Coal, the Enemy of the Human Race, will price itself out of the market
There is an awesomely smart post about the economics of coal over at Grist. the gist of it is that Coal might end up pricing itself out of the market. Old coal fired power plants that were built before the Clean Air Act are cheap to run- the capital investment has been made back and they don’t have to run power sucking pollution or CO2 controls/sequestering. New Coal is expensive because you have to deploy all those new clean technologies. It eventually becomes more expensive than wind, solar, and other renewable energy technologies
We’ve seen it before- a few years ago in Texas, wind credit customers- people who signed up to pay MORE money every month for wind credits- were actually paying LESS on their monthly bill. The high price of natural gas forced everyone else’s electricity bill up except for the good green folks who signed up for wind. When the news first broke there was extra capacity within the wind credits program, but it sold out within a day of the story hitting the newspapers and airwaves. People like saving money.
The easiest way to green someone up is to make it cheaper to make the switch. If New Coal power is X times more expensive than wind and solar then the markets will do their jobs and Coal power will die the horrible death is so rightfully deserves.
Here’s a snip from the Grist article, but swing over for the full read, it’s a good one.
Today, we don’t deploy as much [fill in your favorite clean technology here] as we might like to, in no small part because the price of electricity is so low. Of course, that’s because we subsidize the dirty stuff. And we don’t price in externalities. And maybe we’d still need some government mandates. Yeah, yeah, yeah. But we can all agree that we would make more ecologically sensible choices if electricity wasn’t so cheap.
And why is power so cheap? In no small part, because so much of it comes from coal. Fifty-eight percent in the U.S. at last count. And Ol’ Dirty Coal is cheap.
Why is Ol’ Dirty Coal cheap? A couple reasons, but the most important one is that, as a practical matter, we haven’t built any new coal plants since the Clean Air Act was passed. Much better to run those old grandfathered ones which have (a) already paid off all their capital, and (b) don’t have all the parasitic loads to run the scrubbers and baghouses mandated by the Clean Air Act. So as a practical matter, that cheap baseload power price is set just by the price of the fuel and a little bit for maintenance.
But here’s the rub. The coal fleet is just about maxed out. (See here, click on “Trends in US Energy Markets”). We’re running all those grandfathered plants about as hard as we can. So as load grows, we’ll now need to build new coal.
And new coal is expensive. Really expensive. North of $2500/kW expensive. Er, as much as $3000/kW expensive. Want carbon sequestration put on the back end? Then add another $2000-$3000/kW (PDF) worth of expensive. The kind of expensive that makes wind look cheap, and solar look competitive. The kind of expensive that makes natural-gas fired power plants, even at today’s gas prices, look like really good investments. The kind of expensive that makes you quit your job because of all the money you’re suddenly saving on your new CFLs.
