The Morning Economic Report
8:26 am
Tue July 1, 2014

Coal Comeback - 7/1/14

Coal may be making a comeback.  Conventional wisdom suggests that coal will gradually be replaced by natural gas and other fuels.  Since the 1950's, coal has been the mainstay of electricity production in America, but its market share has been falling.  According to Bloomberg, it accounted for 39 percent of total U.S. electricity generation last year, down from nearly half in 2007.  But coal use rose earlier this year as brutally cold temperatures and pipeline bottlenecks induced a temporary spike in natural gas prices.  Some utilities are going ahead with plans to shutter coal-fired power plants. 

In 2011 and 2012, coal units capable of generating 14 gigawatts of electricity were closed.  Another 63 gigawatts, or more than a fifth of the coal fleet, may disappear by 2017 according to Bloomberg because of rules curbing mercury and other pollutants.  Despite that, it’s too soon to count out coal.  In a community located 90 miles southwest of Tuscaloosa, Alabama, utility Southern Company is building the first large-scale power plan in America designed to transform coal into gas, capture carbon dioxide and pump it underground.  This is a $5.2 billion construction project and ultimately its success or failure may determine the future of coal in the age of climate change.