For most of the twentieth century, the primary use of coal in the
United States was for electric power generation, and for most of
the history of power generation in the United States, coal has been
the dominant fuel used to produce electricity. Even as recently as
2011, coal was the fuel used for almost 42% of power generation in
the United States accounting for 93% of coal use. Industrial uses
represented the remaining 7%. However, in April 2012, coal's share
of the power generation market dropped to about 32% (according to
Energy Information Administration statistics), equal to that of
natural gas. Coal was the fuel of choice because of its
availability and the relatively low cost of producing electricity
in large, coal-burning power plants which took advantage of coal's
low-priced, high energy content to employ economies of scale in
steamelectric production. However, coal use for power generation
seems to be on the decline, and the magnitude of coal's role for
power generation is in question. Two major reasons are generally
seen as being responsible: the expectation of a dramatic rise in
natural gas supplies, and the impact of environmental regulations
on an aging base of coal-fired power plants. A recent drop in
natural gas prices has been enabled by increasing supplies of
natural gas largely due to horizontal drilling and hydraulic
fracturing (i.e., fracking) of shale gas formations. If the
production can be sustained in an environmentally acceptable
manner, then a long-term, relatively inexpensive supply of natural
gas could result. Decreased natural gas prices are lowering
wholesale electricity prices, stimulating a major switch from coal
to gas-burning facilities. The electric utility industry values
diversity in fuel choice options since reliance on one fuel or
technology can leave electricity producers vulnerable to price and
supply volatility. However, an "inverse relationship" may be
developing for coal vs. natural gas as a power generation choice
based on market economics alone, and policies which allow one fuel
source to dominate may come at the detriment of the other.
Coal-fired power plants are among the largest sources of air
pollution in the United States. More than half a dozen separate
Clean Air Act programs could possibly be used to control emissions,
which makes compliance strategy potentially complicated for
utilities and difficult for regulators. Because the cost of the
most stringent available controls, for the entire industry, could
range into the tens of billions of dollars, some power companies
have fought hard and rather successfully to limit or delay
regulations affecting them, particularly with respect to plants
constructed before the Clean Air Act Amendments of 1970 were
passed. The expected retirement of approximately 27 GW of
coal-fired capacity by 2016 has been reported to the Energy
Information Administration (EIA) by coal plant owners and
operators, accounting for approximately 8.5% of U.S. coal-fired
capacity. While the costs of compliance with new Environmental
Protection Agency regulations are a factor, several other issues
are cited by coal plant owners and operators as contributing to
these retirement decisions including the age of coal-fired power
plants, flat to modest electricity demand growth, the availability
of previously underutilized natural gas combined-cycle power
plants, and the lower price of natural gas due to shale gas
development. Even coal plants which have made significant
modifications to meet existing EPA regulations are being closed or
mothballed due to a combination of low natural gas prices, and the
inability to sell power into other markets. EIA expects coal to be
a significant part of the U.S. power generation industry's future
to well past 2030. But given price competition from natural gas,
and emerging environmental regulations, that role will likely be
smaller than in recent decades. Coal-fired generation is likely to
face a challenging future.
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