Posted by: bmeverett | February 6, 2014

Should we get rid of coal?


According to the New York Times, the elimination of coal as a power generation source in the United States is the “potentially historic centerpiece of President Obama’s climate change legacy.” The EPA is currently working on regulations to do just that. Setting aside the very real constitutional issues of whether the executive branch has the authority to take such broad economic planning steps, let’s just ask two simple questions: what would the elimination of coal power plants cost and what would we gain?

A precise analysis would be very complex, but we can make a quick ballpark estimate. Let’s start with some simplifying assumptions. First, no new coal-fired power plants will be built. With current low natural gas prices, few new coal plants would be competitive in the marketplace with or without government regulation. Second, the proposed regulations would shut down all existing coal plants by 2020. It is theoretically possible but unlikely that existing coal plants could meet the new regulations (whatever they turn out to be), since carbon capture and storage technology (CCS) is not technically ready, let alone economically viable. Finally, let’s assume that the current coal plants are replaced with equal parts of natural gas combined cycle, onshore wind farms, offshore wind farms and large solar installations.

According to the Energy Information Administration (EIA), through October of 2013, US coal plants generated about 1.3 trillion kilowatt-hours (kWh) of electricity. Let’s gross this up by 20% and estimate total 2013 coal generation at 1.6 trillion kWh. Per our assumptions, we replace this amount with 400 billion kWh each of natural gas, offshore wind, onshore wind and solar. My latest estimates for the costs new power generation from these sources, including capital, operating and fuel costs, would be 4.7¢/kWh for natural gas, 20.5¢ for offshore wind, 9.3¢ for onshore wind and 18.1¢ for solar. The total annual cost for generating 1.6 trillion kWh from these power plants would be about $208 billion. We would save only the fuel and operating costs for the shuttered coal plants, since the capital cost is already sunk. There would of course be reclamation costs unless we wish to leave these dead generating stations as permanent eyesores, but let’s ignore these costs for the moment. Coal costs about 2¢/kWh and plant operating costs (fixed and variable) another 1¢ for a total savings of 3¢ per kWh or a total annual savings of $47 billion. Our switchout would therefore cost us a total of about $161 billion per year, most of which would be reflected in higher electricity bills for consumers. With about 110 million households in the US, the average electricity bill would increase by about $120 per month. There would naturally be substantial regional variations, but on a national scale, that’s a pretty heavy burden on the middle class.

This estimate does not reflect the substantial difficulties and costs associated with integrating renewable energy into the grid. Since electricity demand is instantaneous while wind and solar power are intermittent, the power system requires either extensive storage or back-up fossil fuel generation to incorporate these technologies. At present, wind and solar account for about 4% of our electricity generation. In my scenario, their share would rise to 30%.

Even if excessive renewable energy proves not to be a problem, what would we get in return? According to the EIA, American coal-fired power plants emitted about 1.31 billion tonnes of carbon dioxide in the first ten months of 2013, so let’s estimate total 2013 emissions at 1.57 billion tonnes. The total cost of this carbon reduction would therefore be roughly $100 per metric tonne. Is that good or bad?

Last November, the White House updated its estimate of the “social cost of carbon” the official estimate of the cost of emitting a tonne of carbon dioxide into the atmosphere. The new estimate is $37 per tonne – a little over one-third of the estimated cost of shutting down all US coal-fired power plants. (If you’d like to see an exercise in tortured logic, take a look at the report that generated this number, which you can find at http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCYQFjAA&url=http%3A%2F%2Fwww.whitehouse.gov%2Fsites%2Fdefault%2Ffiles%2Fomb%2Finforeg%2Fsocial_cost_of_carbon_for_ria_2013_update.pdf&ei=MsbyUtaPMM2BogTCr4CQBw&usg=AFQjCNEYMkkDA_ad6D5lk6BX-O153P9u2A&bvm=bv.60983673,d.cGU.)

By the government’s own logic, shutting down our coal plants would cost 2½ times more than it’s worth. The Climate Community answers, “So what? We have to do something to save the Earth.” OK, but the EIA estimates total global carbon dioxide emissions in 2020 at about 36.5 billion tonnes per year. The shut-down of all US coal plants would therefore reduce global carbon emissions by just over 4%. We can’t even measure carbon emissions within 4%. In effect, we would be paying $161 billion per year for a rounding error.

To put the problem in perspective, shutting down US coal power plants by 2020 would reduce our annual emissions output by about 220 million tonnes each year. Over that same period, the EIA projects that China will increase its annual carbon emissions from coal use by an identical amount. In other words, the program to shut down US coal plants barely offset the growth in China.

The willingness of the Climate Community to support such measures is based on one of the great fallacies of the climate change debate. Other countries, so the argument goes, are waiting on the United States to take the lead. When the US shows a “real willingness” to accept the costs of carbon reduction, the rest of the world will follow. This argument reprises the assertion that the world would eliminate all its nuclear weapons if the US would just “take the lead” and disarm unilaterally.

China, the world’s largest carbon emitter has embarked on a two-fold endeavor of historic proportions. The Chinese government wants to bring nearly a billion people out of poverty and at the same time expand China’s geopolitical reach into East and Southeast Asia and later into the world as a whole. Reducing carbon emissions is inconsistent with both goals. It’s easy for the Chinese to talk about their sincerity in fighting climate change and to encourage the West to take steps that weaken their economies. The belief that China cares about carbon mitigation is one of the great self-delusions of our time – equivalent to the common view in the 1930s and 40s that Stalin was trying to create a fair and just society.

Climate “action” is difficult precisely because the costs of even small carbon reductions are very high. No matter what you believe about climate change, the President’s program is the worst possible outcome – no meaningful reduction but at a very high cost.

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Responses

  1. Great article Dr. Everett, would love to hear your thoughts on the protests of the new gas plant for Salem, MA since it’s not only local to Tufts, but seems to provide a great benchmark of the oppositions tendency to not have a well thought out alternative beyond rhetoric. Entergy-Arkansas had a nice write up on alternative land scales for solar/wind for replacing the 1800MW of the Arkansas Nuclear One Station. (~7.4 acres/MW for solar means the 692MW Salem gas plant would need about 5,120 acres of solar to replace this power generation capacity, nevermind what to do with the existing waterfront property where the old plant resides). If you believe there’s a 5,100 acre tract of land in the region available for a solar farm, I have a bridge for sale…

    Would love to hear your thoughts on these recent protests as I had the chance to engage several Salem residents and they seemed supportive of any step in the right direction that allowed for a smaller footprint on prime real estate in their harbor.

    • The protests against a new natural gas power plant in Salem are indeed a bit strange. Most of us can understand why people didn’t like the old and inefficient coal plant in this heavily populated area. The citizens of the North Shore still, however, need electricity, and natural gas is by far the best choice. It’s clean and quiet and the fuel is supplied by pipeline. Wind and solar do have a significant problem in terms of the amount of land they require, but that’s just one symptom of a larger problem. Renewables are simply too expensive, and they create serious technical constraints on the management of the power grid since these sources are intermittent while power demand is instantaneous. Massachusetts consumers have for many years wanted all the benefits of affordable, reliable power without paying any cost. That’s why they really love electricity brought in from Canada by transmission lines. Let somebody else bear the burden. We just want the benefit!

  2. I was recently told that Cape Wind would make a huge impact on supply. Furthermore that it’s being held up strictly due to political reasons. While I won’t discount the political discourse that has maligned the project, the expiration of a key tax credit at the end of 2013 is the backbone of their current inability to get financing for the project. According to the Cape Wind project site, they say an average generation of 174 MW is expected, this is about 0.25 Salem Gas Plants. Take into account the closing of Brayton Point (1500MW) and Yankee Nuclear (604MW), that’s over 13 Cape Winds needed to replace just these 3 plants, nevermind the fact MA still imports a large chunk of electricity.

    I often use the argument if it was as economically competitive as they would have you believe, where’s the huge influx of VC $ to push the political buttons to make this happen? If it’s such a good investment, why is there not a line out the door applying for permits? Footprint is truly the least of feasibility concerns, but it seems to be easiest to understand of “what does the alternative look like”. Ask Germans how they feel about the increase in renewable energy charges to their electric bills (around 8 cents/kwh), which is comparable to some of the cheaper electric rates US citizens pay in total (not just a tack on fee).

    Excellent work with your blog and it’s a breathe of fresh air in a conversation that often overlooks the fundamentals of energy consumption/production in terms of “how much does it cost to make a KWH?”

  3. However, we must remember that “Fiction well-served trumps truth every time”. Real science is faced with convincing these people – you cannot confuse them with facts because their minds are already made up.

    If something is not done to stop these loons our nation is headed for a real disaster. I believe a majority of the American public understands the inaccuracies of climate forecasts – yet the idiots in the WH and the wimpy bureaucrats are not willing to accept facts – fiction is more fun. Big O finds it impossible to tell the truth on any level.


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