King Coal’s Fading Grip

According to a new study from Duke, coal may be on the way out. as “[l]ow natural gas prices and stricter, federal emission regulations are promoting a shift away from coal power plants and toward natural gas plants as the lowest-cost means of generating electricity in the United States.” The authors estimate that “the economic viability of 9% of current coal capacity is challenged by low natural gas prices, while another 56% would be challenged by the stricter emission regulations.”  Under current regulations, coal plans would become the cheapest source of power if the relative price of coal rose by about a third.  Under pending regulations, however, the price of natural gas could triple with respect to coal before coal became competitive.

The reason that the new regulations have such a dramatic effect is simply that natural gas is inherently a much cleaner energy source than coal.  For that reason, it’s much cheaper to meet air pollution standards with natural gas than with coal.  the move away from coal is a good thing.  A 2011 study in the American Economic Review showed that coal has actually been underregulated compared to its costs (mostly impacts on public health).   By strengthening the shift to natural gas, pending regulations are redressing the lax treatment that has helped keep coal competitive at the expense of the public’s health.

air pollution, coal, natural gas, regulatory policy