Ken Silverstein | Mar 03, 2011

 

If a Clean Energy Standard is enacted, what will that mean for fossil fuels? Interestingly, the emphasis on the development of sustainable fuels is not at the exclusion of coal and natural gas. 

 

President Obama has shifted the focus away from enacting carbon constraints and more toward the formation of cleaner energy sources. He wants 80 percent of all such energy forms to come not just wind and solar but also nuclear, natural gas and “clean coal.” 

 

Not all fuel forms, however, are created equal. And while nuclear and natural gas have the opportunity to thrive in a low-carbon environment, coal will be the most challenged. That’s because of all the pending regulations seeking to control sulfur and nitrogen oxide as well as mercury and carbon. That is making any fixes expensive, not to mention the construction of new coal plants that would capture and bury carbon dioxide. 

 

“In the near term, the electric industry is focused on coal retirements, not carbon restrictions,” says Mark Griffith, managing director of Black & Veatch Corp., at a conference sponsored by Wartsila in Vail, Colo. “If greenhouse gas regulations are eventually enacted, there will be an increased reliance on natural gas, nuclear and renewables.” 

If greenhouse gas regulations are later approved, Griffith would expect a “real flip” in the nation’s energy mix: Coal, which now provides about 45 percent of the nation’s fuel to make electricity, would drop to 21 percent by 2035. Natural gas would rise from about 20 percent today to 40 percent during that time while renewables would go from 2 percent now to 11 percent. 

 

Environmental issues dominate the decision making process. Next year, the U.S. Environmental Protection Agency says that it will implement its Clean Air Transport Rule. After that, it is expected to enforce the Maximum Achievable Control Technology standards that relate to mercury. On the horizon: those involving disposal of coal ash and greenhouse gas emissions. 

 

Altogether, Black & Veatch anticipates 52,000 megawatts of coal-fired capacity to be retired in the short run and in response to those regulations. About 300,000 megawatts of coal-burning generation now exist. 

 

Green Goals

 

To be sure, coal will be vital to the nation's economy. And the thinking in some corners is that coal will not sit idle while other fuels vie for its share of the pie. The industry, in fact, is working feverishly with the utility sector to develop new technologies that it says will give it new life while others are also cautioning that natural gas prices cannot be expected to stay so low.

That said, coal has a tough road ahead. Reports are suggesting that will it cost as much as $70 billion to comply with all of the rules. Utilities are finding that for their older, smaller coal units, it is easier and cheaper to retire them. Natural gas will be one of the beneficiaries. 

 

“Natural gas is 50 percent cleaner than an existing coal plant,” says Saya Kitasei, sustainable energy fellow at Worldwatch Institute, at the Wartsila conference. “We think natural gas has a future in a low-carbon economy. We have taken a lot of flack from our comrades in the environmental space for this position.” 

 

The green movement has been concerned about the use of unknown chemicals to extract shale-gas deposits and the effect those fluids are having on drinking water. If this issue can be resolved, natural gas would have key roles in electricity production: First, as peak generation to meet high energy demand and second, as backup power for renewables. Others think it could become a base-load fuel. 

 

Indeed, Credit Suisse and Deutsche Bank say that if natural gas prices stay around $4-$6 per million Btu, then utilities would be hard pressed to avoid this option. Prices have remained low for two years now and are projected to rise only nominally. That's all because of the gold rush to find shale gas and the modern drilling techniques that allow developers to access those deposits.

Ultimately, though, the goal of the Obama administration and its backers in the environmental community is to advance wind and solar, and other renewables. Until then, they will need subsidies -- monies that the Obama administration has proposed to come out of the pockets of the mature oil and gas industries. 

That kind of leadership gives the developers of everything from solar panels to wind turbines to energy storage devices the faith they need to innovate, says Erik Ela, an engineer at the National Renewable Energy Laboratory. Vendors have the ingenuity, he says, but tenuous markets often make such progress impractical. 

The landscape is changing. The pressure is on to reduce emissions and to develop cleaner and greener energy. With a push from the president, the changes will occur more rapidly and result not only in more wind and solar power but also more advanced coal and natural gas generation.

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