The U.S. Energy Information Administration estimates the share of U.S. electricity generated from coal will fall from 42 percent in 2011 to 36.8 percent in 2013.
Some of that decline is due to advances in fracking making cheaper natural gas available. That’s bad news for coal miners but no different than problems all industries face from competition.
Cheaper natural gas cannot explain all coal’s decline, however. A federal study found that coal use in electricity declined just 1.4 percent for every 10 percent change in relative prices between the coal and natural gas. This is not surprising because electric plants cannot change from coal to natural gas by just throwing a switch.
An important reason for coal’s decline is the administration’s war on coal.
Vice President Joe Biden made that clear during the 2008 campaign when he said the Obama policy was “No coal plants here in America.” Similarly, candidate Obama told the San Francisco Chronicle that he would ensure that building a coal plant would “bankrupt” the operator because of the cost of complying with new carbon-dioxide emission regulations.
Deliberate government efforts to end an industry are not part of normal competitive market pressures and bad for the U.S. economy for three reasons.
First, virtually all our coal production goes directly to generate electricity. Changing that is costly: our electric grid was designed based on generation patterns dominated by multiple coal plants. Eliminating coal requires both costly new generation facilities and expensive grid modifications.
Moreover, while the rapid development of domestic natural gas is cutting generation costs today, it is not guaranteed to continue indefinitely. If anti-fracking activists – who are also often anti-coal activists – succeed in their campaign to restrict natural gas production and pipeline construction, natural gas costs will rise.
Second, diversity in sources enhances our energy security by minimizing the chance that politics or wars in unstable and unfriendly countries will disrupt our energy supplies.
America is called the “Saudi Arabia of coal” because it has more than a quarter of world coal reserves. Energy security is vital because energy is embedded in most goods and services. Almost half of our energy use is indirect and so invisible to consumers. Among the most energy intensive sectors of our economy are health care and food; we risk much more than higher utility bills if we remain vulnerable to unfriendly and unstable energy suppliers.
Third, the coal industry is a significant source of jobs. The typical coal miner earns $73,000 a year, says the National Mining Association, which represents the mining industry in Washington.
An estimated 60,000 Americans work in coal-fired power plants. These are high-productivity jobs because the employees work with large amounts of capital. Electricity generated by coal takes just 0.18 employees per megawatt of plant capacity. Coal-fired power plant jobs pay high wages because their employees are skilled. Yet new EPA regulations are estimated to cut total coal employment by 1.4 million job-years between 2011 and 2020.
Besides destroying jobs, the new regulations imposed by the administration will lead to the closing of 40 gigawatts of electric generation capacity. A staggering 12 percent of America’s current coal capacity will be shut down. There could be many long, hot summers if we lose these reliable sources of power.
Coal plays a key role in electricity generation. The power produced from coal-fired plants is embedded in everything from our prescription medications to the food we eat.
Tens of thousands of Americans earn good livings in coal-related industries. Domestically produced coal reduces our dependence on unstable and unfriendly suppliers.
Those facts make it obvious that market forces – not Washington bureaucrats – should determine the role coal plays in our economy.
Contact Morriss, a law professor at the University of Alabama, at firstname.lastname@example.org.