Coal Generation Outlook

JUST FIVE YEARS AGO, FEW WITHIN THE INDUSTRY believed that coal's reign as the primary fuel source for U.S. electric power generation would come to an end in their lifetime. In 2006, 19 new coal projects were under construction and coal fueled approximately 50 percent of all U.S. power generation. Although coal will likely remain the primary fuel source for the next 10 years, its market share has already begun to erode, giving way to the coming new era that will be fueled by natural gas.

Diverse factors contribute to the approaching re-positioning of the U.S. energy portfolio that will end coal's reign as our nation's primary fuel source. Among these factors are new, pending and potential federal greenhouse gas regulations; projected low natural gas prices and abundant supply for the foreseeable future; public sentiment; and restricted access to capital for carbon-intensive projects.

Of immediate consequence is the U.S. Environmental Protection Agency's suite of proposed new air, waste and water regulations, and if all are enacted within the current proposed timeline, many will require full compliance within the next five to 10 years. Approximately 16 percent of existing U.S. coal-fired generation will be retired rather than face the cost of compliance. By today's numbers, that could reduce coal's share from half to just over a third of the energy mix.

Natural gas will be our "new coal." The Marcellus Shale alone is estimated to have enough gas to power the entire Northeast for nearly 50 years. And, with plentiful supply, conventional wisdom suggests fuel costs will remain stable and low - similar to our country's vast coal resources.

Power generation demand for natural gas will grow 2.6 percent per year through 2035, when it will account for approximately 40 percent of the nation's energy mix. During that same time frame, coal's contribution will fall and represent just one quarter of the power generation fuel source. Signs of this new era in fuel supply are already apparent. The U.S. Energy Information Administration projects 80 percent of all new added generation between now and 2013 will be from natural gas-fueled facilities.

Coal's role in the development of the United States into a superpower is unquestioned. It was coal that powered the U.S. into and through the Industrial Revolution. It was coal that fueled the steam locomotives as pioneers and gold rush seekers aimed to fulfill the country's Manifest Destiny. It was coal that kept our manufacturing efforts continuously going throughout World War II, helping to bring our country victory in Asia and Europe. And, it was coal that provided our booming population with reliable and cheap electricity that customers nationwide have come to expect and enjoy today.

There is no question that coal's reign as our leading fuel source for electric generation will come to an end. There is also little doubt that although coal's role will be smaller, it will still make a significant contribution to the energy mix for the foreseeable future. The debate now centers on how much and how fast the U.S. energy mix will change.