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King Coal Strikes Back at the Obama Administration

Commodities / Crude Oil Oct 15, 2014 - 03:00 PM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: The latest salvo in the “Coal Wars” comes from the American Coalition for Clean Coal Electricity (ACCCE), and it’s aimed squarely at the Obama Administration.

Of course, the ACCCE isn’t exactly an impartial observer. In fact, you might say it has one huge dog in this fight.


But in its latest missive, fired off just last week, the coal industry group emphasizes an important point that’s always been just below the surface in the continuing battle between coal producers and government regulators.

It’s the high price consumers are going to have to pay as coal goes away…

Trying to Send “America’s Workhorse” to the Glue Factory

All of this comes on the heels of the recent Environmental Protection Agency (EPA) moves to restrict non-carbon emissions from coal-fired power plants.

These new regulations place stringent limits on mercury, sulfurous and nitrous oxide emissions, which will accelerate the closures of additional coal-fired power plants nationwide.

The ACCCE expressed its concerns about how diminished coal generation – as a result of new EPA regulations – will impact electricity costs and electric reliability for American consumers.

“The Obama Administration’s dangerous and costly regulations have left America relying on a more narrow fuel source portfolio that excludes our most affordable, abundant, and reliable fuel source: coal,” said Laura Sheehan, senior vice president for communications at ACCCE.

“Coal is the workhorse of America’s electric grid, delivering stable, low-cost heat and electricity and often picking up the slack for more expensive, less reliable fuel sources. With less coal in our energy mix, millions of Americans will face higher electricity costs and diminished electric reliability, putting their health, well-being, and financial security in jeopardy,” Sheehan said.

Now granted, you have to consider the source. But there’s more to this story than a simple political difference over the cost of electricity. There are tangible economic concerns developing as well.

Take what happened during last year’s “polar vortex,” for example.

As Gregory Meyer of the Financial Times from London reported several months ago, the particularly cold and nasty winter throughout much of the U.S. caused natural gas prices to surge and threatened electric grid reliability.

As Meyer noted, pipeline infrastructure issues, coupled with increased demand, resulted in staggering price increases and serious issues with transporting natural gas to Americans who needed it most. That included selected rural areas where the grid has never been particularly reliable.

These are areas where the infrastructure for power delivery is the oldest and problems are most common. And with another tough winter already shaping up, the debate over the importance of coal is being renewed again, since last winter’s troubles could begin to extend into other regions.

That could well have a serious impact on business and industrial requirements.

Of course, we are not looking at an actual lack of electricity or the need to employ rolling brownouts. But it does mean that cost of power is going to be rising.

Case in point: in January, electric grid manager PJM received approval to increase the rates passed onto customers for the rest of the winter because of the high cost of natural gas.

Meanwhile, electric utility American Electric Power (NYSE: AEP) had to run nearly 90 percent of its coal-fueled plants slated for retirement in 2015, just to meet the increase in customer demand.

“We may not be able to predict future weather, but we do know that the outlook for American families and businesses finding affordable, reliable electricity is bleak, especially if the EPA’s proposed carbon regulations move forward. Once coal plants are taken offline, there is no turning back, and America’s energy infrastructure will be put into a tailspin,” Sheehan added in the ACCCE release.

A Contentious Battle Over 40% of Our Electric Power Generation

Last week, the U.S. Energy Information Association (EIA) projected winter energy costs will be less than last year, basing its analysis on the National Oceanic and Atmospheric Administration’s forecast that temperatures are expected to be warmer than last winter. Yet, the new report raises questions about what will happen if the “mild” winter it projects turns out to be wrong, noting that “extreme weather patterns last winter elevated demand for all heating fuels, led to a drawdown of inventories, and put upward pressure on prices.”

ACCCE examined the impacts in an in-depth look at how the extreme cold weather last winter impacted the price and reliability of electricity. Coal provides nearly 40% of America’s electric power, making it the most used feedstock for electricity generation.

The advocacy group noted that the coal-based power industry has led in the attempt to find ways in which, as they put it, “to use our most reliable, affordable and abundant resource more cleanly and efficiently than ever before, investing nearly $120 billion so far to reduce emissions by 90 percent and putting in an additional $27 billion between now and 2016.”

Environmentalists would rush to disagree. There is also economic analysis showing that the residual non-environmentally evasive harm from using coal to generate electricity is also increasing. This category would include damage to other physical assets from plant emissions.

But the cost of providing electricity on an aging network is once again occupying center stage. That means the issue of coal’s position in the power sector is going to remain a contentious one.

Source : http://oilandenergyinvestor.com/2014/10/king-coal-strikes-back-obama-administration/

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