Solar power has been growing like crazy. Last year the solar industry installed a record amount of solar capacity. The impact can be seen in the data. According to the Energy Information Administration, in 2012 there were 3.5 million megawatthours of electricity generated by solar photovoltaic panels. In 2013 that more than doubled to 8.3 million Mwh. And to think that a decade ago the U.S. generated just 6,000 Mwh from solar PV. Solar is closing in on price parity with the likes of coal — with full-cycle, unsubsidized costs of about 13 cents per kilowatthour, versus 12 cents for advanced coal plants.
So is the solar revolution finally here? Not quite. Even after a decade of rampant growth solar energy still barely moves the needle in the U.S. energy mix. In fact, solar merely equals the amount of electricity that the nation generates by burning natural gas captured from landfills. And it’s only slightly more meaningful than the 7.3 million Mwh we get from burning human waste strained out of municipal sewer systems.
Indeed, when you factor in all the sources of energy consumed in this country, captured solar power amounts to well less than 1 quadrillion Btu out of an annual total of 96.5 quadrillion.
The biggest sources are the old standbys. Oil still reigns supreme at 36 quadrillion Btu, natural gas at 26 quads, nuclear 8. Hydropower and biomass bring up the rear at 2.6 and 2.7 quads. Wind is just 1.5 quads. And coal — the great carbon-belching demon of the global energy mix — its contribution is 19 quads. That’s nearly 8 times all the nation’s wind and solar generation combined.
This is all important to keep in mind in light of pending efforts by the EPA to initiate draconian new regulations governing carbon dioxide emissions from coal-burning power plants. Coal is responsible for about 1.7 billion metric tons a year of carbon dioxide out of the 5.3 billion ton annual total.
The assumption, by policy makers like President Obama, is that the country can cut carbon emissions by closing coal plants, while making up for the lost electricity by burning more natural gas and building more solar and wind. Indeed, natural gas has taken a bite out of coal. In 2013, coal production from U.S. mines fell to 995.8 million short tons. The last time it was that low was in the late 1980s. Coal production peaked in 2008 at 1.17 billion short tons.
President Barack Obama removes his jacket before speaking about climate change, Tuesday, June 25, 2013, at Georgetown University in Washington. The president is proposing sweeping steps to limit heat-trapping pollution from coal-fired power plants and to boost renewable energy production on federal property, resorting to his executive powers to tackle climate change and sidestepping the partisan gridlock in Congress. (AP Photo/Charles Dharapak)
The fall off in demand has seriously wounded America’s biggest coal mining companies. Over five years shares in Peabody Energy Peabody Energy are down 36%, Arch Coal down 67% and Alpha Natural Resources Alpha Natural Resources off 78%. Contrast that with shares in SolarCity SolarCity, up 400% in just 18 months.
But coal is certainly not dead. Not even close to it. “When even the president is anti-coal, it’s like you’re fighting City Hall. But the truth will prevail,” says Andrew Redinger, managing director at KeyBanc Capital Markets, which has done investment banking work for coal utilities and solar developers alike. “I see coal making a comeback. The best thing for coal will be when we start exporting natural gas.”
This winter showed that “declaring the death of coal is premature,” says Bob Yu, analyst at Bentek, a division of Platts. “Winter was a reminder that natural gas is used for heating. Coal consumption was up a lot this winter because of natural gas demand by retail buyers.”
Consider what happened last winter during the death grip of the polar vortex. In January, shortages of natural gas in the Northeast caused prices to spike above $100 per mmBTU in some markets. Electricity spot prices in the Mid-Atlantic region spiked as high as $2,000 per megawatthour for a brief period. Natural gas was in such high demand for residential furnaces that electricity providers couldn’t even get what they needed for their power plants. Some providers had to turn to emergency back up generators that burn far more expensive petroleum. So much for that glut of shale gas.
Natural gas prices have already jumped three-fold in two years. And coal-to-gas switching has already reversed. From making up 40% of the national electricity mix in the first quarter of 2013, coal’s share rose to 41.4% in the first quarter of 2014. Natural gas dipped from 25.6% of total power generation a year ago, to 23.8% in the first quarter of 2014.
This will slow what has been a gradual move away from coal. Power companies have been shutting down old coal-burning plants ahead of tougher emissions regulations, with 4.7 gigawatts of coal capacity retired in 2013, following 10.3 GW retired in 2012. Another 60 GW of additional closures are expected by 2020. Analyst Yu says, “that may seem like a lot, but not in relation to the entire grid mix.” The plants being closed are old ones, not yet outfitted with the expensive “scrubbing” technology that can reduce harmful emissions by 90%, even when burning low-quality, sulfur-laden coal.
At big electric utilities in the Midwest, where coal still provides more than 70% of fuel, the costs of turning coal into power are so low that we’ll see very little switching over to natural gas — especially with gas prices having tripled in two years. In fact, the question is whether or not shale gas drillers will have the wherewithal to fill up depleted gas storage ahead of next winter. We should be ok. After all, the forecasts are of more than ample natural gas supplies as far as the eye can see. Once pipeline bottlenecks are sorted out, there should be more than enough gas wherever it’s needed.
So what would it take for America to replace every coal-fired power plant (amounting to 19 quads of energy a year) with natural gas and solar? Let’s think about it. Assuming a natural gas turbine building boom, paired with a ramping up of gas power plants to full capacity, we could reasonably boost power generation from gas by 50% in five years, providing about 13 quads. To make up the rest of coal’s share with solar would require boosting the amount of electricity we get from solar about six-fold to around 50,000 megawatthours per year. Achieving that would require 20% compound annual growth in solar installations for 10 years. Or about a 9% CAGR for 20 years.
This is doable, for awhile. Electricity generation from solar PV generation nearly tripled from 2009 to 2010. It more than doubled in 2011. And more than tripled in 2012. Achieving such a growth rate is easy when you’re tiny, but the bigger the base the tougher it gets. Wind power is a good model — it managed to grow 19% last year from a much bigger base, to 168 million Mwh. But keep in mind that both wind and solar have to overcome the challenge of geography — developers install systems in the most windy and sunny spots first. The worse the location, the more panels or windmills you need to get the same amount of electricity. That’s why it’s less important how many megawatts of solar capacity gets installed, and more important how much actual electricity that gets generated by those panels.
For all the talk of “grid parity” the simple reality is that even combined with far more power generation from natural gas, renewable alternatives will need decades to push out coal. And the irony will be that as demand for coal lessens, it will become cheaper and cheaper, making it even more attractive for the coal-burning power plants that survive the coming cull. The direct cost of generating electricity from coal is 2.5 cents per Kwh.
It’s refreshing to see that even some respected veteran environmentalists have shown themselves to be in touch with reality when it comes to coal. Armond Cohen, executive director of the Clean Air Task Force, has focused for 30 years on reducing the environmental impact of the global energy system. Yet in an essay published late last year, he stated that “coal is not going away.”
Coal will be central to economic modernization in the developing world, where most energy supply will be built in the next three decades. Coal will also have a significant residual role in much of the OECD. Coal is not going away. We need to begin to use it without emitting significant carbon dioxide, and quickly. If we don’t, the risk to global climate is immense, and likely irreversible. It’s that straightforward. People who wish otherwise, and simply hope for the demise of coal, are not facing the facts. (…)
Let me be clear: But for the environmental challenges, this expansion of coal-fired power boom is a good thing; reliable energy is a correlate of economic growth and human development. But let me be equally clear: The carbon associated with this expansion is unacceptable and puts us on a collision course with our global climate.
Coal has gotten immensely cleaner over the past generation. And new and better ways will be found to extract energy from coal without sending its dangerous byproducts into the environment. It’s scalable and reliable in ways that renewable energy sources simply aren’t. In short, unless we’re willing to put up with blackouts that freeze grandma in the winter and melt her in the summer, coal will remain a mainstay of U.S. power generation for decades to come.
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