Recognizing Coal's Constraints

Coal's long term future is up in the air. But if it is to continue to serve the American economy and to provide the preponderance of fuel that generates electricity, it is clear that the utilities using it will have to make it much cleaner.

The status quo won't do. Utilities that rely on coal recognize the pressures on them. Some are now investing in the kinds of technologies that seek to reduce emissions and to capture carbon emissions that many say are tied to global warming. To achieve such goals, however, takes time and money -- issues that both state and federal lawmakers must acknowledge and subsequently incorporate into energy laws.

"Coal produces just about 50 percent of the electricity generated today, and it's going to produce a lot of electricity for a long time in the future, but to preserve that coal option, we need aggressive development and deployment of carbon capture and storage technologies," says Tony Earley, chief executive of DTE Energy, at the EnergyBiz Leadership Forum. "So as part of our climate change solution, we've got to provide funding for these technologies and then set targets and timetables that correspond with the commercial availability of those technologies."

Even though the enthusiasm for carbon legislation is waning, over time that will change. Most of the participants at the forum that was held in early March say that tougher laws are inevitable. Simply, too much work -- as well as the development of the technologies to make reductions possible -- has gone into the effort for it to just die. With that mind, most of them also go on to say that coal will continue to have vital role.

According to the U.S. Energy Information, to achieve carbon emissions reductions of 80 percent by 2050, electricity prices would rise 80 percent during that time. If no nuclear or clean coal is used, those prices would climb by 200 percent.

Kentucky and California are following two different tracks. In Kentucky, the four leading U.S. senatorial candidates vying for office there are all competing for the coal sector's endorsement. Collectively, they tend to agree that any limitations on coal would be bad for the state's economy. Legislation that would limit carbon emissions would invariably add to coal's costs -- an expense that would be passed along to consumers and hurt Kentucky's business base, they say.

In Los Angeles, by comparison, the mayor there has said that a monthly carbon surcharge would be instituted so that the city could rid itself of coal by 2020. Most of the city's citizens said in a survey that they would be willing to pay an extra $2.50 per month to wean itself from fossil fuels.

"The increase will incentivize stakeholders to use alternative energy and therefore reduce Los Angeles' dependence on fossil fuels," says Mayor Antonio Villaraigosa, in a statement.

Cleaner Footprint

The Waxman-Markey bill would require 17 percent reductions in greenhouse emissions by 2020. Among other things, utilities would have to implement more renewable energy into their generation portfolios as well as participate in a cap-and-trade program that would gradually reduce carbon emissions.

While the legislation passed the House last summer, it has stalled in the Senate where it will remain in limbo for a time. To push it along, the Obama administration has ordered the Environmental Protection Agency to publish its own rules in accordance with an earlier U.S. Supreme Court decision that allows it to do so.

Unequivocally, industry would rather work within with the legislative framework than under the mandate of EPA. In a sternly delivered message to the participants of the EnergyBiz Leadership Forum, Rep. Ed Markey, D-Mass. says that global warming is real and that the last three decades have progressively become the hottest on record. At the same time, he says that the infrastructure has been laid to increase the nation's green energy mix.

The pressure to become cleaner will only intensify, Markey says. Therefore, "Congress must pass laws to give your businesses regulatory certainty."

Ohio, long considered a symbol of the old economy, says that it is on the cusp of the evolution. Governor Ted Strickland says that the state's manufacturing base is already in place and that it can adapt to the new age. All of the essentials exist, he says, noting that 10 percent of all solar panels are now made in Ohio.

Among the companies now there: First Solar, with $100 million in orders for the next five years, and SunPower, with 39 patents. "Today, workers who once made auto parts can now make windmills," Strickland told the EnergyBiz Leadership Forum audience.

Southern Company says that it understands implicitly the need to develop a cleaner energy footprint. One of the biggest users of coal, it says that it has a coal gasification application now pending in Mississippi. If approved, it would eventually commercialize the gasification of low-rank coal, which makes up about half of the world's coal reserves. The facility would not sequester the carbon; rather, it would capture it and then sell it so that it could be used to enhance oil recovery in the region.

"We've said as an industry that we have to preserve the ability to utilize one of the most abundant domestic sources of energy in the form of coal," says David Ratcliffe, chief executive of Southern.

Support for coal in key states remains strong. And while the political backing may be enough to slow down the pace of legislation to require reductions in carbon emissions, it is unlikely going to be sufficient to permanently sidetrack it. Many of the bigger utilities are acknowledging as much and are subsequently moving to make the critical investments in clean coal technology.