Plants, Poles and Plugs
Each Fuel Source Faces Challenges.
The impact of rising energy prices on the economy underscores the importance of fuel diversity in ensuring a reliable supply of electricity. However, policy makers and regulators are asked to remember that each fuel source faces its own challenges that can restrict fuel generation options.
No individual fuel is capable of meeting all of our nation's electricity demands. Maintaining the diversity of available fuel resources helps to ensure that we do not become too dependent on one fuel source. Fuel diversity protects consumers from contingencies such as fuel unavailability, price fluctuations, and changes in regulatory practices.
Coal: The U.S. Department of Energy’s Energy Information Administration (EIA) predicts that the share of electricity produced from coal-based power plants will increase to 57 percent of the national fuel mix in 2030[1]. In order to meet the increased demand for electricity generated from coal, electric companies must invest in more power plants and clean coal technologies. EPAct 2005 provides incentives for the development of clean coal technologies, and electric companies are committed to investing in these emerging technologies.
However, coal-based generators face a variety of environmental challenges and regulations aimed at reducing power plant emissions. While today’s coal-based plants are much more efficient and cleaner than those built 20 years ago, there are still concerns about the environmental impact of coal-based plants. In addition, coalbased plants are more expensive to build than natural gas-based plants, and require a more extensive permitting process and longer construction times. Also, rail and barge transportation issues can affect the cost and availability of coal. Finally, the possibility of federal regulation of carbon dioxide (CO2) and other greenhouse gases presents an element of regulatory uncertainty, while the electric power sector strives to develop ways to capture and store CO2 emissions from coal-based power plants.
Despite these challenges, electric companies have made significant reductions in the emissions of nitrogen oxides and sulfur dioxide, even as demand for coal-based electricity increased. Going forward, electric companies remain committed to even further reductions. By investing in emerging clean coal technologies, electric companies are helping to develop the next-generation of clean, efficient coalbased plants, including demonstration of a near-zero emissions generating unit. Through continued collaboration with the federal government, the electric power industry will help move these projects along the research and development path to full-scale commercialization.
Nuclear Power: Interest in building nuclear power plants continues to grow as supporters recognize the improved efficiencies of the plants and the carbon-free source of energy they provide. The electric power industry is working together to create new nuclear projects through a nuclear development company owned by nine power companies. The industry also is actively participating in domestic and international partnerships to further the development of next-generation nuclear technologies. EPAct 2005 encourages investment in new nuclear facilities with financial incentives and risk protections for initial project development. After an energy company receives the necessary permits, building a nuclear power plant can take four to five years. Nuclear power produces no sulfur dioxide, nitrogen oxides, mercury, or carbon dioxide emissions.
However, unresolved questions about how to dispose of spent fuel from nuclear power plants are a significant impediment to further utilization of this fuel source. In addition, the next generation of nuclear plants is expected to face higher capital costs than conventional fossil fuel units.
Natural Gas: Increasing demand for natural gas has created pressure on the supply of this fuel source and increased its price dramatically over the past few years. Importantly, EPAct 2005 provides incentives to increase natural gas production and encourage investment in natural gas delivery facilities. Congress also passed legislation in late 2006 to open more than 8.3 million acres in the Lease 181 area of the Outer Continental Shelf for oil and natural gas exploration. Lawmakers should continue to reconsider long-standing policies that restrict energy exploration and limit the availability of natural gas. Reforming these policies will allow further utilization of this fuel source and will help to reduce price pressures.
Hydropower: Hydropower is our country’s most prevalent renewable resource, providing nearly seven percent of total U.S. electricity supply. Importantly, there are no fuel costs or air emissions associated with hydropower. Due to the locations of large water sources, certain parts of the country have become highly dependent on hydropower. In fact, in the Pacific Northwest, up to 70 percent of electricity is generated from hydropower. EPAct 2005 modestly improved the relicensing process for existing hydropower projects, a key component to the future of this fuel source. However, ongoing pressures from federal and state regulators and non-governmental organizations threaten the continued viability of existing hydro facilities, while creating hurdles for the development of new hydro capacity.
Non-hydro Renewable Sources: Renewable energy sources—such as solar power, wind, geothermal, and biomass—produce minimal environmental impact and generally have low or no fuel costs. To promote non-hydro renewables, EPAct 2005 extended the production tax credits for certain renewable energy sources and authorized research and development programs in renewable energy. Over the past few years, wind power has become the fastest-growing renewable energy source in the country, with wind farms currently operating in 32 states.
However, many renewable sources are intermittent—that is, not available at all times or not readily available when electricity is required immediately. As a result, intermittent renewable resources must be backed up by generating facilities that can be better controlled, such as natural gas plants. Renewable technologies generally are more expensive to build (on an installed $/kilowatt basis) than fossil fuel-based generation, although wind power has become more competitive in this area. Renewable sources of energy also face their own environmental and siting concerns.
[1] U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook 2007, February 2007.
