In the electricity-generation market of 2009, coal generation had only a 44 .6 percent share, 3.6 percentage points lower than in 2008 and the lowest level since 1978 when it represented 44.2 percent of the market. Hydroelectric power, wind energy, and natural gas picked up most of the market share coal lost in 2009. Higher water levels helped lift hydroelectric generation, while wind and natural gas boosted their generation levels by adding capacity. Natural gas was also able to compete more effectively against coal, inasmuch as gas’s price was about 50 percent lower in 2009 than in 2008.
Natural gas garnered over half the share lost by coal’s decreased generation because, unlike wind, combined-cycle generators have higher capacity factors and are dispatchable. Therefore, they are a better substitute for coal-powered electricity generation. But substituting natural gas-fired generation for coal-fired generation comes at a price to consumers, inasmuch as average coal-fired production costs in 2009 were 40 percent lower than those of natural gas—2.97 cents per kilowatt hour for coal versus 5.0 cents per kilowatt hour for natural gas.
Why is coal seeing a reduced market and what are the consequences to electricity consumers? A number of factors are responsible for coal’s lower market share, including: the possibility of further national legislation and regulation benefitting other technologies and promoting the reduction of coal-fired generation; state programs for reducing greenhouse gas emissions and increasing renewable sources of energy; a more competitive environment for natural gas production and generation; higher subsidies on a production basis for renewable sources than for traditional coal-fired generation; and regulatory reviews and legal delays that result in the cancellations of coal-fired projects. Among the consequences of increased regulatory and legislative programs are higher costs both for the substitute technologies and for compliance by coal-fired generators.
An example of what electric utility companies face with regard to coal-fired generation can be seen in a report by the National Resource Defense Council (NRDC), based on 2008 data but recently released and showing the criteria pollutants (e.g., sulfur dioxide, nitrogen oxide, and mercury) and carbon dioxide emissions of the nation’s top 100 electric generation producers. According to Dan Lashof, NRDC’s climate director, “Power companies have been on notice for more than a decade that they will need to cut their emissions of carbon dioxide and other pollutants. This report shows which companies have made smart decisions to position themselves for the transition to clean energy and which are lagging.” Three electric utility companies co-sponsored the report with the NRDC and CERES, an investor advocacy coalition that describes itself as “a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.”
Federal Regulatory and Legislative Activity Affecting Coal
Various proposals are circulating for national regulation and legislation that effectively mandate less coal consumption. These include a possible nationwide renewable portfolio standard (RPS) that would require electric utilities to generate a set percentage of their electricity from qualified renewable generating technologies. Another is a cap-and-trade bill that would force the reduction of carbon dioxide emissions. Because coal generation emits twice the carbon dioxide emissions of natural gas, any cap-and-trade policy would be targeted at lowering coal’s share of generation within the electric utility sector.
The Environmental Protection Agency (EPA) just released a proposed “transport rule” that would improve air quality in the eastern United States by reducing power plant emissions from 31 states and the District of Columbia. Specifically, it would alter the limits on sulfur dioxide, nitrogen oxides, and ozone emissions that are currently in place. Accord