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The Dubious Case for Appalachian Coal Subsidies

The Dubious Case for Appalachian Coal Subsidies

As technologies for renewable energy and grid management advance, the special position that coal has held since Thomas Edison’s first power plants in the 1880s has become much harder to defend.

The call to subsidize coal is a sign of how the economics of power generation have been transformed. Just five years ago, it was renewable sources that needed subsidies to compete, but their costs have been plummeting. Now the US is phasing out its federal tax breaks for renewable energy, and it is coal producers that are pleading for help.

The plight of Appalachian coal owes a lot to a factor specific to the US: the flood of cheap gas unleashed by the shale revolution. Elsewhere, though, there are signs that demand for coal is crumbling.

World coal production fell by 6 per cent last year, according to the International Energy Agency, as demand from power plants dropped in the US, Britain and other countries. Even China, long seen as the consumer of last resort, cut its coal use by 1.8 per cent. In Germany, which plunged early into renewable energy when costs were much higher, and sent its electricity prices soaring as a result, coal made a comeback during 2009-13, but here too it is in decline.

With the cost argument slipping away, defenders of coal have been shifting to the issue of reliability. (West Virginia Gov. Jim) Justice talks about his hoped-for subsidy as a “national security” incentive, guaranteeing coal to keep grids working.

The argument is that as “baseload” coal-fired plants, available to run 24/7, have had to close because of unfavorable economics, grids have become more reliant on variable wind and solar power, raising the risk of blackouts.

So far, though, there is little evidence that the rise of renewables has had any impact on reliability. In the US, the share of generation coming from wind and large-scale solar plants has risen from 0.7 per cent in 2005-07 to about 6 per cent in 2014-16, but the number of people affected by an “electric emergency [or] disturbance” has dropped from about 13m a year to about 11m.

Other countries with higher use of renewable energy report similar results. Over 2006-16, the proportion of wind and solar power in Britain’s electricity supply grew from 1.3 per cent to 14.2 per cent, but the total number of minutes when customers lost power — excluding “exceptional” events — dropped by 41 per cent.

The IEA has argued that countries can source up to 45 per cent of their electricity from wind and solar “without significantly increasing power system costs in the long run”.

To go beyond that “calls for a system-wide transformation,” but the technologies to make that possible already exist. In a recent article in the Electricity Journal, Amory Lovins of the Rocky Mountain Institute lists options for balancing the grid that could cost less than coal-fired plants. These include greater efficiency and “demand response” — cutting use to avoid strain on the grid.

The barriers to adopting those resources are mostly commercial and political. There is a strong incentive to overcome those obstacles.

“Keeping the lights on” has been a rousing rallying cry in the defense of King Coal, but it increasingly looks like a rearguard action.

More: ($) The lights are dimming on King Coal’s hold over energy markets

 

Bloomberg via Getty Images

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