Coal - Energy Policy Analysis: A Conceptual Framework - page 33

electric generating stations in northern New England, New Jersey, and southern California makes
it prohibitively expensive in those states, because there are no nearby mines. Correspondingly,
the delivered price of coal to power plants in Montana, Wyoming, and North Dakota is among
the lowest in the nation because there are large mines in those states; and the price is also low in
Nebraska and Iowa because there is excellent railway infrastructure to them from large mines in
nearby states (USEIA 2011a, Table 34).
The price of coal also varies due to sulfur and Btu content. Coal with high Btu content is more
expensive because it has high heat content. High-sulfur coal is less expensive but its use requires
more capital investment in air pollution control equipment. The advantage enjoyed by low-sulfur
coal may be offset by higher transportation costs to the point of utilization today, and in future by
increased regulation of toxic air pollutants like mercury, lead, and other heavy metals, which will
require additional capital investment in air pollution control equipment for the burning of even
low-sulfur coal. Coal will become less attractive in general as compared to other fuels as we move
toward regulation of greenhouse gases like carbon emissions, because that will make coal more
expensive relative to other fossil and nonfossil fuels. A variety of “clean coal technologies” are
available today, but using them makes it more expensive to produce electricity. Although coal at
one time was widely used in rail transportation, it was displaced by development of large diesel
locomotives, and it may find a similar fate when we begin to get serious about reducing the impact
of carbon emissions on global climate change.
Historically, planning lead times for development and construction of coal-fired generating
plants have been much longer than for all other technologies except nuclear plants. A 1980 study
of new power-generating stations in the southwestern United States found planning lead times
reported by electric utilities then typically ran six to eleven years for coal-fired plants, three to six
years for natural gas combustion turbines, three to seven years for combined cycle units, and ten
to fourteen years for nuclear units (Hamilton and Wengert 1980, 69). Long lead times to construct
coal-fired plants increase the financial costs of borrowing capital in the form of interest paid, as
compared to shorter lead times. The longer the period after money is borrowed before revenue is
produced by a new facility, the more expensive is capital construction.
In July 2011, the EPA finalized the Cross-State Air Pollution Rule (CSAPR), which requires
twenty-seven states in the eastern United States to significantly improve air quality by reducing
power plant emissions that contribute to ozone or fine particle pollution in other states. Carried
long distances across the country by wind and weather, power plant emissions of sulfur dioxide
and nitrogen oxide continually travel across state lines, reacting in the atmosphere and contrib-
uting to harmful levels of ground-level ozone and fine particulate soot, which are scientifically
linked to widespread illnesses and premature deaths and prevent many cities and communities
from enjoying healthy air quality.
Emission reductions were scheduled to take effect starting January 1, 2012, for sulfur dioxide
and annual nitrogen oxide reductions, and May 1, 2012, for ozone season nitrogen oxide reduc-
tions. By 2014, the CSAPR, combined with other final state and EPA actions, will reduce power
plant sulfur dioxide emissions by 73 percent and nitrogen oxide emissions by 54 percent from
2005 levels in the CSAPR region (USEPA 2011b).
According to the EPA, the CSAPR rule will protect over 240 million Americans living in the
eastern half of the country, resulting in up to $280 billion in annual benefits, which would far
outweigh the $800 million projected to be spent annually on the rule in 2014 and roughly $1.6
billion per year in capital investments already under way as a result of the earlier Clean Air In-
terstate Rule. EPA expects pollution reductions to occur quickly without large expenditures by
the power industry. Many power plants covered by the rule have already made substantial invest-