplaceapremiumonotherpowersources,suchasnatural
gas,thatcanrampupordownquicklyasneeded.
potentneurotoxinthatthreatensfetalandinfantbrain
development.TeEPAsforthcomingAiroxicsRule, limitingmercuryandothertoxicemissions,wouldrequire
uncontrolledplantstoinstallcontrolsonthesepollutants.
Keeping toxic coal ash from contaminating the water. Coal
ashcontainsmanytoxiccomponentsandiscurrentlystored
inwaysthatcanresultbothincatastrophicreleases(such
astheKingston,N,ashspillof2008)andinslowleakage
intogroundandsurfacewaters.ProposedEPAruleswould
requiresaferashhandlingandpotentiallyobligemany
plantstoconvertfromwethandlinginsurfaceimpound-
mentstodryhandlinginlinedlandlls;plantscouldalso berequiredtoaddnewwatertreatmentsystemsinorderto
keeptoxinsoutofourwatersuppliesandecosystems.
Reducing sh kills and protecting water bodies. Coalplants
usevastquantitiesofwaterfromadjacentrivers,lakes,and
bays,takingaheavytollonaquaticlifeasaresult.TeEPA
isconsideringnewrulesthatwouldrequiremorecoal(and
otherthermalpower)plantstoinstallcoolingtowersthat
wouldgreatlyreducetheamountofwatertheywithdraw
andthethermalpollutiontheydischarge.
Retrottingcoalplantswithpollutioncontrolsandother
technologiescouldgreatlyreducetheseenvironmentaland
healthdamages,andtheretrotswouldcostmuchlessthan
whatthedamagescurrentlycostsociety.However,theretrot
costswouldbesubstantialformanyplants,particularlythe
oldestanddirtiest.Telimitedremainingusefullifeofmany
oldercoalplantswouldmakesuchinvestmentsdicult,
ifnotimpossible,torecover,makingretirementthebetter
nancialoption.
Major coal projects face high and unpredictable construc-tion costs.Coalplantconstructioncostsroseatarapidratein
theyearsleadingupto2008,contributingtothecancellation
ofmanyproposedfacilities.Despitethesubsequentrecession,
constructioncostshaveremainedhigh(IHSCERA2010),and
somecoalplantprojectswerestillannouncingsubstantialcost
increasesin2010.Muchoftheconstruction-costincreasewas
drivenbyrisingglobalcommoditycosts.Whilethesecommod-
itypriceswentbackdownwiththeglobaleconomiccrisis,they
2 Levelized cost of electricity (LCOE) is an economic assessment of the cost of
energy generation of a particular system. LCOE includes all of the costs over the
systems lifetime, such as capital expenditures, operations and maintenance, fuel
cost, and cost of capital, discounted to a net present value. The LCOE is the price at
which energy must be sold for the project to break even.
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xiv U N I O N O F C O N C E R N E D S C I E N T I S T S
A costly history threatens to repeat itself.Whenconsidering
long-terminvestmentsincoaltoday,itishelpfultoremember
anearliereraofpower-sectorinvestmentsthatdidnotend
well.Inthe1970s,utilitiesinvestedmassivelyinbothcoaland
nuclearplantswhileignoringthesweepingchangesthatwere
increasingthecostsof,anddecreasingthedemandfor,suchplants.Teresultwasstaggeringnanciallossesaroundthe
countryasscoresofplantswerecancelledafteryearsofspend-
ing.Wecanavoidrepeatingthatcostlyhistorybyrecognizing
thatchangesunderwaytodayaremakinglong-terminvest-
mentsincoalpoweranunacceptablyriskyproposition.
We can dramatically reduce our dependence on coal power.
Long-terminvestmentsincoalwouldbelessriskyifthenation
hadnochoicebuttocontinuewithitscurrentlevelofcoaluse,
nomatterhowhighthecosts.Butthatisnotthecase.Studies
bytheUnionofConcernedScientistsandothersshowthatwe
couldinfactreplacemostofourcoalpowerusingrenewableenergy,demandreduction,andnaturalgaswithinthenext
15to20years,withadditionalreductionsincoalpowerafter-
ward(Keithetal.2010;Specker2010;Cleetus,Clemmer,and
Friedman2009).Andtheoverallbenetsoftransitioningtoa
cleanerenergysystemsavinglives,protectingairandwater,
andhelpingusavoidsevereclimatechangeswhilestimulating
technologicalinnovationandbuildingnewclean-energyindus-
trieswouldbetremendous.
Figure ES.5. LEVELIZED COST OF ELECTRICITY FOR VARIOUS TECHNOLOGIES
All projections assume newly built installations coming online in 2015 and represent levelized costs over a 20-year period. A range of capital
costs is assumed for all technologies; a range of fuel costs is assumed for coal, natural gas, and biomass; and a range of capacity factors is
assumed for wind, solar, natural gas, and nuclear power. A range of CO2
prices is taken from Synapse projections (discussed in Part 4).
Current tax incentives for wind and biomass are assumed to be extended to 2015.
nTotal Cos ts with Incent ives
nTotal Cos ts without Incentives
nLow CO2
Costs
nMid CO2
Costs
nHigh CO2
Costs
Coal IGCC-CCS
Nuclear
Coal IGCC
Pulverized Coal
Solar Thermal
Large Solar PV
Biomass
Geothermal
Wind (Onshore)
Natural Gas CC
Eciency
0 50 100 150 200 250 300 350
$ / M W h
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P A R T O N E
BackgroundThe Changing Outlook for Coal
Scienticconcernoverglobalwarmingcontinuestogrow,
andtheneedforsteepreductionsincarbonemissionsis
nowwidelyrecognizedwithinthesciencecommunity.
Whilethe111thCongressfailedtopassalawlimiting
heat-trappingemissions,thefactthattheclimatethreatisboth
graveandgrowingmeansthatCongresswillbeundersustained
pressuretotackletheproblemagain,perhapsseveraltimes,dur-
ingtheoperatinglifetimeofalong-terminvestmentincoal.Coal
plants,asthenationslargestsourceofglobalwarmingemissions,
wouldsurelybetargetedbyanyfutureclimatelaws.
Meanwhile,evenwithoutapriceoncarbon,theeconomicoutlookfornewcoalplantshasalreadychangeddramatically
underU.S.EnergyInformationAdministrationprojections.
Asforexistingcoalplants,manyareseveraldecadesold,highly
polluting,andfacingtheprospectofnallyhavingtoinstall
technologiestoreducethesubstantialdamagetheydototheair,
water,land,andpublichealth.Industryanalystsaretherefore
projectingawaveofcoalplantretirementsaheadindeed,such
awavehasalreadybegunmadepossiblebythefactthatthe
nationselectricgridhassubstantialsurplusgeneratingcapacity.
The Need for Urgent Action to Address ClimateChange Is Now Indisputable
Nooneplanningalong-terminvestmentincoalcanaordto
beunawareofthescienticevidencethatshowshowurgently
anddeeplyweneedtoreduceourcarbonemissions.Basedon
itsmostcomprehensivesurveyofclimateresearchtodate,the
NationalAcademyofSciences(NAS)releasedinMay2010a
seriesofcongressionallyrequestedreportsthatconcludedyet
againthattheearthiswarming,thatemissionsfromtheburn-
ingoffossilfuelsarelargelytoblame,thatthiswarmingposes
awiderangeofseriousriskstosocietyandnaturalsystems,
andthatthereisanurgentneedforU.S.actiontoreduce
[greenhousegas]emissions(NRC2010aand2010b).3Tis
conclusionrearmedtheNationalAcademys2009joint
statement,withitscounterpartscienticacademiesof12
othernations,bluntlystating,theneedforurgentactionto
addressclimatechangeisnowindisputable(NAS2009).
Inthisspirit,theNAShasspecicallyrecommendedthat
theUnitedStatesacceleratetheretirement,retrotting,or
replacementof[greenhousegas]emission-intensiveinfrastruc-ture(NRC2010b).
Ourclimateisalreadychangingindangerousways,with
morefrequentandseveredroughts,heatwaves,anddown-
pours,amongothermanifestations.Andclimatechange
posesbothdirectandindirectthreatstopublichealth,such
asthroughheat-andweather-relatedstresses,respiratoryill-
nesses,insect-bornediseases,andcontaminationoffoodand
water(APHA2010;NIH2010;EPA2009e).Inrecognition
ofthesethreats,thenationsleadingpublichealthgroupshave
recentlyaddedtheirvoicestothecallforlawsthatwouldlimit
3 In 2009, allegations of scientic misconduct were made against certain U.S. and
U.K. climate scientists, based on stolen and misinterpreted email correspondence.
These allegations, which were given broad media coverage, created confusion in
some nonscientic circles about the certainty of the science behind researchers
global warming conclusions. Subsequent investigations that exonerated these
scientists of misconduct, and rearmed the strength of the underlying climate
science, received far less coverage (Oxburgh et al. 2010; Penn State 2010; Russell et
al. 2010). In actuality, the fundamental science underlying climate concerns, based
on multiple independent lines of evidence and the work of thousands of scientists,
is robust and was never in doubt.
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2 U N I O N O F C O N C E R N E D S C I E N T I S T S
heat-trappingemissions(APHA2010).Manyofthechanges
totheworldaroundusareunfoldingfasterthanscientists
projectedjustafewyearsago(NAS2009;Rosenzweigetal.
2008;Rahmstorfetal.2007;Stroeveetal.2007).Inaddi-
tion,thedatashowthatmuchworseliesaheadifwedonot
changecourse(Meinshausenetal.2009;Solomonetal.2009).
Indeed,wemaybeveryclosealreadytotriggeringnatural
amplicationmechanismsthatcouldcauseirreversiblechanges
withcatastrophicconsequences(NRC2010a).
Deep Emissions Cuts Are Required from the
Coal Sector
Mostclimateexpertsagreethatinordertohaveareasonablechanceofavoidingthemostsevereimpactsofglobalwarm-
ing,wemustpreventaverageglobaltemperaturesfromrising
morethantwodegreesCelsius4abovepreindustriallevels(UCS
2008;ClimateChangeResearchCentre2007).TeCopenha-
genAccord,negotiatedatameetingofworldleadersinDecem-
ber2009,formallyembodiesthisgoal(UNFCCC2009).
However,thereisnoguaranteethatatwo-degreewarming
wouldbesafe,andsomeprominentscientistsnowthinkthat
allowingeventhatmuchwarmingwouldbearecipeforglobal
disaster(Hansen2008).TeCopenhagenAccordexplicitly
callsforreassessmentofthetwo-degreetargetandconsiderationofa1.5-degreetargetby2015(UNFCCC2009).
Eventhetwo-degreelimitwouldrequireambitious
reductionsinheat-trappingemissionsby2020andbeyond.
Teabove-mentionedNationalAcademyofSciencesjoint
statementnotesthat,limitingglobalwarmingto2degreesC
wouldrequireaveryrapidworldwideimplementationofall
currentlyavailablelow-carbontechnologies(NAS2009).o
haveareasonablechanceofachievingthatlimit,industrialized
nationstakencollectivelywouldhavetoreduceemissionsto
25to40percentbelow1990levels(or35to48percentbelow
2005levels)inthenext10years(IPCC2007).TeUnionofConcernedScientistsrecommendsthattheUnitedStates
reduceemissionsbyat least35percentbelow2005levelsby
2020,basedontheworkoftheIntergovernmentalPanelon
ClimateChange(IPCC)andotherstudies(Baeretal.2008;
denElzenetal.2008).UndertheCopenhagenAccordthe
Obamaadministrationsetalesserbutstillambitioustargetof
reducingU.S.emissionsintherangeof17percentby2020
(pendinglegislativeaction)(Stern2010).
Evendeeperemissionscutsbeyond35percentareneeded
intheyearsfollowing2020intherangeofatleast80percent
by2050(NRC2010b;Luersetal.2007).TeUnitedStates
andotherdevelopedeconomiesagreedforthersttime,atthe
2009G8Summit,thatdevelopedcountriesshouldcuttheir
heat-trappingemissionsby80percentormorefrom1990
levelsby2050(G82009).
Teselonger-termreductionsarepossiblebutrequirean
immediateandsustainednationalcampaigntomoveawayfrom
high-carbon-emittingenergy.Becausecoalplantsaloneaccount
formorethanathirdofallU.S.CO2emissionsfromenergy
usetheyemitmorethanallofthenationscars,trucks,and
trainscombined(Figure1)wecannotachievethereductions
weneedwithoutslashingcarbonemissionsfromcoalpowerin
theyearsahead.Evenifthecoalpowersectoronlymadeitspro-
portionalshareofreductions,itwouldfacereductionsofatleast
17percentinthenextdecadeandmorethan80percentover
fourdecades.Butasmanystudieshaveshown(someofwhich
arediscussedinParts4and8),ifsocietyfollowsanythingresem-
blingaleast-costpath,adisproportionateshareoftheemissions
reductionswillbeachievedbyshiftingawayfromcoalpower.
Tesescienticrealities,whicharedrivingpolicyresponses
elsewhereintheworld,willkeepfuelingdemandsforstronger
policiesintheUnitedStatesaswellincludingalawthatputs
apriceoncarbon,whichwouldhavenancialimplicationsfor
coalthatwediscussinPart4.Butevenwithoutsuchaprice
inplace,theeconomicprospectsbothofoldcoalplantsand
proposednewplantshavealreadychangedprofoundly.
Federal Projections of New Coal Plants Plummet
Oneofthemostcommonlycitedsourcesofinformation
aboutthenationsenergysectoristheEnergyInformation
4 This is equivalent to about 3.6 degrees Fahrenheit. We have already warmed
by 1.7 degrees Fahrenheit above preindustrial levels (Arndt, Baringer, and
Johnson 2009).
Apart from plants already under construction,
the EIAs model no longer projects the
construction ofanynew coal plants through
2030 without carbon capture and storage (CCS).
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Administration(EIA)anindependentagency,withinthe
U.S.DepartmentofEnergy,thatisthesourceofocialfederal
energystatisticsandanalyses.TeEIApublishesanAnnual
EnergyOutlook(AEO)thatmakeslong-termforecasts,basedonhighlydetailedcomputer-basedeconometricmodeling,
aboutU.S.energymarkets.Asamatterofmethodology,the
AEOreference-caseforecastassumesimplementationofexist-
inglawsandregulationsonly.Teseannualforecaststherefore
donotfactorinafuturepriceoncarbon(discussedinPart4),
nordotheyreectmanyofthepollutioncontrolupgradesthat
existingplantsface(discussedinPart5).
Justafewyearsago,whenmanyplantsinthepipeline
todaywererstannounced,theEIAforesawarobustfuture
fornewcoalplants.IntheAEO2006,theEIAsmodelpro-
jectedtheconstructionof145gigawatts(GW)ofunplannednewcoalcapacityby2030,ortheequivalentofabout240
newcoalplantsof600MWinsize(inadditiontothe9.3
GWofplannedcapacity,whichtheEIAputintothemodel
toreectnewcoalprojectsthatitunderstoodtobeunder
constructionandthatitassumedwouldbecompleted)(EIA
2006).Whilecritics,includingtheUnionofConcerned
Scientists,pointedoutthattheseforecastswerebasedoninap-
propriatelylowcoal-plantconstruction-costassumptions,and
thattheydidnotreectcarbonregulatoryrisk,backersofnew
coalplantspointedtothesefederalprojectionsasevidenceof
theeconomicwisdomofbuildingmorecoalcapacity.
ButintheEIAsAEO2011(EarlyRelease),thosehundredsofprojectedcoalplantshavevanished,areectionofthe
profoundeconomicchangesthathaveoccurredsince2006.
Apartfrom11.5GWofplantsalreadyunderconstruction,the
EIAsmodelnolongerprojectstheconstructionofanynewcoal
plantsthrough2030withoutcarboncaptureandstorage(CCS)
(EIA2011a)(seeFigure2,p.4).Only2GWofcoalpower
withCCSareprojectedby2030,whichreectnewplantsthat
theEIAassumedwouldbestimulatedbyexistinggovernment
subsidies(EIA2011a).
Widespread Retirements Expected amongExisting Plants
AlargepercentageofU.S.coalplantcapacityhasreachedor
exceededitsoriginallyassumedusefullifetime.Seventy-twopercent
ofU.S.coalplants(bycapacity)areolderthan30years,34percent
areolderthan40years,and14percentareolderthan50years
(Bradleyetal.2010).Only1percentare10yearsoldorless,and
onlyafewnewplantsarenowinthepipeline.AsFigure3(p.5)
shows,however,thenationdoeshavesubstantialnewlybuilt
Figure 1. U.S. CO2
EMISSIONS FROM ENERGY USE BY SOURCE, 2009
More CO2
is emitted from coal plants than from any
other technology or sector, including all modes
of surface transportation combined. (Power plant
emissions are presented under coal plants and
other electricity generation, rather than under
the residential, commercial, and industrial sectors
where the power is consumed.)
Coal Plants
33.2%
Other Electricity Generation 5. 0%
Residential 6.2%
Commercial 3.9%
Industrial 15.4%
Surface Transportation 32.9%
Aviation3.3%
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4 U N I O N O F C O N C E R N E D S C I E N T I S T S
energycapacityintheformofnaturalgasplants(which
havebeengreatlyunderutilizedinrecentyears,asdiscussedinPart2)and,increasingly,windpowerandotherrenewablesources.
Teadvancedageofsomanycoalplantspresentstwoprob-
lems.First,theyrequireadditionalinvestmentsjusttokeeprun-
ning.After30yearsofoperation,theavailabilityofacoal-red
boilerdeclinessharplyandtheplantfaceshigherratesofforced
outages;largecapital-improvementprojects,whichoverhaulor
replacekeyplantcomponents,aretypicallyneededtoextendthe
plantsoperatinglife.5Suchprojectsarenotonlycostlybutcan
alsorequireextendedplantshutdowns(Slat2010).
Second,manyolderplantslackmodernpollutioncontrol
technologies,sotheytypicallyposemuchgreaterthreatstoair,
water,land,andpublichealth(andsomewhatgreaterclimate
impacts,giventheirlesserfueleciency)thandonewplants.Tesehighlypollutingplantsfacetheprospectofnewand
moreprotectiveregulatorystandards(discussedinPart5),
whichwouldforcetheirownerstodecidewhethertoretire
themornallyinvestinpollutionreductiontechnologies.
Severalclosuresofoldcoalplantsaroundthecountryhave
Figure 2. DECLINING FEDERAL PROJECTIONS OF NEW COAL PLANTS THROUGH 2030
In its Annual Energy Outlooks (AEOs), the EIAs projections of unplanned coal capacity coming into service by 2020, 2025, and 2030 have
dropped dramatically. In 2006 the EIA projected 145 GW of new coal by 2030 (the equivalent of about 240 new plants of 600 megawatts). But
the agency now projects only 2 GW by 2030, consisting entirely of advanced plants with CCS technology that are inputs to the model based on
the assumed response to federal subsidies. Planned capacity additionsplants that the EIA understands to be under construction already
are not reected.
5 Much of the litigation under the Clean Air Acts New Source Review program
has involved coal plant operators that failed to obtain preconstruction permits
before replacing major plant components. Among the plant components that
required upgrading have been economizers, reheaters, primary and secondary
superheaters, waterwalls, cold end air heaters, and boiler oors. See U.S. v. Ohio
Edison Co., 276 F. Supp. 2d. 829 (S.D. OH 2003).
160
140
120
100
80
60
40
20
0
CUMULATIVENEWC
OALCAPACITY
(GW)
AEO 06 AEO 07 AEO 08 AEO 09 AEO 10 AEO 11(ER)
n2020
n2025
n2030
E I A P R O J E C T I O N S B Y Y E A R
Sources: EIA 2006, 2007, 2008a, 2009a, 2010a, 2011a
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6 U N I O N O F C O N C E R N E D S C I E N T I S T S
gaswhenadjustingonanelectricityequivalentbasis.
Awfulenergymarginssuggesttousthatownersshouldbereevaluatingtheircoaleetsduetopureenergyeconomics
beforeeventakingontheburdenofa[capitalexpenditure]for
environmentalcontrolequipment(Eggersetal.2010).Coal
plantretirementsareprojectedtohaveapositiveeconomic
eectonmanypowerproducers.TeCreditSuisseanalysis,
entitledGrowthfromSubtraction,predictsthatamong
theseproducersthenewEPAregulationswillproducemostly
winnersandbiggerwinnersandhavetheeectofcullingthe
herdofbadplants(Eggersetal.2010).
Excess Generating Capacity Facilitates CoalPlant Retirements
Fortunately,withprojectionsofextrageneratingcapacityon
thegridforyearstocome,theUnitedStatesisnowinarela-
tivelygoodpositiontohandleawaveofcoalplantretirements.
Eachregionofthecountrymustmaintainenoughelectric
generatingcapacitytomeetexpecteddemand,plusanaddi-
tionalreservemargintodealwithplantoutages,transmis-
sionfailures,unexpecteddemand,andotherfactors.Inmost
regions,theminimumtargetreservemarginis15percent
orless,butinrecentyearsactualreservemarginsaroundthe
countryhavebeenwellabovethatthreshold,andin2013
reservemarginsareexpectedtorangefrom22to46percent,
dependingontheregion.Accordingtoarecentanalysisby
M.J.BradleyandAssociates,inaggregatetheelectricsectorisexpectedtohaveover100GWofsurplusgeneratingcapacity
in2013(Bradleyetal.2010).
TeNorthAmericanElectricReliabilityCorporation
(NERC)issuedanassessmentinlate2010oftheimpactof
fourdierentforthcomingEPAregulationsonreliability;it
foundpotentialforanimpact,dependingonwhethersuf-
cientreplacementcapacitycanbeaddedinatimelymanner
Table 1. COA L PL A NT RETI REMENT PROJECTI ONS
A recent series of reports and presentations has attempted to predict the scale of coal plant retirements over the next few years.
The reports vary in the factors they considered and the type of analysis, but all agreed that the aging U.S. coal eet faces signicant
retirements ahead.
S O U R C E O F A N A L Y S I S
Black and Veatch (Grith 2010)
Brattle Group (Celebi et al. 2010)
Charles River Associates (Shavel and Gibbs 2010)
Credit Suisse (Eggers et al. 2010)
Deutsche Bank Climate Change Advisors
(Mellquist et al. 2010)
FBR Capital Markets (Salisbury et al. 2010)
ICF International (Fine Maron 2011)
Wood Mackenzie (Snyder 2010)
P R O J E C T I O N S
54 GW (in response to pending environmental regulations)
5066 GW vulnerable to retirement by 2020
39 GW retired by 2015
60 GW assumed retired in base case by 2017
35 GW and 103 GW retirements considered on other scenarios
60 GW expected to retire by 2020
92 additional GW inecient and ripe for retirement
45 GW retired in base case by 2018
(3070 GW range)
20% decline in coal eet by 2020
12% decline in coal generation by 2020
Nearly 50 GW by 2020
A large chunk of the U.S. coal eet is vulnerable
to closure simply due to crummy economics.
C R E D I T S U I S S E
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BankshowsapathwaythatwouldreducepowersectorCO2
emissionsby44percentby2030. Inthelongerterm,theUnitedStatescanretireafarlarger
shareofitscoaleetthanthoseprojectedintheseanalyses;
indeed,doingsowouldbeacentralfeatureofmakingthedeep
cutsinglobalwarmingemissionsthatweneed.Forexample,in
amultiyearmodelinganalysisreleasedin2009,theUnionof
ConcernedScientistsshowedhowwecouldreducecoaluseby
84percentby2030,replacingitmainlywitheciencysav-
ingsandmorerenewablepowerwhilesavingenergyconsumers
money(Cleetus,Clemmer,andFriedman2009).Wediscussthis
studyfurtherinPart8,alongwithotherresearchshowingthat
theUnitedStatescouldretireitsoldcoalplantsatarapidpaceandstillmeetitsenergyneeds(Keithetal.2010;Specker2010).
Growing Opposition to Coal
Amongtheveryrealbuthard-to-quantifyrisksfacedbythose
investingincoalisthelikelihoodthatpublicoppositionto
coalwillkeepbuilding,particularlyastemperaturesclimbin
theyearsahead.Manynewcoalplantproposalshavealready
beenstoppedbypublicopposition,drivenatleastinpartby
climateconcerns.Andbecauseslashingthecarbonemissions
ofexistingplantsiscriticaltoclimateprotection,activists
alreadymobilizedtoopposenewplantscanbeexpectedtoincreasinglyturntheirattentiontoclosingexistingplants.Te
failuretopassacomprehensiveclimatebillduringthe111th
Congressmayjustsharpenclimateactivistsfocusoncoal
plants,giventhattheyarethebiggestcarbonpollutersandthe
mostobvioustargets.
Butrisingoppositiontocoaluseisbasednotjuston
climateconcerns.Mountaintop-removalminingincreasingly
drawsprotestsandactsofcivildisobedience,includingatthe
WhiteHouseinSeptember2010,when1,000protestorsdem-
onstratedand100werearrested(Reis2010).Andthethreats
posedbycoalash,madeevidentbythe2008ashspillinKingston,N,havealsopromptedprotestsandheavycitizen
turnoutatEPAhearingsaroundthecountrytocallforstricter
ashregulation.
Inshort,thoseplanningtomakelong-terminvestmentsin
coalpowershouldexpectgreaterscrutiny,morecontroversy,
andstrongerlegalandpoliticaloppositionintheyearsahead.
Tisoppositionposestheriskthatprojectsmaybedelayedor
stoppedaltogether.
(NERC2010).TeNERCanalysisassumed33to70GWofplantretirements,buttheseguresincluded30GWofsmall,
oldoilandgasunitsretiredinresponsetotheEPAsas-yet-
unproposedcooling-waterrule.However,asthesubsequent
CharlesRiverAssociates(CRAInternational)analysispointed
out,thenumberofprojectedcoalplantretirementsnationwide
issmallcomparedwiththerateatwhichtheUnitedStateshas
addedgeneratingcapacityinthepast.CRAInternationalalso
foundthatafterthe39GWofcoalretirementsitprojected,
alloftheregionaltransmissionorganizationswouldstillhave
sucientresourcestomeetreservemarginrequirementsevenif
newadditionsintheplanningandsitepreparationstageswerenotincludedintheanalysis(ShavelandGibbs2010).
Teseamplereservemarginsresultinnosmallpartfromthe
manynewnaturalgasplantsthatcameonlineinthelastdecade
(Figure3)butthathavebeenoperatingatjustafractionoftheir
capacity.Teseplantscouldreplacethepowerlostfromsubstan-
tialnumbersofretiringcoalplants,andlowerprojectednatural
gaspricesmakethisprospectevenmorelikely(seePart2).In
addition,demanddroppedsubstantiallywiththerecession,with
powersalesin2009about5percentbelowtheir2007levels
(EIA2010h).Whilethedemandforpowerbegantorebound
in2010,surplusgenerationcapacityisstilllikelytopersistforlongerthanwasexpectedbeforetherecession.Accordingto
theDeutscheBanksanalysis,thereisamplecapacity,stranded
fromthe19982003dashtogasoverbuild[,]andtherecession
hasincreasedreservemargins,reducingpressureonaddingnew
plantsinmanyregions(Mellquistetal.2010).Teseanalysts
assumethatatleasttwo-thirdsofthecoal-to-gasswitchthey
projectcouldoccurbyincreasingtheuseofexistinggasplants;
combinedwithgrowingrelianceonrenewablepower,Deutsche
ZenSutherlandPhotography
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S 9
ingavoidedfuturecarboncosts)(EERE2008).Despiteits
variableoutput,severalU.S.andEuropeanutilitystudieshave
shownthatwindpowercouldprovideupto25percentoftotal
generationonutilityandregionalsystemsatmodestintegra-tioncosts(oflessthan$10/MWh,orroughly5to10percent
ofwindpowerswholesalecost)(WiserandBolinger2009;
Holttinenetal.2007).
Teinstallationofwindandsolarenergytechnologieshas
expandedatastrikingpace,withwindgrowingatanaver-
ageannualrateof39percentbetween2004and2009and
solargrowingatanannualaveragerateof41percentoverthat
period.In2007,forthersttime,theUnitedStatesadded
morerenewablecapacity,mainlywind,thanitdidnonrenew-
ablecapacity(EIA2009c).From2008to2009,morewind
capacitywasaddedtotheU.S.powersupplythaninthepreviousthreedecadescombined(Figure4,p.10)(Wiserand
Bolinger2009).In2010,however,windinstallationsdropped
oconsiderablyfromtherecentrecordpace,dueinlargepart
totherecessionaswellastoincreasedcompetitionfromlow-
pricednaturalgas(AWEA2010a;AWEA2010b).
Temarketshareofsolarphotovoltaic(PV)powerisalso
growingrapidly,andthisoptionhasthepotentialtotransform
theenergygridassolarpanelpricescontinuetofall.PVinstal-
lationsduringthersthalfof2010were55percenthigher
thanin2009onanannualizedbasis(SEIA2010b).California
nowhas600MWofPVcapacityonline,aspartofapushtoinstall3,000MW(CPUC2010),andNewJerseyhas120
MWunderdevelopment(Belson2009).Unlikemostother
spendingonratepayer-fundedgasandelectriceciency
programsnearlydoubledbetween2007and2009,risingfrom$2.5billionto$4.3billion(ACEEE2010a).Suchaggressive
andsustainedinvestmentsinenergyeciencycouldnotonly
greatlyreducetheneedfornewsourcesofgeneration(includ-
ingcoal)butalsocutdemandforexistingpowerplants.
Arenewedcommitmenttoenergyeciencyatthefederal
levelwillhelptodrivedemandreductionsnationwide.For
example,theAmericanRecoveryandReinvestmentActof
2009(ARRA)providedapproximately$17billioninincentives
forhomesandbusinessestoinvestinenergyeciency(ACEEE
2010b).Moreover,sinceJanuary2009theU.S.Departmentof
Energyhasnalizedneweciencystandards,formorethan20householdandcommercialproducts,estimatedtocumulatively
saveconsumers$250billionto$300billionby2030(DOE
2010).Tesearebillionsofdollarsthatwillnolongerneedto
bespentoncoalpoweroranyotherkindofelectricitysupply.
Renewable Power
Tepotentialofrenewablesourcestomeetafargreatershareof
ourelectricityneedsiswelldocumented.Temajorrenewable
energytechnologieswind,solar,geothermal,bioenergy,and
small-scalehydropowerhavethepotentialtoproducemany
timesthecurrentU.S.powerdemand(Cleetus,Clemmer,andFriedman2009).Ofcourse,notallofthatpotentialispracti-
callyrealizable,butnumerousstudieshaveconsistentlyfound
thattheUnitedStatescouldsignicantlyincreaserenewable
energygenerationinanaordableandreliableway(ASES2007;
Nogee,Deyette,andClemmer2007).ANationalRenewable
EnergyLaboratory(NREL)studyrecentlyconcludedthatby
2025theUnitedStatescouldmeet22percentofitselectric-
ityneedsusingnon-hydrorenewablepowerupfromabout
3.6percentin2009withnosignicantimpactonconsumer
pricesatthenationallevel(EIA2010b;Sullivanetal.2009).8
Inaddition,a2009EIAstudyprojectedthatincreasingtheshareofrenewableelectricityto25percentnationallyby2025
wouldlowerconsumernaturalgasbillsslightlycomparedwith
businessasusual,therebyosettingslightlyhigherelectricity
bills(EIA2009g).
Accordingtoalandmark2008analysisbytheU.S.Depart-
mentofEnergy,windpoweralonecouldmeet20percentof
ourelectricityneedsby2030withoutcompromisingreliability
orraisingelectricratesbymorethan2percent(notconsider-
The next decade may see a dramatic and
sustained increase in overall [energy
eciency] funding levels, and a fundamental
redrawing of the energy eciency map.
L A W R E N C E B E R K E L E Y N A T I O N A L L A B O R A T O RY
8 The NREL analysis examined three proposed renewable energy standards,
the most stringent of which would require 25 percent of retail power sales to
derive from renewable power by 2025. However, because smaller utilities were
exempted from this standard, the eective renewable requirement was only
22 percent by 2025.
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10 U N I O N O F C O N C E R N E D S C I E N T I S T S
50percentinthelasttwoyears,partlyduetonewlow-cost
manufacturingfacilitiesinChina(Bradsher2010).Analystsat
DeutscheBankreport,lookingatlearningcurves,weexpect
manyrenewabletechnologieswilllikelybeascheapasfossil
fuel-redpowergenerationon[alevelizedcostofelectric-
ity]basiswithinthenext510years(Mellquistetal.2010).
Whiletheseanalystsfocusparticularlyonrapidlyfallingsolar
PVprices,theynotethateventherelativelymatureonshore
windindustrysawturbinepricesfallin2010andthatprices
areprojectedtobe20percentlowerin2011thanin2009
(Mellquistetal.2010). Evenwithoutsuchfallingprices,renewablepowerwould
seecontinuinggrowthdrivenbyfederaltaxcreditsandstate-
levelrenewableelectricitystandards,whichrequireelectricity
supplierstoprovideaminimumpercentageoftheirelectricity
fromrenewablesources.Already,29statesandtheDistrict
ofColumbiahaveenactedsuchstandards,anumberthathas
morethandoubledsince2004.Arecentanalysisprojectedthat
iffullcompliancewiththesestatestandardswereachieved,it
powersources,onsitesolarPVprojectsbecomecompetitive
whencostsfallbelowretailratherthanwholesalepowerprices.
Netmeteringpoliciesandinnovativenancingmechanisms
(suchasproperty-assessedcleanenergy,orPACE,nancing),
whichhelpreducethebarrierstowideruseofPV,arespreading
quickly(Rose2010;SEIA2010a).
Otherrenewabletechnologiesarealsoseeingimpressive
growth.Concentratedsolarpower(CSP)canfunctionaround
theclockwhenpairedwithnewheat-storagetechnologies.Tis
optionistakingoparticularlyinCalifornia,wherestateregu-
latorsapprovedninenewprojectstotalingover4,000MWoverafour-monthperiodinlate2010(Kraemer2010).Onesuch
project,at1,000MW,willbethelargestintheworld(Hsu
2010).Onanotherfront,in2009geothermalpowergrew26
percentinnewprojectsunderdevelopment,with7,875MWof
projectsunderwayin15states(GEA2010).
Renewablepowercontinuestobecomemorecompetitive
withfossilfuelsbecauseoftechnologicaladvances,economies
ofscale,andotherfactors.Solarpanelpriceshavedroppedby
Figure 4. WIND POWE R GROWING AT RECORD PACE
U.S. wind power capacity expanded by over 50 percent in 2008 alone and continued to expand in 2009 despite the recession.
40
35
30
25
20
15
10
5
0
ANNU
ALCAPACITY
(GW)
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
CUMULA
TIVECAPACITY
(GW)
12
10
8
6
4
2
0
Annual U.S. Capacity
Cumulative U.S. Capacity
Source: Wiser and Bolinger 2010
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S 11
ensstandardsforthesepollutants,aswellasunderanyfuture
carbon-costscenario.Naturalgasplantsalsohavethecapability
toincreaseorreducetheiroutputasmarketdemanductuates,
whichcoalplantscannotecientlydo.Tisexibilitymakes
gasplantsinherentlybetteradaptedtoagridontowhichagrowingnumberofvariablerenewableenergysourcesarebeing
added,pursuanttostatepoliciesandshiftingeconomics.
Teprospectsforallpowersources,includingcoal,are
greatlyaectedbynaturalgasprices.Whenpriceswerelow,in
the1990sandearly2000s,thepowersectorbuiltagreatmany
ecientnaturalgascombined-cyclepowerplantsdesigned
tooperateasaround-the-clockbaseloadcapacity.10Whengas
wouldresultinsome76GWofnewrenewableenergycapacity
by2025orasmuchas97GWifthenewlyenhancedCalifor-
niastandardandthevoluntarygoalsadoptedinsevenaddi-
tionalstateswereincluded(Wiser2010).Federalsupporthas
alsobeenimportant,withextendedtaxcreditsforrenewablegenerationextendedthrough2012aspartofthe2009ARRA
legislation.TeEIAprojectsthatthesetaxcredits,combined
withexistingstate-levelstandards,willincreaserenewable
energysshareofelectricitygenerationto12.3percentby2020
(EIA2010a).
Inshort,whilecoalpowerisshrinkingandfacesnew
regulatoryhurdlesandrisingcosts,renewablepowerisexpand-
ingwithgrowingpolicysupport;moreover,costsarefallingfor
manyofthesetechnologies.Renewablepowersmarketshare
willthuscontinuetoincreasetoasubstantialfractionofthe
U.S.powermarket,meetingelectricitydemandthatmightotherwisebelledbycoal.
Competition from Natural Gas
Naturalgasplantsholdimportantadvantagesovercoalplants.
Teyburncleaner,producinglessthanhalfthecarbonemis-
sions,aboutone-tenththenitrogenoxides,andnegligible
amountsofsulfurdioxide,mercury,andparticulates.9Tus
naturalgaswillhaveanaddededgeovercoalastheEPAtight-
9 A federal analysis of power plant performance found that a new natural gas
combined-cycle plant emitted 58 percent less CO2
per megawatt-hour than a
new coal plant using subcritical technology and 55 percent less CO2
than a new
coal plant using the more ecient supercritical technology (NETL 2007).
10 Baseload power is the term used for those sources of electricity that are run
most of the time and at a steady rate. This is in contrast to peaking or interme-
diate plants, which are turned on when demand reaches a certain point and
ramped up and down as demand shifts, and in contrast with intermittent sources
such as wind, which provide power only when available. Traditionally, coal,
nuclear, hydroelectric (except in drought years), biomass, and geothermal plants
have provided the baseload power, though lately natural gas combined-cycle
plants have also been a source of signicant amounts of baseload power in some
parts of the country.
MartinD.Vonka,S
hutte
rstock.com
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12 U N I O N O F C O N C E R N E D S C I E N T I S T S
priceslaterincreased,muchofthenewnaturalgascapacitywas
leftunderutilizedandthepowersectorlaunchedacoalplantbuildingspree,withannouncementsofover150proposed
newcoalplantsatitsheight.Sincethen,naturalgasprices
havefallen,contributingtothecancellationofsomeofthose
newcoalplantsandpromptingtheownersofseveraloldcoal
plantstoannounceplanstoreplacethemwithnaturalgasunits
(Smith2010).
Naturalgaspricesareparticularlyhardtoforecast,butit
isworthnotingthatwhileestimatedcoalreservesarebeing
reducedandcoalpricesarerising(seePart3),theoppositeis
happeningwithnaturalgas.Industryexpertsrecentlyexpanded
theirestimatesofU.S.domesticgasresourcesbyadramatic39percentsincethelastestimatein2006,announcinganexcep-
tionallystrongandoptimisticgassupplypictureforthenation
(PotentialGasCommittee2009).Tiscondenceresulted
fromadvancesindrillingtechnologyhorizontaldrillingand
hydraulicfracturingthatletdrillersreachtheformerlyinac-
cessibleshalegassupplieslocatedinmanystates.
Terearemanyunresolvedconcernsovertheimpactthat
hydraulicfracturingcanhaveonwaterqualityandsupply,
however.Andtherearequestionsastowhethertheglobal
warmingimpactofmethaneleakedduringtheproductionof
naturalgasmoregenerallyhasbeenfullycounted(LustgartenandProPublica2011).Teseissues,andthepublicopposition
toexpandeddrillinginsomeareas,coulddampenexpectations
aboutfuturegasproduction.Still,shalegasisviewedbymany
ascausingadramaticimprovementintheoutlookfordomestic
naturalgasproduction.Tisincreaseinnaturalgasavailability
couldhavesignicantimplicationsforcoalpower,especially
whencombinedwithclimate-protectionpolicies.A2010
The threat to coal from natural gas is particularly
great at present, given the many natural gas
plants built in the last decade that have been
operating at far below capacity.
analysisbyResourcesfortheFuturefoundthatexpandedpro-
ductionofshalegas,combinedwithacap-and-tradeprogram,
wouldreducecoalgenerationin2030bymorethan
halfcomparedwithbusiness-as-usuallevels(Brownand
Krupnick2010). Tethreattocoalfromnaturalgasisparticularlygreat
atpresent,giventhemanynaturalgasplantsbuiltinthelast
decadethathavebeenoperatingatfarbelowcapacity.For
example,combined-cyclenaturalgasplantswereoperatingat
42percentin2007(Kaplan2010)andatonly33percentin
2008(Bradleyetal.2010).ACongressionalResearchService
reportestimatedthatbringingutilizationofthoseplantsto85
percent,asistechnicallyfeasible,wouldbesucienttocutcoal
generationbynearlyathirdandreduceCO2emissionsby19
percent(Kaplan2010).Anotherassessmentconcludedthat
almost70percentofthecoaleetcouldbeidledbyfullyutiliz-ingthenaturalgascombined-cyclepotential(Casten2009).
Teseandotherreportshaveacknowledgedthemanypracti-
calbarrierstoawidespreadsubstitutionofgasforcoal(Aspen
EnvironmentalGroup2010).Still,theexistenceofsomany
underusedgasplantswhengaspricesareprojectedtoremain
relativelylowrepresentsyetanotherpotentiallysignicant
threattocoalpowersmarketshare.
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14 U N I O N O F C O N C E R N E D S C I E N T I S T S
years,evenwhilethesizeoftheU.S.coaleetshrinksbecause
ofplantretirements.
U.S.coalplantsdependentonPRBcoalmustalsocontend
withtherisksassociatedwithlong-distancerailtransporta-
tionandthebottlenecksthatcanthreatenreliabledelivery.
In2005,heavyrainandsnow,twoderailments,andresulting
trackdamagereduceddeliveriesofPRBcoaltopowerplants
formonthsandcausedPRBspotpricestomorethandouble(NRC2007).Onelong-contemplatedrailprojectdesignedto
expandPRBdeliveries(theDakota,Minnesota,andEastern
Railroadexpansion)haseectivelybeenputonhold,inpart
becauseofuncertaintyoverfutureU.S.coalpolicy(Dowd
2010).Inaddition,thecostoflong-distancecoaldeliveries
canbesignicantlyaectedbythepriceofdiesel,whichrose
steadilyin2010.
upwardtrajectorysincemid-2009(Figure5).Eveninthewest-
ernUnitedStates,whichhistoricallyhasbeenlessexposedto
globalmarkets,thepriceforaone-monthcontractforPowder
RiverBasin(PRB)coalrose67percentbetweenOctober2009
andOctober2010(Jae2010).
Currently,limitedamountsofPRBcoalareshippedtoAsia
viaCanada,butPeabodyEnergy,thelargestU.S.coalproducer,
admitsitisplanningtosendlargerandlargeramountsofcoaltoChina(Rosenthal2010).PeabodyisseekingtobuildaWest
Coastterminalforthispurpose,andanAustraliancoalcom-
panyisseparatelyexploringthepurchaseofasiteinWashing-
tonStateforabulkcoalexportterminal(Learn2010).Ifsuch
plansarerealized,thecoalplantsinthe34U.S.statesthatcur-
rentlygettheircoalfromWyomingwillincreasinglybeforced
tocompetefortheirfuelwithChinaandIndia.Itisplausible
thatdemandgrowthinAsiacoulddriveupU.S.coalpricesfor
Figure 5. AVERAGE WEEKLY COAL SPOT PRI CES
Coal prices spiked dramatically in 2008, largely in response to the inuence of global coal demand on U.S. coal markets, particularly in
Appalachia. Prices in most basins are rising again with the economic recovery.
Source: EIA 2010e
$160
$150
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
DOLLARSP
ER
SHORTTON
30Mar07
10Jun07
21Aug07
1Nov07
12Jan08
24Mar08
4Jun08
15Aug08
6Jan09
19Mar09
30May09
10Aug09
21Oct09
1Jan10
14Mar10
25May10
5Aug10
15Oct10
27Dec10
nCentral Appalachia
nNorthern Appalachia
nIllinois Basin
nPowder River Basin
nUinta Basin
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S 17
Chinascoaldemandweretogrowinstepwithitseconomic
growth,thenationsreserveswouldlastonly19years(Hein-bergandFridley2010).ArecentWall Street Journalarticle,
ChinasCoalCrisis,citedaHongKong-basedbrokeragerm
asestimatingthatevenifthegrowthinChinascoaldemand
werehalved,to5percentyearly,thecountrywouldrunoutof
coalin21to28years(dependingonwhichreserveestimateis
used)(Winning2010).TeChinesegovernmentsannounced
capondomesticcoalproduction,discussedearlier,will
slowthedepletionofChinesereserves,butthecapwillalso
shrinkingeventhough,withhighercoalprices,theyshouldbe
rising(HeinbergandFridley2010;EWG2007). Chinascoalreserveestimatesareofparticularinterest,given
itsenormousandacceleratingcoalconsumption.Aseriesof
recentarticlesraisedtheprospectthatChinacoulddepleteits
reservesfarsoonerthanearlierestimateshadsuggested(Rudolf
2010).Forexample,intheirNaturearticleTeEndofCheap
Coal,authorsRichardHeinberg,ofthePostCarbonInstitute,
andDavidFridley,deputyleaderoftheLawrenceBerkeley
NationalLaboratorysChinaEnergyGroup,notedthatif
Figure 7. C H A N G E S I N U . S . C O A L M I N E L A B O R P R O D U C T I V I T Y
After decades of greatly increasing labor productivity, U.S. coal mines have experienced signicantly declining productivity since about 2000.
This trend suggests that technological changes are no longer compensating for the depletion of the easiest-to-mine coal, even at the
relatively new coal mines of the Powder River Basin (PRB). (Note that the graph shows Wyoming mine productivity, rather than
PRB productivity in particular, for the sake of continuity across the years, but PRB mines dominate Wyoming production.)
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
200
180
160
140
120
100
80
60
40
20
0
%C
HANGE(SHORTTON
/MINER)
nWyoming
nU.S. Total
nWestern Total
n Interior Total
nAppalachian Total
Sources: EIA Annual Coal Reports, 20012009; Coal Industry Annuals, 19942000
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18 U N I O N O F C O N C E R N E D S C I E N T I S T S
Virginialeadingtocallsforstrongerregulationofminesafety
(Wald2010b). Surfacemining,especiallythepracticeofmountaintop-
removalmininginAppalachia,isalsogettingmuchcloser
scrutinythaninpreviousyears(McIlmoilandHanson2010).
Asitsnameimplies,thetechniqueinvolvesblastingawaythe
topsofmountainsandthendisposingofthewastesinadjacent
valleys(apracticeknownasvalleyll).TeEPAestimates
thatalmost2,000milesofAppalachianheadwaterstreams
havebeenburiedbythesevalleylls(EPA2010h).Agrowing
bodyofscienticevidenceshowsthatmountaintopremoval
andvalleyllshaveimpactsthatarepervasiveandirrevers-
ible,withahighpotentialforharminghumanhealth(Palmeretal.2010).
InJanuary2011theEPAvetoedthewaterpermitforwhat
wouldhavebeenoneofthelargestmountaintop-removaloper-
ationsever(Ward2011).Earlier,in2010,theagencyhadalso
issuednewguidancetobetterprotectAppalachianwatersheds
fromtheimpactsofmountaintopremoval.EPAAdministrator
LisaJacksontoldreporters,noorveryfewvalleyllsare
goingtobeabletomeetstandardslikethis(Ward2010).And
afederalcourtdealtwhatcouldbeasignicantblowtomoun-
taintopminingwithadecisioninSeptember2010.Underthe
ruling,anAppalachiancoalcompanywouldhavetoinstallatreatmentsystemtoreducedischargesofthewaterpollutant
seleniumfromtwoofitsmountaintop-removalmines(Schoof
2010).Evenifmountaintopminingwereallowedtocontinue,
suchdecisionscouldincreasethepriceofAppalachiancoal.
acceleratethedepletionofreservesinothernationswhiledriv-
ingupglobalcoalprices. Teseprojectionsusethetraditionalmethodofestimating
coalreserves,basedongeologicdataandassumptionsabout
howmuchoftheundergroundresourcecanbeeconomically
mined.Teestimatedamountisthentypicallydividedbya
givenproductionratetodeterminehowmanyyearsofcoal
isleftatthatrate.Butthisapproachfailstoreectthepat-
ternofrisingcostsandfallingproductionthatcharacterizethe
depletionofnonrenewableresources.Inmanyways,themore
importantquestionfromaneconomicorplanningstandpoint
isthetimeatwhichproductionofcoalwillpeakandthen
beginitsdecline,therebyputtingsustainedupwardpressureonprices.Someanalystsattempttopredicttheseproductionpeaks
usinghistoricalproductionratesandthenprojectingfuture
ratesthroughtheuseofabellcurve.Tisapproachhasbeen
describedasamathematicalwayofmodelingthefactthatwe
tendtondandproducethemostaccessibleportionofthe
[nonrenewable]resourcerst,sothatproductionrequiresmore
eortovertime(Heinberg2009).
Tecurve-ttingapproachcanleadtomuchsmaller
estimatesoffutureproductionthanthetraditionalapproach
(Rutledge2010;Kerr2009).Onerecentanalysisusingthe
curve-ttingmethodconcludedthatthepeakinglobalcoalproductionfromexistingcoaleldswouldbecloseto2011
(Inman2010;PatzekandCroft2010).Whileestimatesusing
thisapproacharestillcontroversial,theydeservegreateratten-
tion,particularlyinlightoftheirmajorimplicationsandthe
poorqualityofthedataonwhichcurrentU.S.andglobalcoal
reserveestimatesarebased.
Other ProductionCost Increases Ahead
Otherupwardpressuresoncoalproductioncostsarisefrom
issuessuchasunderground-safetyrequirementsandthe
potentialdicultyofobtainingpermitsfornewsurfacemines(EIA2009e).Teaveragecostofcoalfromlow-costproduc-
ersincentralAppalachiahasmorethandoubledsince2003,
andthischangemaybeattributableinparttoagreaterfocus
inrecentyearsonminesafety(Mellquistetal.2010).Evenso,
coalminingremainsdangerous,havingcaused29fatalinjuries
and4,760nonfatalinjuriesin2008,mostlyinunderground
mines(NRC2010c).In2010,29minerswerekilledinasingle
accidentatMasseyEnergysUpperBigBranchmineinWest
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20 U N I O N O F C O N C E R N E D S C I E N T I S T S
receivedbroadsupportfromCaliforniavoterswhenthey
decidedlyrejectedareferendumattempttorollbackthestates
emission-reductionlawsinNovember2010),andthereis
alreadyafuturesmarketdevelopinginCaliforniacarbon
allowances(PointCarbon2011).
AmongthetopenergyrecommendationsofaNovember
2010conferenceofcorporateleaderssponsoredbytheWall
Street Journalwasacallforacomprehensiveenergypolicythatprovidesconsistencyandpredictabilityforinvestment,includ-
ingclearerpolicyoncarbonconstraintstoavoidapatchwork
ofstaterules(Ball2010).Terewasarecognitionthatsome
typeofcarbonpricingwillbeneeded,saidoneoftheCEOs
indescribingtheconference;anotherCEO,aftersimilarly
notingthat,weregoingtoneedsomekindofasignalon
carbon,highlightedthehundredsofbillionsofdollarsthat
companiesarereadytoinvestiftheuncertaintyovercarbon
wereclearedup(Ball2010).Ithinktheprospectofnocarbon
[regulation]isputtingblinderson,saidtheauthorofanew
reportbyconsultinggroupICFInternational,whichpredictedthatcoalplantownerswillstillfactorclimateregulationsinto
theirdecisions(FineMaron2011).
evenwithsuchcoal-friendlyassumptions,themodelsresults
showthatgenerationfromcoalplantswithoutCCSdeclinessteadilyandoftensteeply.
Itishardlysurprisingthatalawdesignedtosqueezecarbon
pollutionoutoftheeconomyascost-eectivelyaspossible
woulddrivethenationawayfromcoal.Coalpowerisour
largestsourceofCO2emissionsandthemostcarbon-intensive
sourceofpower,andtherearemanywaysinwhichwecancost-
eectivelyreplaceit.Indeed,anypathtowardcarbonreduction
thatdidnotgreatlyreduceourdependenceoncoalgeneration
wouldalmostsurelybestrayingfromtheleast-cost(andmost
benecial)pathwhileimposinggreateroverallcostsonsociety.
obesure,politicalpressuresmaycontinuetodelayormitigatetheimpactsofclimateprotectionpoliciesoncoalgeneration.
Butthefactthatshiftingfromcoalisthemostobviouswayto
reducecarbonemissionsmeansthatthecoalpowersectorwill
remainunderpressuretoshrinkastheworldwarmsandas
societyseeksthebestwaytocutemissions.
Carbon Prices Still on the Horizon
Tereisnowasubstantialliterature,largelyderivedfromthe
computermodelinganalysesconductedbythefederalgovern-
mentandothers,thatforecastspossiblefutureCO2allowance
prices.12
Mostofthestudiesaretiedtooneoftheclimatebillsthathavebeenproposedinrecentyears,particularlythe
ACESbillthatpassedtheU.S.Housein2009,andthey
generallylookatmultiplescenariosthatvarykeyassumptions
suchasthefeaturesofthefederalprogramandthecostsof
availabletechnologies.
Tebillsinquestiondidnotpass,butseveralfactorsensure
thatCongresswillbeundercontinualandgrowingpressure
toputcomprehensivecarbonrestrictionsinplaceoverthe
nextfewyears.Amongthesefactorsistheincreasinglyurgent
needtoreducecarbonemissions,whichwillbecomeeven
moreapparentasconcentrationsofglobalwarminggasesrise,pushingtheplanettowardhighertemperatures,moreextreme
weatherevents,andothernegativeclimaticconsequences.
Anotherfactorisindustrysdesiretoforestalltheemerging
patchworkofstateclimatepoliciesinfavoroftheuniformity
andgreatercertaintyoffederallegislation.Tepowersectoris
alreadysubjecttoacap-and-tradeprogramintheNortheast
undertheRegionalGreenhouseGasInitiative,Californiais
movingaheadwithitsowncap-and-tradeprogram(which
12 Under various climate bills that have been considered by Congress in recent
years, a limited and declining number of allowances would be issued by the
government that grant the right to emit one ton of carbon dioxide. The allow-
ances would be tradable and their prices set by market forces.
PhotoDisc
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22 U N I O N O F C O N C E R N E D S C I E N T I S T S
Whilemanyofthecomponenttechnologiesthatwould
likelybeusedtocapture,transport,andstoretheCO2ingeologicformationshavebeenusedinotherindustrialapplica-
tions,therehasnotyetbeenacommercial-scaledemonstration
ofCCSatacoal-redpowerplant.Withthisneedinmind,
theUnionofConcernedScientistspublishedareportin2008
thatdescribedCCStechnology,revieweditsstatus,potential,
andcosts,andcalledforthefederalgovernmenttosubsidize
5to10full-scaledemonstrationprojects(Freese,Clemmer,
andNogee2008).However,despitesupportforsuchprojects
Uncertainties around CarbonCapture Retrots
SomeproponentsofnewcoalplantinvestmentspointtoCCStechnologyassomethingtheycouldeventuallyaddtothose
plants.Afterall,totheextentthatCO2emissionscouldbe
capturedandstoredundergroundratherthanemitted,the
plantsownerswouldnotberequiredtobuyCO2allowances.
However,thistechnologymustovercomenumeroushurdles
beforeitiscommerciallyviable,includingveryhighcostsand
eciencylossesundercurrentdesigns,particularlywhenadded
asaretrottoanexistingcoalplant.
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
ALLOWANCEPRICE(2010$/SHORTTON)
Source: Synapse Energy Economics (Johnston et al. 2011)
Figure 8. CO2
A L L OWA NCE PRI CE F ORECA STS COMPA RED WI TH PREVI OU SL Y MODEL ED SCENA RI OS
Recent forecasts by Synapse Energy Economics of high-, mid- and low-cost CO2
prices are contrasted with the CO2
prices projected under
multiple scenarios by federal modeling of climate bills considered by the last Congress.
EIA HR 2454 EIA APA EPA HR 2454 EPA HR 2454 Supp
EPA APA Synapse Low Synapse Mid Synapse High
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S 23
plantwouldincreaseitslevelizedcostofenergybyasmuchas
330percent,thoughthisestimateisrelativetoamuchlower
assumedlevelizedcostthanthoseofnewplants(Figure9).
AsCCStechnologynallymovesintothephaseof
commercial-scaledemonstrationprojectsandasweincorporate
thelessonsfromsuchprojectsintoplantdesign,thesehigh
costsmaywellcomedown(Al-JuaiedandWhitmore2009).
Also,anumberofinnovativeapproachestocarboncapture
arebeingresearched,someofwhichmayhavepotentialfor
breakthroughsincostreduction.Butsubstantialresearchanddevelopmentwillberequiredbeforeweknowifanyofthese
approachescanbesuccessfullycommercialized.
withinthepowersectorandthefederalgovernment,progress
towardcommercialdemonstrationtodatehasbeenslow.
AddingCCStoacoalplantisestimatedtogreatlyincrease
thecostofelectricityfromthatplant,particularlyiftheCCS
wereaddedasaretrot(Figure9).Almostallcoalplantsin
operationtodayusepulverizedcoaltechnology,13andthey
couldemployeitherapost-combustion captureprocessoravari-
ationcalled oxy-combustion(inwhichthecoalisburnedusing
pureoxygenratherthanair).woplantscurrentlyinoperation
intheUnitedStatesusethealternativeintegratedgasicationcombined-cycle(IGCC)technology,14whichcouldemploya
pre-combustion captureprocess.Accordingtofederalestimates
basedoncurrenttechnologicaldesigns,addingCCStoa
newpulverizedcoalplantwouldincreaseitslevelizedcostof
electricityby65percentor78percent(usingoxy-combustion
orpost-combustion,respectively);andaddingpre-combustion
capturetoanewIGCCplantwouldincreaseitslevelizedcosts
by36percent.AddingCCSasaretrottoapulverizedcoal
Figure 9. REL A TI VE COST I NCREA SES F ROM A DDI NG CA RBON CA PTU RE TO COA L -F I RED POWER PL A NTS
Adding CCS to coal plants is projected
to add substantially to the levelized
cost of electricity from those plants.
A recent federal study projected that
costs would increase 36 percent if
adding pre-combustion capture to a
new IGCC plant, 78 percent if adding
post-combustion capture to a new pul-
verized coal plant, 65 percent if adding
oxy-combustion to a new pulverizedcoal plant, and 330 percent if adding
post-combustion capture to an existing
pulverized coal plant. The much greater
relative cost increase for the existing
plant is largely because it is assumed to
start with much lower levelized costs.%I
NCREASEIN
TOTALCOSTOFELECTRICITY
350
300
250
200
150
100
50
0
36%
NEW IGCC NEW POST NEW OXY RETROFIT POSTCOMBUSTION COMBUSTION COMBUSTION
78% 65%
330%
13 Some plants use a variation on pulverized coal combustion called circulating
uidized bed (CFB) combustion.
14 One additional IGCC plant is under construction and several others have
been announced.
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A RI SKY P RO P O SI T I O N : T H E F I N AN CI AL H AZ ARDS O F N EW I N VEST MEN T S I N CO AL P LAN T S 25
aremoreviablethanpastexpectationsaroundCongressional
actiononclimatechange(carbon)orrenewablessincethis
EPAeventismostlyaboutenforcementofexistinglawswhere
thehealthandsocietalgoodbenetsareoflimiteddebateat
thispoint(Eggersetal.2010).
Teexactcompliancecostsfacedbyanygivenplantwould
depend,amongotherthings,onwhatthefuturerulesactually
requiredandwhatpollutioncontrolsandotherequipmentthe
plantalreadyhadinplace.Butcoalplantsareclearlyatriskof
majornewcosts,especiallytheoldestplantsthatinmanycases
havemanagedfordecadestoentirelyavoidinstallingmoderncontrols,thusexternalizingtheassociatedcostsofhealthand
environmentaldamageontoothers.
Teregulatoryeortslikelytoimposethemostsignicant
costsarediscussedbelow.
Transport Rule: Preventing Thousands of Deaths
from PollutionRelated Diseases
Publichealthexpertsandgovernmentalregulatorshavelong
recognizedthatairpollutantemissionsfromU.S.coalplants
killthousandsofpeopleyearlyandcausemanymorenon-
fatalhealtheects.Anextensivebodyofresearchshows,forexample,thatneparticulatesintheairincreasethedeathrates
fromheartandlungconditionsandstrokes(CAF2010;EPA
Quiteapartfromtheirimpactonclimate,coal
plantscauseastaggeringarrayofotherharmsto
theenvironmentandhumanhealth.Coalplants
contributetotheprematuredeathsofthousandsof
Americanseachyearfromheartandlungdisease,forexample.
Teyarethesourceofmorethanhalfofthenationsatmo-
sphericemissionsofmercury,apotentneurotoxinthateach
yearthreatensthousandsofnewbornswithlifelongreduction
inbrainfunction.Coalplantsgeneratemillionsoftonsoftoxic
ashandothersolidwastesknowntoleakintogroundand
surfacewaters.Andcoalplantsrequireenormousquantitiesofwaterforcooling,therebyputtingstressonwatersuppliesand
takingaheavytollonaquaticlife.
Coalplantsfacetheprospectofhavingtomorethoroughly
reducetheseandotherenvironmentalandpublichealth
impactsoverthenextfewyears.TeEPAiscurrentlyworking
throughabacklogofstandardstoaddresssuchthreatsaback-
logthatdevelopedlargelyunderthepreviousadministration,
whentheEPAinsomeinstancesadoptedrulesthatthecourts
struckdownasinsucientlyprotectiveandinotherinstances
failedtoactaltogether.
InadditiontotriggeringtheseriesofnancialanalysesthatprojectedthecoalplantretirementsdiscussedinPart1,these
pendingrulemakingshaveprovokedpoliticaloppositionand
promptedcallsforlegislationthatwouldbartheiradoption.
However,itwouldberecklessforthoseinvestingincoalplants
tocountonsuchlegislationbeingpassed,giventhatthehealth
andenvironmentalbenetsoftheruleswouldgreatlyoutweigh
theirprojectedcompliancecosts.15Oneoftherecentanalyses
offorthcomingairqualityrulesconcluded,theEPAactions
P A R T F I V E
Coals Damagesto Air, Water, Land, and Public Health
and the Costs of Reducing Them
15 The Clean Air Act has been particularly successful in delivering benets far
in excess of compliance costs. The EPA estimates that the total benets of the
Clean Air Actin lives saved, reduced heart disease, fewer asthma attacks, and
other positive eectsamount to more than 40 times the costs of regulation
(Jackson 2010).
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26 U N I O N O F C O N C E R N E D S C I E N T I S T S
andparticul
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