Don't abandon coal after Elk River
Friday , February 07, 2014 - 10:34 AM
Coal mining is dangerous. So, too, is the chemical process for cleaning coal, as revealed by the leakage of contaminants into the Elk River from a storage tank owned by Freedom Industries. That spill caused about 300,000 people living in or near Charleston, West Virginia, to lose access to potable tap water for weeks and Freedom Industries to file for bankruptcy protection to stave off, at least temporarily, lawsuits seeking compensation for damages.
In the meantime, the United States seemingly is moving toward reliance on a single fuel for electricity generation: natural gas. For now, that energy source is cheap and abundant in most parts of the country, tempting some to think that America’s electric-power grid can be converted entirely from coal to gas.
Along with the surge in domestic shale-gas production that followed the discovery of “fracking,” President Obama’s “War on Coal” has helped propel the shift to gas. On the front line of that war is the Environmental Protection Agency, which has become known as one of the federal government’s most heavy-handed regulatory agencies.
For example, the EPA recently proposed regulations for new coal-fired plants that would require utilities to capture and store carbon deep underground. Never mind that a technology for sequestering carbon is not yet feasible.
Complying with the new regulations would add to the tens of millions of dollars coal-using utilities already are spending to meet tighter environmental standards for mercury and other toxic emissions.
If you think that decommissioning coal-fired electricity plants is a good thing, think again. One downside of converting to natural gas is that it has a history of price volatility. In recent years, gas prices have swung wildly, from as little as $2 to as much as $13 per million British thermal units (Btus).
Weather extremes like the plunging temperatures experienced in large parts of the country earlier this year underscore the danger in not having a diverse mix of energy sources. In Texas, where natural gas accounts for more than 50 percent of electricity production, wholesale power prices that typically range from $50 to $75 per megawatt-hour, reached $5,000 per megawatt-hour. And power prices also soared in New England, the Mid-Atlantic States and parts of the Midwest, regions that depend ever more heavily on natural gas for electricity production.
Nuclear power has an outstanding track record for safety and reliability in the United States. During the cold snap, the U.S. fleet of about 100 nuclear plants produced electricity 97 percent of the time, according to the Energy Information Administration. This was base-load power generated 24/7 for households, commercial and industrial customers. Without it, the nation’s electricity grid may have collapsed, imposing considerable costs in money and human hardship from brownouts and blackouts.
Despite the abundance, reliability and price stability of coal and nuclear power, they account for only six percent of the electricity generating capacity added to the grid since 1995. The shift to natural gas is expected to continue. At least 50,000 megawatts of natural-gas capacity — maybe as much as 100,000 megawatts — is likely to be added in the next decade.
As for renewable energy sources, those who claim that wind, water and solar power can provide all energy needs by 2030 are engaged in fantasy. No technology is available for storing large amounts of energy for use on days when the sun isn’t shining or the wind isn’t blowing.
The lesson here is that the political and economic costs of dependence on a single fuel potentially are very high. Sound public policy would encourage a balanced portfolio of energy sources, including coal and nuclear power.
So what about Elk River? The kneejerk reaction blames lax regulations and regulatory oversight for the chemical spill. The solution? Tougher regulations. Bigger regulatory agency budgets.
West Virginia’s oversight of chemical storage facilities was weaker than in other coal-producing states. But regulation hardly ever achieves its intended purposes because of the incentives facing regulatory bureaucrats, who lack access to relevant information, are not penalized for poor performance, sometimes are corrupt and are vulnerable to “capture” by the very industries they are responsible for overseeing. Anyone who remembers the disastrous BP oil spill in the Gulf of Mexico will also recall that Minerals Management Agency personnel literally were in bed with BP employees.
If ever there was a time for a reassessment of environmental policy toward coal, it is now, while the consequences of Elk River still are fresh. That reassessment should include market-based solutions to managing the nation’s water resources and the environment more generally (see Aquanomics, published by The Independent Institute in 2012).
Coal and nuclear power should be in the energy mix — especially if we want to keep the lights on.
William F. Shughart II, research director and senior fellow of the Independent Institute, is J. Fish Smith Professor in Public Choice in Utah State University’s Huntsman School of Business.