NCPA - National Center for Policy Analysis

Coal: Fossil Fuel For The New Economy?

October 17, 2000

Coal is getting increased attention from politicians and Wall Street due to soaring prices for oil and natural gas. Although most consumers aren't aware of it, 60 percent of the electricity produced in the U.S. is from coal-fired generators, up from 44 percent in the 1970s.

Coal has a negative public perception, say industry officials, due to past environmental problems, and investors have questioned the industry's growth potential.

  • U.S. utilities have spent an estimated $30 billion on federally-mandated environmental controls in order to reduce sulfuric-acid and other toxic emissions.
  • The added cost of scrubbers and additional gear often negated much of the fuel-price advantage enjoyed by coal.
  • The clean-air drive also sparked output from western states where coal is cheaper and cleaner, but those advantages were offset by its lower energy content and cost of transport.
  • By the 1990s, emissions curbs were joined by uncertainties arising from utility deregulation to bring construction of nearly all types of power plants by utilities to a halt.

However, the demand for electricity is burgeoning and natural-gas prices have doubled from their level of a year ago -- spurring utilities and independent power generators to look at coal again.

  • The high tech sector may use as much as 13 percent of U.S. total electricity production, up from about 2 percent a decade ago.
  • Experts estimate that the U.S. may need to increase its electrical generating capacity by nearly 40 percent in the next decade.
  • At current consumption rates, the U.S. has an estimated 250 years' supply of coal.

While up to 90 percent of new electric generation in the U.S. through the end of the decade will use natural gas, producers are increasingly looking to hedge their bets by building new coal-fired generating capacity.

Source: Harlan S. Byrne, "New King Coal," Barron's, October 9, 2000.


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