Monday, August 15, 2011

'Michigan Wind Is Less Costly Than Coal' Claim Blown Away by Federal Stats

The federal government’s Energy Information Administration (EIA) found that conventional coal is less expensive than wind in its latest study of the cost of energy. Yet, a Michigan Public Service Commission (MPSC) study in February found that coal in Michigan was 22 percent more expensive than what the federal government states as the average U.S. coal cost.

Some experts say that the reason for the discrepancy lies with an environmental agenda that seeks to artificially increase the cost of burning coal for electricity generation by requiring greater restrictions on its production of carbon dioxide — a greenhouse gas.

For example, the Michigan Public Service Commission found the cost of coal to be $133 per megawatt hour, considerably more expensive than the average national cost of $109 per megawatt hour for a similar type plant. Paul Proudfoot, director of the MPSC’s Electric Reliability Division, said a big reason for the higher cost was that the MPSC study tacked a “carbon tax” onto the price of coal. Yet no such tax exists — either at the state or national level. According to Proudfoot, the MPSC added it because of an assumption that such a tax will pass.

The MPSC’s estimated price for coal — inflated with the non-existent tax — has been seized upon by a Michigan environmental group as an argument for a switchover to renewable energy sources.

In a letter to the editor to the Detroit Free Press, Hugh McDiarmid Jr., spokesman for the Michigan Environmental Council, cited the Michigan Public Service Commission’s report, noting that “electricity from renewable sources is already cheaper in Michigan than electricity from a new coal plant would be.”

But McDiarmid’s statement deserves a closer look.

The EIA states that “conventional coal” costs $94.80 per megawatt hour. Conventional coal plants burn coal in its pure form. “Advanced coal” plants first turn coal into gas to reduce emissions, but are more costly at the $109 per megawatt hour. By comparison, wind comes in at $97 per megawatt hour.

But there’s more.

Coal is also a significantly more reliable energy source. The EIA states that coal operates at 85 percent of capacity while wind operates at 34 percent of capacity. Wind energy requires a backup plan and this is not factored onto its cost.

Energy experts also note that environmentalists themselves can be a factor in driving up the price of coal, and thus the cost that Americans pay for electricity. Even the EIA’s current $94.8 per megawatt hour calculation for coal includes a 3 percent increase in the capital costs for building coal plants because of the difficulty of building coal plants in the United States. Mary Hutzler, a former acting administrator of the EIA under former President George W. Bush and a distinguished senior fellow at the Institute for Energy Research, said that 3 percent is in part due because “environmentalists fight it.”

For example, a recent Capitol Confidential story noted that the Sierra Club files a lawsuit against every new permit issued for a coal plant in the United States.

Hutzler also said coal plants are moving from “conventional” plants to the more costly “advanced” plants. She said that’s being done because “advanced” plants are easier to adapt for carbon-reducing than “conventional” plants.

The Michigan Public Service Commission’s study used the more costly “advanced” coal plants cost for its study. Proudfoot said he didn’t think a “conventional” coal plant could even be built in Michigan anymore.

Hutzler said bureaucracy and environmental regulations are “really what is driving the costs (of coal) up.”

The cost of wind also skyrockets when moved offshore, jumping from the $97 per megawatt hour to $243 per megawatt hour, according to the EIA.

Michigan is moving forward with plans for offshore wind farms.

The Great Lakes Wind Council, an advisory body to the Michigan Department of Energy, Labor & Economic Growth, gave a report to former Gov. Jennifer Granholm in October 2010 that said 13,300 square miles of state-owned Great Lakes bottomlands were favorable for development of offshore wind energy.

But the reason this is feasible is because wind is becoming the favored child of government subsidies.

The Institute for Energy Research cited an Energy Information Administration report from July that showed that wind shot past coal in the last three years in terms of federal subsidies.

Wind subsidies increased from $476 million in 2007 to $4.9 billion in 2010, while coal’s federal subsidies grew from $943 million in 2004 to $1.3 billion in 2010.

But considering coal’s place as the overwhelming number one source of electricity generation in the United States with nearly 45 percent of the total, these subsidies are tiny compared to wind. EIA says that coal produced more than 1.8 billion megawatt hours of electricity in the United States during 2010, versus just under 95 million megawatt hours for wind.

In other words, despite the fact that wind is eating up nearly four times the subsidy that coal does, coal is producing 19 times the electricity that wind does.

The EIA reports that the United States sits atop the world’s largest pile of known coal reserves, with 28.8 percent of the world total in 2010. By comparison, Saudi Arabia has the world’s largest oil reserves, with 19.2 percent of the world total in 2010.

The EIA also predicts that the known reserves will allow a large number of Americans to heat, light and cool their homes with coal for the foreseeable future, before they need to go looking for more:

“Based on U.S. coal consumption for 2010, the U.S. recoverable coal reserves represent enough coal to last 249 years. However, EIA projects in the most recent Annual Energy Outlook (April 2011) that U.S. coal consumption will increase at about 1.1% per year for the period 2009-2035. If that growth rate continues into the future, U.S. recoverable coal reserves would be exhausted in about 119 years if no new reserves are added.”

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