Texas Shouldn’t Shy Away from Coal

The Star Telegram
By Margo Thorning
January 29, 2006

(PDF)

As Russia faces its coldest winter in a quarter century, concerns are mounting across the European Union over the former Soviet empire’s aging natural gas lines as a source for heating and energy.

Interrupted and reduced flows of energy are rightly capturing the focus of many Europeans who are scrambling to look for new sources of energy independence. Austrian Chancellor Wolfgang Schuessel, the president of the European Union, has said that greater energy independence had to be at the top of this summer’s European Union summit agenda.

Although these problems may seem thousands of miles away, Texans have been experiencing energy challenges with record-breaking natural gas prices. Unfortunately, there’s very little relief in sight in the immediate future.

In late 2005, the Energy Information Administration forecast natural gas prices for home heat rising by an average of 38 percent this winter. Consumers with electric heat also will see their bills rise sharply if their power companies burn natural gas as fuel, as many in Texas do.

Last month, natural gas soared to a record $15.40 per million British thermal units. Compare that to 2003, when natural gas cost $6 per 1,000 cubic feet, a roughly equal measure.

Exacerbating this problem are growing populations and greater demand for strapped energy supplies. The population of Texas grew from almost 19 million in 1995 to nearly 23 million in 2005; by 2030, there will be 30 million Texans -- all needing electricity.

To meet this demand in an affordable manner, Texas's electricity supply -- a crucial factor in continued economic expansion -- must look to its aging fleet of nuclear and coal plants. It simply cannot rely on costly natural gas plants and a small amount of highly subsidized wind plants alone.

According to the Electric Reliability Council of Texas (ERCOT), much of Texas's electricity generating capacity is more than 50 years old and will need replacement sooner rather than later. Relying on the expansion of natural gas plants for a significant increase in generating capacity is to put Texas households, businesses and the industrial sector at risk for high and unpredictable electricity prices.

Texas utility companies are rising to the challenges of producing dependable and affordable electricity by seeking to add to supply through coal-fired plants. But their efforts are being met with misguided opposition from green groups and many within the media.

In recent months, Texas utilities have been castigated for having the audacity to apply for permits to build coal-fired plants to provide much-needed generating capacity for the state’s growing economy. Opponents attempt to portray today’s coal-fired plants as the high pollutant- emitters of several decades ago -- much like the gas-guzzling, exhaustemitting autos of the 1970s.

The truth is that these new plants will be far cleaner than their predecessors, emitting far fewer pollutants and less carbon dioxide per kilowatt-hour than previous generations of coal-fired plants. Although U.S. industry is steadily becoming more energy-efficient, it is still true that every extra dollar of gross domestic product is associated with an extra 9,270 Btu of energy (down from 17,999 Btu in 1970).

Opponents of coal-fired power plants also are raising concerns about Texas’ ability to comply with cap and trade systems on ozone emissions. But there is only one way to comply with meeting the targets of these regulatory policies: curtailing of economic activity and growth. And that is what hurts. Rising energy prices, lost jobs and lost revenue are the painful byproducts of these cap and trade systems. Texas opinion leaders who disagree may want to remember the California experience when approaching that state’s growing need for electricity.

Even before the current Russian crisis, members of the European Parliament from diverse political backgrounds signed a statement stressing the need for alternative solutions: “The development of renewable energy is important, but we also believe that the goal of securing Europe’s energy future cannot be truly achieved unless the role of other technology development and other energy supplies such as nuclear and cleaner fossil fuels is fully incorporated into EU policy. The European energy mix needs to be diversified because, ladies and gentlemen, electricity does not come just out of the socket.”

Let’s hope that Texas policy-makers are willing to diversify the energy sources in Texas by using coal and continuing Texas prosperity.

Margo Thorning is senior vice president and chief economist of the American Council for Capital Formation, which advocates tax and environmental policies that encourage saving and investment.