Carl from Chicago

The US is known as “The Saudi Arabia of Coal”. We have massive amounts of coal deposits within our borders.

If you look at photos of Dubai with all the skyscrapers and massive construction or read about Russia, likely the most expensive place to live today in the entire world, you see countries whose economies and wealth are being buoyed by commodity wealth. While there are also downsides to riding on commodities, there are positive instances of well run countries (i.e. the UK with North Sea gas and oil) benefiting from their commodity wealth.

The US has basically stopped building coal plants due to environmental concerns. Sure, there are a few coal plants being built here and there (I profile an Illinois coal plant under construction at this post) but the energy is basically dead in its tracks. According to this excellent analysis (which I highly recommend reading in full) from the National Energy Technology Laboratory, here is a summary:

“Actual plant capacity, commissioned since 2000, has been far less than new capacity announced; the year 2002 report of announcements reflected a schedule of over 36,000 MW to be installed by 2007, whereas ≈ 4,500 MW (12%) were achieved. The trend over several years has reflected the bulk of power plant developments shifting out in time due to project delays Delays and cancellations have been attributed to regulatory uncertainty (regarding climate change) or strained project economics due to escalating costs in the industry.”

Beyond typical NIMBY activities and our broken deregulation system, a key factor stopping construction of new plants are the emissions and ties to warming by environmental groups.

However, this recent article by the BBC (a fairly reliable source, historically) says that China is now the world’s top carbon polluter, and probably passed the USA back in 2006-7. China, of course, has no problem whatsoever in putting up coal plants and sensibly (from an economic perspective) utilizes coal heavily since they have their own deposits and don’t have to import fuel, while coal is also a proven technology for power generation. There are various accounts of their coal construction but I continuously see the reference to “a plant a week” but I would have to do more research to verify those claims; in any case many sources point to a massive construction boom of coal plants in China.

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There is a looming electricity crisis that is about to overtake the United States. While our demand for electricity continues to increase due to construction, computers (data centers take up a significant portion of electricity demand), and potentially even electric cars, essentially no new “base load” supply of electrical generation is being added to the market. We do get the occasional wind farm or solar or geothermal source of energy, and a bit of conservation is on the rise, but these tiny dents in supply and demand, respectively, don’t even begin to cover growth much less the fact that many electricity plants are aging and will face retirement in the future. Due to the long lead times involved with getting a new plant on line (at LEAST 5-10 years in the case of large base load coal or nuclear plants, best case), our problem is that we aren’t doing anything NOW to head off the crisis LATER, when we won’t have any options at all. If you are interested in any background or more detailed analysis of the energy situation and in particular our Illinois issues go here to see the posts I have written on this topic.

Recently I was in London and I noted a similar situation was emerging in that country. Unlike the US, where conservation measures are still haphazard and sporadic, London seemed to have “smart” meters installed in many hotels (like I noted in Italy) and the entire culture embraces the “concept” at least of saving energy.

As in the US, however, the situation in Britain is going to be desperate soon. This graph from the April 5, 2008 issue of the Economist shows in a great, simple diagram how the declining use of coal and nuclear power is going to cause an energy crisis in Britain. Britain, like the US, has an ample supply of coal and can import much more from reliable allies like Australia, and has been a pioneer of nuclear power technology and is quite capable of building and operating these plants. While Britain does have North Sea natural gas available, the supply is declining and has other uses (industrial, heating) beyond power generation.

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