Coal is decreasing in the energy mix because of economics

Jon Koomey write a great post making the observation that Coal's use is decreasing not due to EPA regulations, but due to economics.

I want to focus on #4 (and on a terrific paper by Susan Tierney on that topic), because it gives interesting insight into the factors that cause utilities to retire power plants.  

The first thing to understand (as I pointed out in Cold Cash, Cool Climate) is

About 15% of existing US coal plants (about 50 GW out of 300 GW total) are old, inefficient, polluting plants that were grandfathered under the Clean Air Act, so they have few or no pollution controls.[1] More than half of US coal plants are 35 years of age or older.[2] The total social cost of running many of these plants is higher than the cost of alternative ways of supplying that electricity (even without counting the damages from greenhouse gas emissions),[3] so they represent an obsolete capital stock from society’s perspective.

These older plants are comparatively inefficient, even though they have few or no pollution controls, so it’s not surprising that they are the ones being retired in the face of the economic forces outlined by Tierney.  That report points to increasing coal prices, decreasing natural gas prices, and declining electricity demand as the main factors thus far in encouraging the retirement of existing coal plants.

The coal economics is an issue in Australia as well reports the WSJ.


Companies are shutting Australian coal mines and questioning whether they should continue with billions of dollars of investments—squeezed between falling prices and rising costs.

Australian coal has been the country's most valuable export for decades. But rising wages and the strong Australian dollar have helped make coal twice as expensive to produce as it was in 2006, according to consulting firm Wood Mackenzie. Higher taxes soon will add to that burden.

The use of coal is declining due to its cost.  And the environment benefits.

Part of what is increasing the cost of coal is labor and taxes.

Emboldened by a shortage of skilled workers, Australian miners have fought successfully for better work conditions and higher wages, driving up labor costs. Exports from BHP Billiton's coal mines in Queensland have been disrupted by rolling strikes. Australia's government estimates that the country's miners earned A$2,207 (US$2,172) a week on average last year. That compares with 1,737 Canadian dollars (US$1,699) for Canadian resource workers, according to an official estimate in that country.

And Australian costs will rise further starting in July, when taxes aimed at cutting pollution and bolstering government coffers go into effect. Canberra's latest budget forecast that revenue from resources will jump to A$7.2 billion in fiscal 2013 from A$1.5 billion this year. Income from the new Mineral Resources Rent Tax was projected to bring in another A$3 billion in fiscal 2014.