Environmentalists fight new coal plants with economics and George Bush reacts!

You might remember that President Bush came out with a global warming proposal to cap carbon emissions. His plan would cap emissions in the year 2025. This was actually not a plan to reduce global warming but to give a guarantee to new coal-fired power plants that they would be able to produce at full capacity for their expected life times. His plant was really a guarantee to increase global warming by eliminating an economic restriction on building new coal-fired plants. Fortunately his plan didn’t get very far.

Since it is difficult now for new coal-fired plants to be constructed, the new marginal cost of new electric production is based on the cost of natural gas fired power plants. These plants are very clean and release about half the carbon as a coal-fired plant for each unit (watt hour) of electricity produced. This sets a higher cost standard when considering new sources of electric power. The higher cost standard means that wind power in particular new becomes economically viable (assuming infrastructure like more long distance grid capacity is available). Solar also gets much closer to standing on its own economically. The cost of electricity from natural gas is higher than from coal, but not enough to severely disrupt the business and residential customers who depend on having affordable electric power.

Some politicians feel that they need to restrict the production of oil as a way to force our nation’s conversion to renewable energy sources. The problem with their reasoning is that high gasoline and diesel don’t affect the price of electricity. We don’t generate a meaningful amount of electricity from oil. Oil does not set the price threshold for new electric production. Restricting off-shore drilling will not cause utility companies to build more renewable energy sources. Restricting coal however, does force this conversion.

It is interesting that both Republicans and Democrats seem to favor more coal production. John McCain seems to be pushing the ‘All the Above’ energy development which includes coal and oil shale. Barack Obama is in favor of ‘low emissions’ coal based electric production. I don’t really know what ‘low emissions’ means. George Bush favors
‘clean coal’ which means removing the toxic byproducts of emissions, but not reducing the carbon emissions. Sequestering carbon emissions would mean removing all the carbon dioxide and sequestering it in permanent underground storage. The problem is that sequestering is more of a theory and has not be proven to work yet, if ever.

To push our switch to renewable fuels, we should prohibit the building of new coal-fired electric generating capacity. That would force the issue in this country. We could also reduce and eventually stop or exports of steam coal for electric production in other countries. China, which burns almost twice the volume of coal as the United States, will probably start importing coal this year for the first time to meet their rapidly increasing electric requirements. Cutting off coal exports would significantly raise the world price of coal and make renewable energy sources a much more appealing alternative in countries like China.