Coal is not going away. While the natural gas industry is looking at coal-to-gas switching for new demand, coal-fired power generation will remain in the mix. And, if natural gas prices go back up again, utilities could switch back.
In a presentation in September on “American Energy Policy, Jobs and the Economy,” Tom Fanning, chairman, chief executive officer and president, Southern Co., said, “The issue of a national energy policy is not a Democrat issue. It’s not a Republican issue. This is an American issue.”
He was referring to an energy policy regarding power generation. But, it could be policy for all parts of the energy industry. Probably since the oil embargo in 1973, president after president has touted creating an energy policy for the U.S. and we are still waiting.
It’s not just Democrats and Republicans that can’t agree on an energy policy. It is also producing versus consuming states. It is coal states versus oil and gas states. Sometimes a state itself is divided like California (producer and consumer) or Wyoming (coal, and oil and gas). It is environmental concerns versus industrial development.
“An American future without coal is no future at all and, yet, what we are seeing now are overreaching rules and regulations — in the absence of a clear energy policy — that will have the effect of eliminating any new coal — and a significant portion of our current coal fleet — from our energy future,” Fanning noted.
However, the coal industry isn’t the only energy producer being challenged. For years, the petroleum industry has complained about too many rules and regulations. The nuclear industry is stagnant in the U.S. The oil and gas industry is in major environmental battles over greenhouse-gas emissions, such as methane, and fracing. We need the energy, but there doesn’t seem to be any common ground from which an energy policy could be formed.
Fanning also pointed out that “the United States is blessed with a variety of energy resources. We’ve got to take advantage of all of them. If you are a stockholder, you probably have a favorite stock, but you don’t invest everything in that one stock. You diversify your choices. That’s what we need to do from an energy policy standpoint.
“We use the phrase ‘all of the arrows in the quiver.’ We need to bring to bear all of the energy wealth this nation has to offer. That’s new nuclear, 21st Century coal, natural gas, renewables and energy efficiency.”
With unemployment too high and a shaky economy, the energy industry is one of the few domestic industries that could gear up quickly with new investments and new jobs. Why isn’t that a part of a national energy policy?
“With unacceptably high unemployment, do we want to remove more than a million jobs from our economy? That is the impact these regulations would have, according to an analysis by NERA Energy Associates,” Fanning explained. “And, why now do we want to add an increase of energy prices to this struggling economy?
“NERA estimates the price of electricity will increase between 10% and 25% depending on where you live. So why now would we burden the American people, who are already challenged with higher energy costs and a feeble job market?” he asked.
“The absence of a robust national energy policy works to our disservice. What we have right now is a patchwork quilt of one-off laws and overreaching regulation. The likely consequence is that we will see continued pressure on employment levels and rising energy prices that will burden this challenged economy,” he emphasized.
As Fanning noted, the U.S. is spending $1 billion per day on imported oil. That impacts the country’s balance of payments and adds to the national debt. Yet, there is no clear cut plan of action to reduce either one. How do we balance lower emissions with the cost of doing business?
One of the major principles of a sensible energy policy will be that the U.S. has to reinvest from an energy standpoint in robust proprietary research and development.
Another is to invest in all forms of energy. Southern, for example, is moving forward with coal, nuclear, natural gas and renewables for power generation.
“Twenty percent of the energy produced in the United States today comes from nuclear power. That number needs to grow,” he said. The company is building new units at Plant Vogtle in Georgia and expects approval from the Nuclear Regulatory Commission by year-end.
“Another arrow in the quiver is 21st Century coal. In fact, 50% of all electricity production in America today is derived from coal. A transition of our energy resources is already occurring in the United States. Natural gas prices have fallen rather dramatically, and we always do what’s economic for the interests of our customers. So we don’t need an overreaching regulatory stick to make this transition happen,” he explained.
“Since 1995, over 95 percent of the new electricity generation in America has used natural gas as its primary fuel source,” he noted.
However, natural gas faces several challenges — environmental concerns around fracing, lack of sufficient infrastructure to bring the gas to the markets and price volatility.
“Volatility in energy prices is not good for American families, and it is not good for American business,” Fanning stated.
“Renewables are an exciting, important source of energy for the future. The major sources of renewables are generally wind and solar. And where there are significant resources, generally speaking, there are no people.
“We also must keep in mind that the renewable industry is supported by significant federal subsidies. Considering our current debt crisis, how much longer can the United States continue to do that?” he asked.
“Southern has also developed our own environmental technologies, where we’ve invested more than $8 billion. Since 1990, energy production has increased 40% to meet demand while our emissions are down 70%.
“In the next three to four years, depending on how the proposed environmental regulations resolve themselves, we’ll spend another $2 billion to $4 billion and we’ll take emissions down to about 90% removal. We’re doing this at costs 10% to 20% less than the rest of our industry. And we have emissions removal rates far in excess of America’s electric utility standards,” he continued.
In conclusion, Fanning stated, “We cannot let agencies that are responsible to no electorate set energy policy here in America. That is not appropriate and, therefore, we must get behind an effort to bring the cleanest, most common-sense approach to this critically important economic issue.”
There are lots of opportunities for a meeting of the minds and the U.S. has the people, knowledge and resources to make an energy policy happen. The time is now.