I tried to find it, a post I made a few years ago on this topic...
Posted By: UtahFanSir
Date: Tuesday 8 January 2019, at 03:19 pm
Recommended by 1 user(s)
Yes, the air quality standards to reduce mercury, nitrogen oxide, and CO were part of the closure issue.
But two other major issues dwarfed those.
Firstly, most of the plants were at what is called useful life in utility parlance. Typically that is 30 years, plus (fleet average is 50 to 58). The plants needed to be completely refitted and upgraded and likely turbines to be replaced. But none of that would change the fact that the thermal efficiency of these plants remained in the low to mid-30% or that installed costs were much higher than better alternatives.
Secondly, the development of shale gas beginning in 2007, or so. Now ten years in more resources have been developed. Not only are combined cycle gas-fired power plants about double the thermal efficiency, they emit about 30% less CO2 per unit of energy. But the abundance of natural gas, typically when the price of an mmBtu is below $3.25-$3.50, produces power at a lower cost.
Additionally, for gas plants the economy of scale is like 60mW, whereas for a coal plant, its at a minimum 300 mW and more like 600. And unit installed costs are much less than for a scale coal plant.
Why do we have to put most of the blame for the competitiveness of coal versus gas-fired power on politicians, Obama and his regs for clean air. Economists Sedgwick and Pigou are credited with the concept of externality. A negative externality is any difference between the private cost of an action or decision to an economic agent and the social cost. In simple terms, a negative externality is anything that causes an indirect cost to individuals.
The classic example is the toxic gases that are released from industries, coal power plants or mines, these gases cause harm to individuals within the surrounding area and have to bear a cost (indirect cost) to get rid of that harm. That is precisely why Obama's team enacted the clean air standards.
Add to the first two major forces the fact that the best cheap coal in the US is gone, save for shipping Wyoming coal across the country. Stripping ratios became very high, and the machines needed in the best mines had reached their maximum size, most manufactured in Germany. Very few people except industry folks appreciate that. Coal costs were rising while natural gas prices were declining.
This issue is complex, so the simple response is to blame Obama.
The bottom line is that market forces crushed coal. The air quality regs were a tack against the spikes the market employed.
History of Coal Retirements.
Coal Demand, Market Forces, and US Coal Mine Closures.
Rising Costs, Not Natural Gas, Main Driver of Coal Mine Closures.
• Since 2002, several thousand Appalachian coal mines have closed, causing tens of thousands of miners to lose their jobs.
• Various factors could cause closure, such as rising production costs, declining coal demand from power generation, or environmental regulation.
• Using data on closures, coal mines, and electricity generators between 2002 and 2012, we compare the effects of natural gas prices, electricity demand, and labor productivity on mine closures.
• Declining productivity explains about twice as many closures as either natural gas prices or electricity demand.
• Policies that raise production costs at mines on federal lands would reduce closures in Appalachian mines, but only somewhat.
Why do I know this stuff: I was a industry participant and contributor to this 2003 NPC study on several study groups, including economics and forecasting, power generation, and industrial consumption. National Petroleum Council, Balancing Natural Gas Policy — Fueling the Demands of a Growing Economy. One of the other industry guys was a senior analyst for a major utility from the midwest-east. What he said about the future of coal costs was eye opening. Virtually everything he talked about has come to pass.
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