By: Stuart A. Sanderson, President Colorado Mining Association Issue: Energy & The Environment Section: Jewel Of Collaboration
Affordable, Reliable and Clean Energy for Colorado’s Future
When gasoline prices hit $4 per gallon last summer, so did the call for reducing our reliance on foreign oil. Skyrocketing natural gas prices, at least until recently, generated significant discussion about the need to lower electricity costs through alternative energy sources.
The fact is, we will need all the energy we can get from a variety of domestic sources in the years to come. According to the Colorado Energy Forum, a non-profit group studying Colorado’s future energy needs, Colorado will require an additional 4,900 megawatts of new electricity sources or energy conservation by the year 2025. (A megawatt is the amount of electricity required to power about 1,000 homes). Where will we get all the energy? Much of the answer already lies right beneath the surface here in Colorado and throughout the United States: Coal.
Coal - America’s Energy Security Blanket & The Best Option for Reducing U.S. Dependence on Foreign Energy
It may come as a surprise, but coal is by far the nation’s most abundant source of electricity. Coal accounts for more than 90% of the nation’s fuel resources and is currently used to generate about half of U.S. electricity. Colorado gets nearly 75% of its electricity from coal.
But these figures really don’t fully describe coal’s abundance. The United States has 27% of the world’s coal reserves (more than any other nation). By contrast, we have only 2% of the world’s oil and 3% of the world’s natural gas. And while some refer to the United States as the “Saudi Arabia” of coal, even that term doesn’t do justice to America’s unique energy riches. The United States has more coal than any other nation has any single energy resource. According to the Illinois Geological Survey, the Illinois Coal Basin alone contains more energy equivalent units of coal than all the oil in Saudi Arabia, Iran, Iraq and Kuwait combined.
Coal’s low cost (about one-fourth the cost of natural gas) and its reliability are essential to keeping energy prices affordable in Colorado and throughout the United States. While recent legislation will mandate increased use of intermittent sources of electricity like wind and solar, coal remains an important fuel capable of providing affordable electricity to meet baseload or 24/7 demand.
But why use coal solely for electricity generation? With U.S. reliance on foreign oil at an all time high, many lawmakers see the bright potential for coal to liquid fuels technology (CTL). The Department of Defense is already studying the advantages of CTL fuels to support our armed forces on the ground and in the air. As the U.S. is reliant on foreign sources to meet 60% of domestic oil requirements, it only makes sense to use our most plentiful fuel resource.
The media and many politicians promote renewable resources as the answer to our dependence on foreign energy. However, most of our imported energy is in the form of crude oil for transportation fuels while domestic sources like coal provide the electricity used to power our homes and businesses.
Plug in vehicles or hybrid electric vehicles could derive some of their power from renewable-based electricity, but it will be a long time before the use of electric vehicles is widespread enough to provide any significant reduction in imports of oil for motor vehicles. A further problem is that renewable energy from wind and solar is an intermittent source; in other words, the sun doesn’t always shine and the wind doesn’t always blow. Thus, wind and solar presently account for only a small portion of the electricity currently generated in Colorado and the United States, and will require continued costly production tax credits and mandates in order to increase their share of the energy market.
Colorado law, for example, now mandates that public utilities generate 20% of their electricity from renewable resources by 2020. Assuming that goal is attainable, where will we get the other 80%? For the foreseeable future, coal remains the fuel of choice for electricity generation for our homes and businesses, as well as for powering plug ins and hybrid electric vehicles. Coal also has significant potential for use in aviation fuel, further reducing demand for imported crude oil.
Colorado Coal - Supporting the Economy, Local Communities and Public Schools
Colorado is one of the nation’s top ten coal producing states, ranking eighth overall and fourth in underground mining. With production at more than 33 million tons in 2008, Colorado’s ten coal mines generated about $1 billion in direct sales and more than $100 million in taxes royalties and fees. About half of the federal royalties paid by coal producers (more than $60 million in 2007) fund Colorado’s public school system. Coal miners are the highest paid industrial workers in Colorado, earning average wages and benefits which topped $100,000 annually in 2007.
Coal mines require hundreds of millions of dollar in capital and must operate over long periods of time (30-40 years or more) in order to recoup the investment. Thus, coal companies tend to become a part of the community. If you travel to coal communities in northwest Colorado, for example, you can see numerous demonstrations of long term good neighbor policies. Coal companies have built and donated ballparks, golf courses, and athletic club facilities to the communities in which they do business.
What About Emissions From Using Coal?
In the past 30 years, coal use for electricity generation is up nearly 180% yet emissions are down by 40%. The Colorado Mining Association (CMA) and the mining industry have long supported cost effective and sound programs to improve Colorado’s air quality. Colorado coal, naturally low in sulfur and mercury yet high in quality, also helps utilities meet federal and state clean air requirements, thus earning the designation as “supercompliance” coal under the 2005 Energy Policy Act.
While climate change policies remain a concern and a challenge, CMA supports the deployment of clean coal technologies, carbon capture and sequestration. But these technologies will not appear overnight and a successful climate policy will require worldwide participation. Colorado’s total carbon footprint is only 1.4% of the nation’s total (including all sources, not just coal power plants); so cutting such emissions locally without a uniform national and global strategy will only sacrifice economic growth and put consumers at risk. As demonstrated by the chart, China has already surpassed the United States in total greenhouse gas emissions.
Unless the entire world can agree on a fair and rational program for reducing greenhouse gas emissions; developing nations like China and India will continue to avoid having to limit such emissions at the expense of economic growth in the United States.
Given the potential costs of implementing greenhouse gas reduction strategies and the fact that they may have no discernible impact on temperature for many generations, the U.S. must carefully weigh the impacts and the risks.
Unfortunately, Colorado’s Public Utilities Commission recently ordered the closure of two coal fired power plants based not on cost considerations (coal is clearly the lowest cost option for electricity consumers), but simply to lower emissions. In so ruling, the Commission rejected a lower cost alternative proposed by the CMA that would have kept the plants open and its workers employed. Co-firing with biomass, as recommended by CMA, would have lowered electricity generation costs and reduced CO2 emissions by more than 212,000 tons annually.
Coal and Natural Gas
In terms of fuel costs, coal clearly beats natural gas, which costs four times the price of coal. As the chart below demonstrates, coal prices have remained relatively stable and well below $2 per million British Thermal Units (BTU – defined as the amount of energy required to raise the temperature of one pound of water by one degree). Natural gas prices hit $12 per million BTU in 2005, and have averaged more than $5.70 per million BTU during the five year period from 2001-2006. By contrast coal prices remained relatively flat at $1.40 per million BTU.
As the U.S. and Colorado turn to natural gas for electricity generation, costs to electricity consumers will increase. The relative scarcity of natural gas also means that utilities may have to rely on imported liquefied natural gas from nations like Iran and Russia, with all of the attendant geopolitical risks associated with importing foreign oil.
Higher Energy Costs Impact Those Who Can Least Afford to Pay
One thing is certain. Higher energy costs hit consumers, especially low income energy consumers, hardest. Those earning less than $25,000 annually, spend up to 29% of their income on energy. They are often required to make hard decisions about what bills to pay – utilities, food or medicine – just to name three examples. And the inability to pay energy bills is a leading factor in homelessness, according to Energy Outreach Colorado, an organization dedicated to helping low income consumers meet their energy needs. Many of the politicians, religious figures and celebrities who speak with such emotion about the perceived effects of climate change never talk about the impact of higher energy prices on the poor.
The U.S. is built on affordable energy – as coal use has increased, so has our nation’s gross domestic product. Thus, the consequences of not acting to secure our domestic energy security pose enormous economic, social and geopolitical risks. Coal must remain a part of the overall energy mix in order to secure that energy future. Mining Matters.
The Colorado Mining Association (CMA) is an industry association, founded in 1876, the year that Colorado became the Centennial State. CMAs 875 members include producers of coal, gold, metals and industrial minerals, as well as individuals and organizations providing services, equipment and supplies to Colorado’s $8 billion mineral resource industry. Colorado’s mining industry employs directly more than 5,000 workers and, according to a recent National Mining Association study, accounts for more than 41,000 jobs in the general economy.