Sunday, June 3, 2012

As the Economics and Pollution of Coal Fired Generators Cause Their Demise, Politicians Move for Higher Costs of Electricity and More Environmental Destruction

Count on Politicians to Fight a Good Thing and Offer No Help to Families Harmed by Change

Nothing of significance in economics is either all good or all bad.  That’s what makes the subject so interesting and difficult.  The recent surge in natural gas production has been both good and bad.  The bad is the potential environmental problems caused by ‘fracking’ to free up the gas.  The good is the huge drop in natural gas prices, resulting in lower cost energy and a movement towards less reliance on foreign oil.  Natural gas is also far less polluting both in its development and consumption than oil or coal.

Economics of natural gas and better environmental regulation are working in tandem to sharply reduce the number of coal fired electrical plants.

Coal and electric utilities, long allied, are beginning to split. More than 100 of the 500 or so coal-burning power plants in the United States are expected to be shut down in the next few years. While coal still provides about a third of the nation’s power, just four years ago it was providing nearly half.

The decline is largely because new pollution rules have made coal plants more costly, while a surge in production of natural gas through the process of hydraulic fracturing, known as fracking, has sent gas prices plummeting. Together, the economics of coal have been transformed after a century of dominance in Washington, state capitals and the board rooms of electric utilities.

This of course is very good.  But it is potentially disastrous for the coal producing regions of the United States, and of course that gets a politician involved.

when the operator of the Big Sandy plant announced last year that it would be switching from coal to cleaner, cheaper natural gas, people here took it as the worst betrayal imaginable.

“Have you lost your mind?” State Representative Rocky Adkins, a Democrat and one of Kentucky’s most powerful politicians, thundered at Michael G. Morris, the chairman of the plant’s operator, American Electric Power, during an encounter last summer. “You cannot wave the white flag and let the environmentalists and regulators declare victory here in the heart of coal country.”

It is of course a private company’s right to do what is best for the company, which is exactly what is going on here.  And this is not a victory for environmentalists and regulators; both groups have been somewhat ineffective in battling coal fired pollution.  The victory is economics; economics almost always wins.

“The math screams at you to do gas,” said Mr. Morris, whose company is the nation’s largest consumer of coal.

And the image of a politician screaming at an industry executive for converting a plant from coal to natural gas is disturbing.  But there is the point that change is almost always detrimental to some people, and that is certainly the situation here.  People of the Appalachian coal country are poor to begin with; the decline of coal will be a devastating economic blow to them without some help and intervention by government.

But government help in the form of mandating or supporting more rather than less coal generation of electricity is not the answer.  That will only cause more pollution, higher energy prices and in the end such a policy will fail.  It is going against history.

Here in Kentucky, the intervention by Mr. Adkins and other coal industry advocates has saved coal at Big Sandy, at least temporarily. American Electric Power, which is based in Columbus, Ohio, is proposing a $1 billion retrofit to allow the plant to continue burning coal and has asked Kentucky regulators to approve a 30 percent increase in electricity rates to pay for the work.

Yes, how does increasing the price of electricity by 30%  and spending/wasting $1 billion on a retrofit help anyone in the long run?  But that’s the way politicians think.  Here’s what proponents of coal want to keep.

The Big Sandy plant spews tens of thousands of tons of pollutants each year into the region’s air, including sulfur dioxide and smaller amounts of mercury, which can cause health problems like respiratory illnesses and possibly developmental disabilities among children. Many of these pollutants would be significantly reduced with the retrofit, but the plant would continue to be a major source of carbon dioxide, which is blamed for global warming.

Big Sandy also maintains a sprawling coal ash pit near the plant, created to store waste ash after the coal is burned, that the E.P.A. recently listed as one of 45 “high hazard” pits nationwide. That means it “will probably cause loss of human life,” the E.P.A. says, if a serious accident occurs. In Tennessee in 2008, a billion gallons of slurry from a coal ash pit washed out area homes and streams, though no deaths resulted.

 Instead of this idiocy an enlightened and compassionate policy would be to move the economic base of the area away from coal and towards industries which can provide economic development without polluting the water, air and ground.  As for Mr. Romney, well, we all know where he stands.

The fight has even become an issue in the presidential campaign, with the industry blaming President Obama and the Environmental Protection Agency for the onslaught, and Mitt Romney, the presumptive Republican nominee, hinting that he would roll back some of the rules.

See, none of his homes in Massachusetts, New Hampshire, Utah, California (with its garage with elevators for his cars) or elsewhere would be near the death and destruction caused by mining and burning of coal.  And if votes are to gathered from his pandering,  that’s even better.

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