In recent years, solar power has shown tremendous growth. Last year alone, the solar industry hit a new record in terms of installed solar capacity. The data shows the impact which according to the Energy Information Administration reached 3.5 million megawatthours of electricity produced by solar photovoltaic panels in 2012. In 2013, that figure more than doubled to 8.3 million Mwh. And to think that ten years ago, the U.S. generated only 6,000 Mwh from solar PV cells. Solar is gradually closing in on price parity with other energy sources such as coal — with full-cycle, unsubsidized costs of almost 13 cents per kilowatthour against 12 cents for more modern coal plants.
So, is the solar revolution finally arrived? Not really. Even after ten years of rampant growth, solar energy still hardly makes an impact in the U.S. energy field. In truth, solar only equals the amount of electricity that the nation produces by burning natural gas derived from landfills. And it is merely a little more significant than the 7.3 million Mwh we get from combusting human waste filtered out of municipal sewer structures.
Ultimately, when you collate all the sources of energy used up in this nation, captured solar energy adds up to significantly less than 1 quadrillion Btu out of an yearly total of 96.5 quadrillion.
The largest sources are the traditional standbys. Oil still stands above the rest at 36 quadrillion Btu, natural gas at 26 quads and nuclear at 8. Hydropower and biomass follow from behind at 2.6 and 2.7 quads. Wind is only 1.5 quads. And coal — the great carbon-emitting monster of the global energy sources —contributes 19 quads. That is about 8 times all the country’s wind and solar generation put together.
This is very vital important to remember in light of pending efforts by the EPA to institute draconian fresh regulations governing carbon dioxide emissions from coal-burning power facilities. Coal emits about 1.7 billion metric tons annually of carbon dioxide out of the 5.3 billion ton yearly total.
The assumption, by policy makers such as President Obama, is that the nation can reduce carbon emissions by shutting down coal plants, while making up for the lost electricity by using more natural gas and putting up more solar and wind plants. In truth, natural gas has replaced much of the coal output. In 2013, coal production from U.S. mines went down to 995.8 million short tons. The last time it went that low was in the late 1980s. Coal production reached its height in 2008 at 1.17 billion short tons.
The president is instituting significant measures to control heat-trapping pollution from coal-fired power plants and to increase renewable energy production on state-owned facilities, making use of his executive powers to resolve climate change issues and avoiding the partisan debacles in Congress.
The shortfall in demand has gravely affected America’s largest coal-mining firms. In the past five years, shares in Peabody Energy BTU +1.5% went down 36%, Arch Coal down 67% and Alpha Natural Resources ANR -1.67% off 78%. In contrast, shares in Solar City SCTY - 4.48%, up 400% in only 18 months.
However, coal is not dead. Certainly not close to it. “Even when the president is against coal, it is like you stand against City Hall. But the truth will conquer,” says Andrew Redinger, managing director at KeyBanc Capital Markets, which has performed investment banking work for coal firms and for solar developers. “I see coal recovering soon. The best thing for coal will be when we begin exporting natural gas.”
This winter proved that “announcing the death of coal is premature,” says Bob Yu, analyst at Bentek, a division of Platts. “Winter showed that natural gas is utilized for heating. Coal use was significantly up this winter because of natural gas purchases by retail buyers.”
Consider what occurred last winter during the chilling grip of the polar vortex. In January, shortfalls of natural gas in the Northeast led to price spikes above $100 per mmBTU in some markets. Electricity spot prices in the Mid-Atlantic region peaked as much as $2,000 per megawatthour for a short period. Natural gas experienced high demand for residential furnaces that electric utilities could not even get what they required for their power facilities. Some had to turn to back-up emergency generators that use much more expensive petroleum. So much for that so-called glut of shale gas.
Natural gas prices have already increased three-fold within two years. And coal-to-gas shift has already reversed. From making up 40% of the national electricity mix in the first quarter of 2013, coal’s share grew to 41.4% in the first quarter of 2014. Natural gas was down from 25.6% of total power production a year ago to 23.8% in the first quarter of 2014.
This will dampen what has been a slow shift away from coal. Power firms have been closing down old coal-burning facilities ahead of more stringent emissions regulations, with 4.7 gigawatts of coal capacity shut down in 2013, following the 10.3 GW in 2012. Another 60 GW of additional closures will occur by 2020. Analyst Yu says, “that may appear like a lot, but not in connection to the entire power mix.” The plants being shut down are many years old, not yet outfitted with the pricey “scrubbing” technology that can decrease harmful emissions by 90%, even when burning low-quality, sulfur-carrying coal.
At large electric facilities in the Midwest, where coal still supplies over 70% of fuel, the costs of converting coal into power are so low that we will see negligible shift over to natural gas — especially with prices of gas tripling in two years. In fact, the issue is whether or not shale gas drillers will have the capacity to fill up depleted gas storage ahead of the coming winter. We should be alright. After all, predictions say more than ample natural gas supplies are available as far as can be foreseen. Once pipeline obstacles are cleared out, there should be enough gas for everyone wherever it is needed.
So, what would it require for America to replace every coal-fired power facility (totalling to 19 quads of energy annually) with solar and natural gas? Let us consider it. Assuming a natural gas turbine construction bonanza, coupled with a rise in gas power plants’ operations to full capacity, we could significantly enhance power generation from gas by 50% in five years, supplying about 13 quads. To make up the rest of coal’s share with solar would require increasing the amount of electricity we get from solar about six times to about 50,000 megawatthours annually. Attaining that would mean 20% compound yearly growth in solar installations for a decade. Or almost 9% CAGR for 20 years.
This is feasible, on the short term. Electricity production from solar PV generation almost tripled from 2009 to 2010. It grew more than twice in 2011. And more than three times in 2012. Achieving such a growth rate is not difficult when you are small; but the bigger the base the harder it gets. Wind power is a fine example — it managed to increase 19% last year from a much larger base, to 168 million Mwh. But remember: Both wind and solar energy have to overcome the obstacle of geography — developers build systems in the most windy and sunny areas first. The worse the location, the more panels or windmills you require to attain the same amount of electricity. That is the reason why it is less important how many megawatts of solar capacity is built and more important how much actual electricity that is produced by those solar panels.
For all the discussions on “grid parity”, the simple truth is that even mixed with far more power generation from natural gas, renewable sources will need many decades to replace coal completely. And the irony will be that as the coal demand decreases, it will become less and less expensive, making it even more attractive for the coal-burning power facilities that endure through the coming storm. The direct cost of producing electricity from coal is 2.5 cents per Kwh.
It is encouraging to see that even some noted veteran environmentalists have proven themselves to be realistic when it comes to coal. Armond Cohen, executive director of the Clean Air Task Force, has concentrated for three decades on minimizing the environmental impact of the global energy system. Yet in an article published late last year, he claimed that “coal is not going away.”
Coal will be crucial to economic modernization in the developing world, where most energy supply will be installed in the next three decades. Coal will also have an important residual role in much of the OECD. Coal is not going away. We need to start using it without emitting considerable amounts of carbon dioxide, and quickly. If we don’t, the risk to global climate is great, and possibly irreversible. It’s that simple. People who think otherwise, and simply hope for the death of coal, are not admitting the facts. (…)
Let me be direct and clear: Except for the environmental challenges, this expansion of coal-fired power boom is a desirable development; dependable energy is a correlate of economic growth and human development. But let me be equally clear: The carbon produced by this expansion is unacceptable and puts us on a dire collision path with our global climate.
Coal has become enormously cleaner over the past generation. And novel and better ways will be discovered to derive energy from coal without producing dangerous by-products and burdening the environment. It is scalable and dependable in ways that renewable energy sources simply are not. Hence, unless we are willing to put up with blackouts that freeze grandma during winter and melt her in summer, coal will stay as a faithful source of U.S. power generation for many years to come.