Not all is rosy for new coal-fired plants. Last year, coal-fired generation fell from 48.2 percent to 44.6 percent of total U.S. electricity generation,[iii] as low natural gas prices raised the gas share, and higher water levels and wind turbine capacity increased the renewable share. While some states remain favorable to new coal-fired generation, others are tied up in legal opposition and regulatory hold-ups for permits. Nevertheless, many folks agree that the present difficulty of putting cap-and-trade legislation through the Senate is having positive effects on new coal builds.[iv]

Past Announcements vs. Operational Units

NETL has tracked announcements versus actual construction of units over time and has noted that escalating costs and uncertainty about whether climate change legislation would pass have caused fewer coal-fired power plants to be constructed than were originally announced. NETL’s 2002 report, for example, noted that over 36,000 megawatts of coal-fired capacity were to be built by 2007, while only 12 percent of that amount (4,500 megawatts) was actually constructed during that period. The figure below shows the announcements of coal-fired plants versus actual plant construction over the past decade.

Current Status

According to NETL, in 2009, 8 coal-fired plants, listed in the figure below, came on-line in the following states: Iowa, Kentucky, Colorado, Illinois, Nebraska, Texas, and Arizona. The laboratory categorizes future plant additions as announced, permitted, near construction, or under construction. A plant in the announced phase is in the early stages of development and may be filing for permits. A plant in the permitted phase either has two or more permits approved or its fuel or power contracts have been negotiated. A plant near construction has obtained approval and received the majority of its permits, has begun site preparation, and is contracting for vendors and Engineering, Procurement and Construction contractors.

As of January 2010, NETL reported that 46 coal-fired plants were announced (26,233 megawatts), 8 were permitted (3,280 megawatts), 1 was near construction (320 megawatts), and 22 coal-fired plants were under construction (13,755 megawatts)for a total of 43,588 megawatts in the pipeline. (See table below.) While plants under and near construction are likely to come on line, NETL warns that regulatory uncertainty and industry cost increases are impacting development decisions for all projects.

The EIA is a little less optimistic. In its Annual Energy Outlook 2010, it is forecasting that between 2008 and 2035, an additional 26,400 megawatts of coal-fired capacity will come on-line; of that, 15,600 megawatts are in the pipeline.[v] EIA’s assessment reflects their beliefs about regulatory and financial uncertainty in the cost of capital for coal-fired units, and assumes a 3-percentage point increase in the cost of capital when evaluating investments in greenhouse gas intensive technologies without carbon capture and sequestration (CCS) technology. The 3-percentage point adjustment is similar to a $15 per ton carbon dioxide emissions fee when investing in a new coal plant without CCS technology. The adjustment accounts for the possibility that the plants may need to purchase allowances or invest in other greenhouse gas emission-reducing projects that offset their emissions in the future.[vi]

The International Energy Agency is a little more optimistic than the EIA in its World Energy Outlook 2009, forecasting an additional 35,000 megawatts of coal-fired capacity above 2007 levels by 2030.[vii]

Regulatory Climate

In some states, coal is essentially banned or is having a very difficult time getting permitted. In California, for example, there is a de facto ban on new coal-fired plants resulting from a performance standard that requires all new base-load generation to produce no more greenhouse gas emissions than a new natural gas combined cycle plant.[viii] Washington State also has a de facto ban on new coal-fired plants, requiring a 20 percent offset in carbon dioxide emissions from new fossil fuel plants.[ix]

In Kansas, in 2008 and 2009, then-governor Kathleen Sebelius vetoed bills by the state legislature that would have allowed Sunflower Electric Power to build two 700-megawatt coal-fired power plants that had been originally rejected by a state environmental official because of its output of carbon dioxide emissions. Once Kansas Governor Sebelius became a cabinet secretary in the Obama Administration, the atmosphere turned more favorable. The new Kansas governor, Mark Parkinson, is allowing one new coal-fired plant to be built.[x]

In Georgia, a state where coal is the primary fuel for electric generation, Longleaf, the first coal-fired power plant to be built in more than 20 years, is tied up in litigation. In late June 2008, Fulton County Superior Court Judge Thelma Wyatt Cummings Moore overturned the decision by state regulators to issue the plant an air permit, saying state environmental officials failed to take the plant’s carbon dioxide emissions into consideration. In her decision, Moore said the plant would annually emit large amounts of air pollutants, including nine million tons of carbon dioxide (even though carbon dioxide was not defined as a regulated pollutant at the time). In November 2008, the plant owners appealed the decision to the State Court of Appeals. In July 2009, the Court of Appeals overturned the decision, but left the plant’s permit invalid. In September 2009, the Georgia Supreme Court ruled that they would not hear an appeal by the Sierra Club against the previous ruling. While the Sierra Club appealed to the court to reconsider, the Georgia Supreme Court held to their prior ruling. In April 2010, the state Environmental Protection Division issued two amendments to the permit, but failed to allow enough time for public comment. The plant is on hold while the state determines when they will provide the documents for comment.[xi]

In New Mexico, the Desert Rock coal-fired power plant, whose permit was originally approved by the Environmental Protection Agency (EPA) under the Bush Administration. The permit, however, was withdrawn by the same EPA during the Obama Administration, citing inadequate analysis of environmental issues and a failure to use the appropriate technology, coal gasification combined cycle. The plant was to use supercritical coal technology and meet standards defined by the International Energy Agency for carbon capture and storage, allowing it to be retrofitted for future deployment of the coal-gasification technology when it becomes commercially available. The 1,500 megawatt plant was to serve parts of Arizona, New Mexico, and Utah, using Navajo Nation coal resources. According to the President of the Navajo Nation, the EPA is holding it accountable to higher standards than other parts of the United States. In April 2010, the power plant owner indicated that the project was not dead, but it is no longer clear what fuel the owner will use—fossil or renewable.[xii]

China’s Reliance on Coal

It is important to remember the big picture. Carbon dioxide emissions are global emissions, in that reducing them in the United States does not guarantee an absolute reduction. For example, unlike the United States, China has no qualms of dramatically increasing its coal-fired electricity generation and carbon dioxide emissions.

China currently gets 70 percent of its energy and 80 percent of its electricity from coal. China is the largest producer and consumer of coal in the world, and many of China’s large coal reserves have yet to be developed. The country currently ranks third in coal reserves, after the United States and Russia, with 13 percent of the world total.[xiii]

The EIA is projecting that those percentages will change very little in the future, despite the so-called lead that the U.S. administration says China has in green energy. By 2035, EIA expects China to get 62 percent of its energy and 74 percent of its electricity from coal. The statistical agency expects China to add 737 gigawatts of coal-fired capacity to its existing 496 gigawatts, an increase of about 150 percent. China’s coal-fired capacity in 2007 exceeded that of the United States by over 180 gigawatts and the additions that China is expected to make to coal-fired capacity by 2035 will be more than double the current coal-fired capacity in the United States. In fact, the forecasted coal-fired capacity of China in 2035 (1233 gigawatts) exceeds the total capacity of all types forecasted for the entire United States in that year (1216 gigawatts).[xiv]

The International Energy Agency (IEA) is also in agreement that China will be building a massive number of coal plants in the future. Their forecast has an additional 773,000 megawatts of coal-fired capacity being constructed by 2030 from 2007 levels, surpassing the total generating capacity in the United States in 2030. They also expect China’s electricity sector to be mainly coal fired, with coal producing 75 percent of the country’s electricity in 2030.[xv]

NETL also agrees with EIA’s and IEA’s outlook regarding construction of coal-fired capacity as the figure below indicates. During the past decade, China has been building 10 to 70 gigawatts of coal-fired capacity each year, and it has about 185 gigawatts planned.

The chart below shows the dramatic difference between the Chinese and American build-rates for coal-fired generating capacity. The blue and green bars show China’s new coal-fired capacity, built, under construction, and planned, and they are compared to the red and yellow bars for the U.S.’s coal fired capacity that are operational and under construction. The announced U.S. plants have been so tentative in the past that they are not included on the chart.

Conclusion

While the current outlook is somewhat brighter for coal-fired power plants here in the United States, their ability to compete with natural gas and renewable technologies is hampered by uncertainty over legislation and regulation, along with legal delays. Congress has had various proposals for a cap and trade bill to limit greenhouse gas emissions, but to date only the House of Representatives has passed their version of the bill. In the mean time, the EPA is planning to limit those emissions through regulation. Coal’s fate in this country is still uncertain, but China realizes that coal is its answer to economic growth, providing the energy it needs to improve the living conditions of its population.

[ii] Energy Information Administration, Electric Power Monthly, http://tonto.eia.doe.gov/ftproot/electricity/epm/02260904.pdf, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261008.pdf

[iii] Energy Information Administration, Monthly Energy Review, http://www.eia.gov/emeu/mer/pdf/pages/sec7_5.pdf

[iv] Associated Press, America’s New Coal Boom, August 17, 2010, http://www.google.com/hostednews/ap/article/ALeqM5iCjlywOJyCu1MSGH7FUqj7jD1c1QD9HL5RUO2

[v] Energy Information Administration (EIA), Annual Energy Outlook 2010, Table 9, http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

[vi] Energy Information Administration, Annual Energy Outlook 2010, http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html

[vii] Organization for Economic Cooperation and Development, International Energy Agency, World Energy Outlook 2009.

[viii] Institute for Energy Research, Energy Regulation in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/california/

[ix] Institute for Energy Research, Energy Regulation in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/washington/

[x] The Washington Post, Gristmill: What’s not the matter with Kansas, July 10, 2008, http://www.washingtonpost.com/wp-yn/content/article/2008/07/15/AR2008071500930.html, and http://www2.ljworld.com/news/kansas/energy/sunflower/

[xi] Wall Street Journal, February 4, 2008, http://blogs.wsj.com/environmentalcapital/2008/02/04/wall-street-tells-big-coal-not-so-fast/?mod=WSJBlog , April 2, 2008, http://blogs.wsj.com/environmentalcapital/2008/04/02/bank-of-america-more-heat-on-coal/ , August, 13, 2008, http://blogs.wsj.com/environmentalcapital/2008/08/13/burning-cash-coal-friendly-banks-under-fire/, and http://www.sourcewatch.org/index.php?title=Longleaf

[xii] The New Mexico Independent, EPA plugs the plug on Desert Rock coal-fired power plant, April 28, 2009, http://newmexicoindependent.com/26011/epa-pulls-the-plug-on-desert-rock-coal-fired-plant , Greenwire, COAL: Extension granted for appeals of N.M. power-plant permit , August 22, 2008, http://www.eenews.net/Greenwire/2008/08/22/8, and The Navajo Times, Desert Rock not dead, April 15, 2010, http://www.navajotimes.com/news/2010/0410/040810desertrock.php

[xiii] Energy Information Administration, http://www.eia.doe.gov/emeu/cabs/China/Coal.html

[xiv] Energy Information Administration, International Energy Outlook 2010, http://www.eia.doe.gov/oiaf/ieo/index.html

[xv] Organization for Economic Cooperation and Development, International Energy Agency, World Energy Outlook 2009.

History and Projections

Just a short seven years ago, China consumed less than half the energy that the United States consumed.[iii] By 2009, China had not only caught up with the United States as far as energy consumption was concerned, but consumed almost 4 percent more energy than the United States, which was suffering from an economic downturn. According to the IEA, China consumed 2,252 million tons of oil equivalent last year, compared to 2,170 million tons of oil equivalent consumed by the United States.[iv] China’s economy and energy demand have grown at breakneck speed as it has become the world’s leading exporter, and it stands poised to overtake the United States in manufacturing output in 2011. [v]

The United States is the largest consumer of energy on a per capita basis, according to the IEA, using about 5 times the amount of energy as China per inhabitant, in part because of the much wider use of personal transportation in the United States. [vi] However, sales of automobiles in China have now outstripped those in the United States.[vii] So that U.S./China per capita ratio is not likely to continue for long.

China recorded its largest oil demand in June of 2010 at 8.98 million barrels per day, 10 percent higher than a year before, and 0.7 percent higher than May 2010, the previous record.[viii] And China is expected to build an additional 1,000 gigawatts of generating capacity, about the total U.S. electric capacity base, in the next fifteen years, according to the IEA.   In contrast, growth in U.S. energy demand has been reduced by the recession, efficiency and intensity improvements, and regulations, while supply has been constrained by opposition to all forms of non-renewable energy and its transport.

The Energy Information Administration projects that by 2035, China will have a total of 1,924 gigawatts of electric generating capacity, compared to 1,216 gigawatts for the United States, with an annual growth rate of over 5 times that of the United States. [ix] Over 60 percent of that new generating capacity is projected to be coal-fired. And while there are “clean” coal technologies for removing sulfur dioxide and nitrogen oxide, there is no commercial technology as yet for removing carbon dioxide emissions. Thus, the EIA projects that China’s carbon dioxide emissions will be over twice that of the United States by 2035, with its emissions from coal being 4.5 times as much as those in the United States.[x]

Global Carbon Dioxide Emissions

According to the  Netherlands Environmental Assessment Agency (PBL)[xi]—using data from British Petroleum (BP), the U.S. Geological Survey (USGS), and the latest version of the Emission Database for Global Atmospheric Research—global carbon dioxide emissions were constant in 2009. (See chart below.) The developed world’s recession brought about reduced fossil fuel consumption, but China and India together offset those reductions.[xii] China increased its coal consumption by 9.6 percent in 2009, and India increased coal consumption by 6.8 percent.[xiii]

According to PBL calculations, emissions from fossil fuel combustion in the industrialized countries (including those from gas flares, the burning of waste gas from oil drilling, and other industrial processes, such as the production of cement and ammonia) decreased by 7 percent owing to an attempted compliance with the Kyoto Protocol by countries that have ratified it and to the global recession. In China, despite a doubling of wind and solar energy for the fifth year in a row, carbon dioxide emissions increased by 9 percent, and in India, they increased by 6 percent.[xiv] Owing to the United Nations’ Clean Development Mechanism (CDM), the developed countries have been funding wind and solar projects in underdeveloped countries as a form of compliance with the Kyoto Protocol.[xv] China has benefited from the CDM to the point that 30 percent of its wind units are still not connected to its electrical grid.[xvi]

China’s Goals for Emission Reductions

China has set targets to reduce energy consumption per unit of economic output by 20 percent this year compared with 2005, and to reduce emissions of greenhouse gases per unit of economic output by 40 to 45 percent in 2020 from its 2005 levels.  However, it is finding it difficult to meet these targets owing to its expanding economy and its population’s desires for Western conveniences (e.g., bigger cars, more appliances).   As a result, apartment and office buildings are being constructed at a rapid pace; sales of large household appliances (such as refrigerators and washing machines) have more than doubled in the past year in rural China alone, owing to government subsidies to help peasants afford modern conveniences; and Chinese malls, which are exempt from temperature regulations, are being built throughout Chinese cities. To provide the electricity needed, last year, China built new coal-fired power plants with a total capacity greater than all the power plants in New York State.[xvii]

Further, China’s auto sales increased by 48 percent last year, surpassing U.S. auto sales for the first time, and they continue to increase.  With its economy shifting away from light industries for export (e.g., toys and clothing) and toward energy intensive industries such as steel and cement to satisfy domestic demand for goods, China has seen its efficiency gains reverse, having declined by 3.2 percent in the first quarter of this year. China uses twice as much energy per dollar of output as the United States and three times as much as the European Union. Further, manufacturing, which is energy intensive, makes up three times as much of the Chinese economy as it does the U.S. economy.[xviii]

With huge demand increases in electricity generation and steel mills, Chinese coal imports are expected to reach a record in 2010. According to Peabody Coal, China imported 70 million metric tons of coal during the first 6 months of this year, double the amount it imported through June of last year.[xix] China uses coal in its industrial processes in addition to its electricity production. In 2007, for example, China produced  50 percent of the world’s cement, more than 13 times as much as the United States.[xx]

Conclusion

As a result of its economic growth—expected to be 10 percent this year—and its citizens’ demand for Western conveniences, China’s energy requirements are increasing and it is becoming less energy efficient, contrary to its stated goals. Because most of its energy is produced from coal, China’s carbon dioxide emissions are increasing at a rapid pace. In fact, China’s carbon dioxide emissions have shown the largest six-month increase ever by a single country.[xxi] With double-digit economic growth, plus growing consumer demand and manufacturing capabilities, China is focused on supplying energy to feed its economic growth and to meet the needs of its population.  As Faith Birol, head of the IEA said when announcing China’s new status as the world’s number one energy consumer, China’s ascendancy marks “the start of a new age in the history of energy.”

[ii] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec2_3.pdf

[iii] Energy Information Administration, http://tonto.eia.doe.gov/cfapps/ipdbproject/iedindex3.cfm?tid=44&pid=44&aid=2&cid=&syid=1999&eyid=2004&unit=QBTU

[iv] According to the BP Statistical Review that includes oil, natural gas, coal, nuclear, and hydroelectric power in its primary energy statistics, China was still slightly behind the U.S. in energy consumption with the U.S. consuming 2,182 million metric tons of oil equivalent, and China consuming 2,177 million metric tons of oil equivalent.  See http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf

[v] “US manufacturing crown slips”, Financial Times, June 20, 2010  http://www.ft.com/cms/s/0/af2219cc-7c86-11df-8b74-00144feabdc0.html

vi The Wall Street Journal, China Passes US as the World’s Biggest Energy Consumer IEA, July  19, 2010, http://online.wsj.com/article/SB10001424052748703720504575376712353150310.html?hat_input=China+Passes+U.S.+as+World%27s+Biggest+Energy+Consumer

[vii] “China overtakes US as world’s biggest car market” The Guardian, January 8, 2010. http://www.guardian.co.uk/business/2010/jan/08/china-us-car-sales-overtakes

[viii] Platt’s Report: China’s Oil Demand in June Hits New High, Up 10% from Year Ago, July 21, 2010, http://www.prnewswire.com/news-releases/platts-report-chinas-oil-demand-in-june-hits-new-high-up-10-from-year-ago-98919164.html

[ix] Energy Information Administration, International Energy Outlook 2010, http://www.eia.doe.gov/oiaf/ieo/pdf/ieoecg.pdf

[x] Ibid., http://www.eia.doe.gov/oiaf/ieo/pdf/ieorefcase.pdf

[xi] “No growth in total global CO2 emissions in 2009″, Netherlands Environmental Assessment Agency, July 1, 2010, http://www.rivm.nl/bibliotheek/rapporten/500212001.pdf.

[xii] Financial Times, China and India, the CO2 culprits of 2009, July 5, 2010, http://blogs.ft.com/energy-source/2010/07/05/china-and-india-the-co2-culprits-of-2009/

[xiii] BP Statistical Review of World Energy, June 2010, http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf

[xiv] “No growth in total global CO2 emissions in 2009″, Netherlands Environmental Assessment Agency, July 1, 2010, http://www.rivm.nl/bibliotheek/rapporten/500212001.pdf.

[xv] Institute for Energy Research, http://www.instituteforenergyresearch.org/2010/03/24/kyotos-clean-development-mechanism-is-it-producing-results-for-whom/

[xvi] Wall Street Journal, China’s Wind Farms Come With a Catch: Coal Plants, September 28, 2009, http://online.wsj.com/article/SB125409730711245037.html

[xvii] New York Times, China Fears Consumer Impact on Global Warming, July 4, 2010, http://www.nytimes.com/2010/07/05/business/global/05warm.html?_r=1

[xviii] Ibid.

[xix] ClimateWire, Coal: Peabody’s 2Q earnings surge on China’s galloping energy demand, July 21, 2010, http://www.eenews.net/climatewire/2010/07/21/3/

[xx] U.S. Geological Survey,  http://minerals.usgs.gov/minerals/pubs/commodity/cement/mcs-2008-cemen.pdf

[xxi] New York Times, China’s Energy Use Threatens Goals on Warming, May 6, 2010, http://www.nytimes.com/2010/07/05/business/global/05warm.html?scp=3&sq=China’s%20Energy%20Use%20Threatens%20Goals%20on%20Warming&st=cse

In the electricity-generation market of 2009, coal generation had only a 44 .6 percent share, 3.6 percentage points lower than in 2008 and the lowest level since 1978 when it represented 44.2 percent of the market. Hydroelectric power, wind energy, and natural gas picked up most of the market share coal lost in 2009.[i] Higher water levels helped lift hydroelectric generation, while wind and natural gas boosted their generation levels by adding capacity. Natural gas was also able to compete more effectively against coal, inasmuch as gas’s price was about 50 percent lower in 2009 than in 2008.

Natural gas garnered over half the share lost by coal’s decreased generation because, unlike wind, combined-cycle generators have higher capacity factors and are dispatchable. Therefore, they are a better substitute for coal-powered electricity generation. But substituting natural gas-fired generation for coal-fired generation comes at a price to consumers, inasmuch as average coal-fired production costs in 2009 were 40 percent lower than those of natural gas—2.97 cents per kilowatt hour for coal versus 5.0 cents per kilowatt hour for natural gas.[ii]

Why is coal seeing a reduced market and what are the consequences to electricity consumers? A number of factors are responsible for coal’s lower market share, including: the possibility of further national legislation and regulation benefitting other technologies and promoting the reduction of coal-fired generation; state programs for reducing greenhouse gas emissions and increasing renewable sources of energy; a more competitive environment for natural gas production and generation; higher subsidies on a production basis for renewable sources than for traditional coal-fired generation; and regulatory reviews and legal delays that result in the cancellations of coal-fired projects. Among the consequences of increased regulatory and legislative programs are higher costs both for the substitute technologies and for compliance by coal-fired generators.

An example of what electric utility companies face with regard to coal-fired generation can be seen in a report by the National Resource Defense Council (NRDC), based on 2008 data but recently released and showing the criteria pollutants (e.g., sulfur dioxide, nitrogen oxide, and mercury) and carbon dioxide emissions of the nation’s top 100 electric generation producers. According to Dan Lashof, NRDC’s climate director, “Power companies have been on notice for more than a decade that they will need to cut their emissions of carbon dioxide and other pollutants. This report shows which companies have made smart decisions to position themselves for the transition to clean energy and which are lagging.”[iii] Three electric utility companies co-sponsored the report with the NRDC and CERES, an investor advocacy coalition[iv] that describes itself as “a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.”[v]

Federal Regulatory and Legislative Activity Affecting Coal

Various proposals are circulating for national regulation and legislation that effectively mandate less coal consumption. These include a possible nationwide renewable portfolio standard (RPS) that would require electric utilities to generate a set percentage of their electricity from qualified renewable generating technologies. Another is a cap-and-trade bill that would force the reduction of carbon dioxide emissions. Because coal generation emits twice the carbon dioxide emissions of natural gas, any cap-and-trade policy would be targeted at lowering coal’s share of generation within the electric utility sector.

The Environmental Protection Agency (EPA) just released a proposed “transport rule” that would improve air quality in the eastern United States by reducing power plant emissions from 31 states and the District of Columbia. Specifically, it would alter the limits on sulfur dioxide, nitrogen oxides, and ozone emissions that are currently in place. According to the EPA, the rule would reduce sulfur dioxide emissions by 71 percent and nitrogen oxide emissions by 52 percent from 2005 levels by 2014.[vi] EPA projects the utilities’ cost of compliance at $2.8 billion.[vii] The agency is still working on the new rule for ozone and plans to finalize it as well as revisit the transport rule in 2012.

Because the power sector has already significantly reduced its sulfur dioxide and nitrogen oxide emissions since 1990 when legislation first required a reduction in criteria pollutants, Dan Riedinger, a spokesman at the Edison Electric Institute, said “EPA’s new proposal would require dramatic reductions in power sector emissions, on top of major reductions to date, on a very short timeline.”[viii] The short timeline is likely to increase the cost of compliance because electric utility companies frequently make technology changes when they are down for scheduled maintenance. Major changes will increase that down time, resulting in less generation output and increased equipment cost to comply with the lower emissions rates. Any legislative or regulatory policy that would reduce existing coal-fired generation or further limit their emissions will almost certainly cause an increase in electricity prices.

Although the Federal government has yet to pass an RPS or a cap-and-trade program for electric utilities, some states have already enacted such programs. The Institute for Energy Research found that, in those states that have an RPS, electricity prices in 2009 were 39 percent higher than in states without an RPS.[ix]

State Programs, Generation Mix Changes, and Electricity Price Increases

In 2009, average electricity prices nation-wide increased by 1.5 percent, a small percentage, partially because of lower natural gas prices. However, some states saw double-digit price increases. For example, West Virginia had an 18 percent increase in average electricity prices, while Virginia customers saw an 11 percent increase. Coal generation in both states was lower, by 24 percent and 17 percent, respectively.[x] In the case of West Virginia, the state has an RPS that requires investor-owned utilities with more than 30,000 residential customers to generate 25 percent of their retail electricity sales from alternate and renewable energy sources by 2025. Virginia does not have a legislated RPS, but has a goal to generate 15 percent of 2007 electricity sales from renewable energy by 2025.[xi]

Several states had large percentage decreases in coal generation. One such state was Ohio. Comparing 2009 to 2008, its coal generation went down by 13 percent; its natural gas generation went up by 87 percent; and its average electricity price went up by 6.9 percent. Ohio has an RPS that requires its utilities to provide 25 percent of their retail electricity supply from alternate energy sources by 2025.[xii] North Carolina and Pennsylvania are other states with an RPS whose coal generation went down (13 and 11 percent, respectively). In 2009, their natural gas generation went up by 18 and 56 percent, respectively, and their average electricity price went up 5 and 3 percent, respectively. Pennsylvania’s RPS requires its utilities to generate 18 percent of their electricity from alternate energy sources by compliance year 2020 (June 1, 2020 to May 31, 2021).[xiii] North Carolina’s RPS requires investor-owned utilities to generate 12.5 percent of 2020 retail electricity sales from renewables by 2021, while municipal utilities and cooperatives must meet a target of 10 percent of renewable energy by 2018.[xiv]

In 2007, the Governor of Kansas rejected a permit for a coal plant due to carbon dioxide emissions. That was the first such rejection of its kind. Kansas, a primarily coal generation state, lowered its coal generation by 5 percent and raised its natural gas generation by 17 percent, with an electricity price increase of 8 percent in 2009 over 2008. Besides its rejection of a permit for a coal-fired plant, Kansas also has an RPS that requires utilities to provide 20 percent of peak demand capacity (based on the average demand from the previous three years) from renewable sources by 2020.[xv] Florida, while not an RPS state, passed legislation in 2008 that authorizes its Department of Environment Protection to develop a greenhouse gas trading program.[xvi] In 2009, Florida’s coal generation went down 17 percent, its gas generation went up 14 percent and its electricity price went up 6 percent.

Other states with a lower coal share include Alabama and South Carolina, where coal generation declined by 25 and 15 percent, respectively, in 2009. While neither state has enacted a cap-and-trade or RPS program, both states capitalized on lower natural gas prices to switch from coal-fired generation to natural gas-fired generation, reducing carbon dioxide emissions as a result.

Conclusion

In 1988, coal’s share of electricity generation peaked at 56.9 percent of the market, over 12 percentage points higher than it is today. Athough coal lost market share thereafter, its generation levels in 2009 were still almost 15 percent higher than in 1988.[xvii] During that time, sulfur dioxide emissions declined by more than 40 percent and nitrogen oxide emissions by more than 60 percent. Meanwhile, electricity prices increased by more than 50 percent.[xviii] Many factors have entered into that increase, including: increases in fuel costs; regulatory impacts from the amendments to the Clean Air Act and other legislation; state regulation and legislation affecting fuel mix, emissions output, and the pricing of electricity; and proposals by the federal government to increase regulations and enact environmental and other legislation affecting the fuel mix of electric generators.

Consumers need to realize that these regulatory and legislative policies increase the price of electricity. And with pressure from the administration to pass energy and environmental legislation this year, U.S. utility companies are on notice that actions need to be taken to reduce emissions from fossil-fired generators.

[i] Energy Information Administration, Electric Power Monthly, March 2010, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf

[ii] Nuclear Energy Institute, http://www.nei.org/resourcesandstats/documentlibrary/reliableandaffordableenergy/graphicsandcharts/uselectricityproductioncosts/

[iii] E&E Publishing, CLIMATE: Report shows decline in U.S. utilities’ CO2 emissions, June 29, 2010, http://www.eenews.net/eenewspm/2010/06/29/5/

[iv] Benching Air Emissions of the 100 Largest Electric Power Producers in the United States, June 2010, http://www.nrdc.org/air/pollution/benchmarking/2008/benchmark2008.pdf

[v] http://www.ceres.org/Page.aspx?pid=415

[vi] Environmental Protection Agency, Air Transport, http://epa.gov/airtransport/

[vii] E&E News, Air Pollution: Power plant rules a ‘work in progress,’ EPA air chief says, July 6, 2010, http://www.eenews.net/eenewspm/2010/07/06/1

[viii]Ibid.

[ix] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/pdf/statereport.pdf

[x] All state electricity generation and price data are from the Energy Information Administration, Electric Power Monthly, March 2010, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf

[xi] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/virginia/ and http://www.instituteforenergyresearch.org/states/west-virginia/

[xii] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/ohio/

[xiii] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/pennsylvania/

[xiv] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/north-carolina/

[xv] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/kansas/

[xvi] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/florida/

[xvii] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec7_5.pdf , and Annual Energy Review, http://www.eia.doe.gov/emeu/aer/pdf/

[xviii] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec9_14.pdf

The White House has launched a coordinated PR campaign to argue that it is not anti-business. That is a difficult argument to make when we look at the Administration’s record on energy. Time after time the Administration has acted to make it more difficult to produce energy domestically and they are actively seeking to make energy more expensive. This only makes an economic recovery more difficult.

The Administration’s Assault on Domestic Energy Production and the Use of Energy [Partial List]

The Administration has been working around the clock to achieve President Obama’s goal of bankrupting coal companies and making electricity prices necessarily skyrocket.

Within days of taking office, the Administration cancelled 77 oil and gas leases in Utah, postponed a new 5-year plan for offshore resources, and cancelled commercial oil shale research leases. But that was just the beginning.

In the wake of the Gulf oil spill, the Administration is trying to put cap-and-trade legislation back on the agenda, calling multiple White House meetings to try to find consensus on increasing the cost of energy. And the Administration has announced a variety of other regulations that will increase the price of energy.

The most impactful new regulation is the Environmental Protection Agency’s (EPA) regulation on greenhouse gas emissions. EPA has already announced regulations on carbon dioxide emissions from automobiles. According to EPA itself, this will increase the price of automobiles by $1000 a car and reduce global temperature (the whole point of the rule) by only a maximum of 0.015 °C  90 years from now.

But that’s only one part of the Administration’s efforts to drive up the cost of producing and using energy. EPA wants to revise the Bush-era ozone rule. If EPA ratchets down the ozone level too far, many counties – even those with no industry – will fail the standard. EPA also wants to tighten particulate matter regulations and mercury regulations nationwide and it has announced a new “transport” rule to further regulate SO2, NOx, and mercury in Eastern states. Finally, the Administration is preparing a new boiler rule to regulate hazardous air pollution from boilers and process heaters.

Administration Cancels 122 Previously-Issued Permits in Texas

Besides imposing new burdensome regulations, EPA is cancelling previously-made decisions to further ratchet up the cost of doing business for domestic energy manufacturers.  In Texas, the Administration cancelled 122 previously-issued air quality permits under a program started under the Clinton Administration. E&E News reports:

According to figures touted by [Gov.] Perry and state regulators, Texas beat national averages over the past 10 years by achieving a 22 percent reduction in ozone emissions and a 27 percent drop in nitrogen oxide emissions.

…

“We are defending our flexible air permitting program because it works,” TCEQ [Texas Commission on Environmental Quality] Chairman Bryan Shaw said earlier this month. “EPA is not able to demonstrate how our program is less protective of the environment than the bureaucratic federal approach. EPA’s philosophy of more bureaucracy by federalizing state permits will not lead to cleaner air, but will drive up energy costs and kill job creation at a time when people can least afford it.”

According to industry representatives, it will cost millions of dollars for each company to change their pollution control technologies. This could cost a lot of jobs. According to a story in the Houston Chronicle:

Corporations said the decision creates uncertainty for their companies.

“Valero has six refineries operating under flex permits, employing more than 2,700 people,” the company said in a statement, noting the EPA did not object to the program when it was created. “Now, 16 years later, EPA is reversing course, and our facilities are caught in the middle, creating significant uncertainty at a time when our economy can least afford it.”

Also, one likely reason the Administration cancelled these permits now is to force these plants to get carbon dioxide permits under EPA’s new carbon dioxide regulations.

Conclusion

We need to be vigilant about air pollution, but the Obama Administration’s carbon dioxide rules, for example, have nothing to do with air pollution. The carbon dioxide regulations are supposed to address global warming, but even EPA admits (as seen above), they will have miniscule impacts on global temperature.

The President says he wants to be pro-jobs, pro-consumer, and pro-market.  If that is indeed the case, then he needs to consider holding off on his regulatory assault on the American economy. One of the reasons that unemployment rates are high and people have been unemployed for so long is because of uncertainty about future regulations and the cost of those regulations.

The American economy is hurting and this regulatory assault needs to be reconsidered for the economy to have any hope of recovering and – more importantly – for enabling the private sector to create real jobs.

Wind is not a new technology. It was one of our principal sources of energy, along with wood and water, prior to the carbon era. But the use of renewables in the pre-carbon age was very different from the current use of renewables. Today, people rely on energy being available 24 hours a day, 7 days a week, 365 days a year, regardless of whether the sun shines, the wind blows, or there are high or low water levels.  We now have over 1,000 gigawatts of generating plants[1], and a large and elaborate electrical grid that requires great coordination among system operators to avoid disruptions.

Also, in the pre-carbon energy era, when renewables were the sole source of energy, there were no coal-fired or natural-gas fired power plants to provide back-up power. Studies have found that the efficiency of those carbon-based plants is affected by incorporating wind energy into the system. When a plant’s efficiency is reduced, its fuel consumption and emissions increase, causing unintended consequences that wind proponents do not disclose. Requiring even larger amounts of renewable energy through renewable portfolio standards will only exacerbate this problem.

Background

Our various electricity generating technologies were designed and constructed to meet electricity demand based on their best operating characteristics for meeting portions of the electricity load duration curve. The load duration curve illustrates periods of constant demand that are served by base-load power versus periods of intermediate and peak demand. Owing to their high capital cost, low fuel cost, and high capacity factors, technologies such as coal and nuclear were designed to operate continuously to meet the base-load demand component. Owing to their lower capital costs but higher fuel costs, natural gas technologies, including combined-cycle and turbine plants, were designed to meet intermediate and peak electrical load.

Wind is an intermittent technology since it can generate power only when the wind blows. Its low operating cost (with no fuel component) and the mandates of state Renewable Portfolio Standards (RPS) make it practically a “must take” technology for system operators. RPSs require that a certain amount of electricity generation be produced by renewable fuels. The renewable target mandates tend to start out low but increase over time, with those of most RPS states reaching 15 to 30 percent by 2020 or 2025.[2] Wind tends to be the primary technology for meeting RPS targets, since it is lower in capital cost than solar, thermal, and photovoltaic technologies, the other politically acceptable “green” technologies.

Part of the rationale for introducing RPSs is that the substitution of “green” technologies for carbon technologies is supposed to reduce pollution emissions as well as carbon dioxide emissions. However, studies have shown that this may not be the case. As conventional generation (coal or natural gas) is reduced to make room for wind generation and is then increased as wind generation subsides, its heat rate rises. The heat rate is a measure of a generating station’s thermal efficiency commonly stated in units of Btu per kilowatt-hour. This reduction in efficiency  increases its fuel consumption and emissions. When sudden increases or decreases occur in generation output, it is referred to as “cycling”.

The Bentek Study

Bentek did a study of the results of integrating wind into the generation mix of the Public Service Company of Colorado (PSCO), using data from the company’s financial reports, the Energy Information Administration, the Federal Energy Regulatory Commission, the Environmental Protection Agency, and the National Renewable Energy Laboratory.[3] PSCO is a largely coal-fired utility with 3,764 megawatts of coal-fired generators, 3,236 megawatts of gas-fired combined-cycle and gas turbine capacity, 405 megawatts of hydro and pumped storage capacity, and 1,064 megawatts of wind generators. Colorado has an RPS that required 3 percent of the electricity generated by investor-owned utilities come from qualifying renewable technologies by 2007, and 30 percent by 2020.[4]

Colorado’s energy demand is highest during the day, peaking in late afternoon or early evening. Wind generation, however, is greatest between the hours of 9 pm and 5 am; it cannot be counted on to provide power when most needed, and so is used when available to meet the RPS. Most of the time that wind generation is available, it backs out (or replaces) natural gas. However, there are times when coal generation, which provides over 50 percent of PSCO’s base-load generation, is backed out to make room for the wind generation. When this happens, coal generation is cycled, causing its heat rate to increase and resulting in more fuel consumption and emissions. In PSCO, coal cycling predominates because of the low amount of gas generation in the system since most of its gas-fired generation is from turbines and because wind is strongest at night when coal use is even more pronounced.

In the Denver non-attainment area, PSCO has 4 coal-fired plants: Arapahoe, Valmont, Pawnee, and Cherokee. Between 2006 and 2009, these coal-fired plants have experienced higher emission rates ranging from 17 to 172 percent higher for sulfur dioxide, 0 to 9 percent higher for nitrous oxide, and 0 to 9 percent higher for carbon dioxide. In 2008, Cherokee even switched to a lower sulfur coal, but still ended up with sulfur dioxide emissions higher by 18 percent. And, between 2006 and 2009, these plants reduced their generation by over 37 percent, exacerbating further the increase in emissions.

Because the PSCO data are limited, Bentek checked their results against data from the Energy Reliability Council of Texas, whose utilities are required to report generation levels by fuel every 15 minutes. Texas has the most wind capacity in the country—over 9,500 megawatts.[5] Texas also has an RPS that was instituted during George W. Bush’s governorship and that pushed Texas ahead of California in wind capacity during 2006. The Texas renewable portfolio standard requires that utilities have 5,880 megawatts of renewable capacity by 2015, including a target of 500 megawatts of renewable-energy capacity from resources other than wind. The legislation also set a target of reaching 10,000 megawatts of renewable energy capacity by 2025, although it will be exceeded much earlier.[6] However, even in Texas, which has a large natural gas–fired capacity base, with over 40 percent of its generation being natural gas-fired,[7] coal-fired generation is cycled as is shown in the graph below.

Another benefit that wind power generators get is that their forecast power generation entails no penalty if it is not available. Other generators must provide their own back-up power if their generation is suddenly unavailable. But the owners of wind generators believe that they can’t be held accountable for whether the wind blows and thus for inaccuracies in their forecasting capability. For example, on February 26, 2008, a cold front moved through West Texas and rendered wind’s output 1,000 megawatts less than promised, and that unexpectedly had to be made up by other generating technologies.[8] Only careful and extensive coordination, such as was carried out in West Texas on that cold February day, can divert brown outs and black outs from occurring.

The Netherlands Experience[9]

Two researchers, C. le Pair and K. de Groot, found that the Netherlands Government was overestimating the amount of carbon dioxide reductions associated with wind production. The government was using incorrect data because it did not correct for the reduction in efficiency of the conventional power plants once wind was introduced into the system. Using data provided by CBS, the Dutch Institute for Statistics, the researchers made an estimate of the “turning point” where the efficiency reduction of conventional power plants balances out the fuel savings from wind energy. Using data for 2007, when wind power was at 3 percent, they found the turning point to be at an efficiency reduction of 2 percent based on all the power stations serving the Netherlands. That is, when the efficiency of the back-up plants was reduced by over 2 percent due to cycling caused by the integration of wind energy into the system, fuel use and emissions of the back-up plants increased.

Heat Rate Simulations

An engineer, Kent Hawkins, evaluated several heat rate simulations to represent cycling of the plants when wind is introduced into the system.[10] One set of simulations evaluates wind energy replacing coal power with different technologies serving as the back-up power to wind, in order to evaluate their effect on fuel use and carbon dioxide emissions. He found that because of cycling, carbon dioxide emissions increase with the incorporation of wind energy if coal is the sole back-up power for wind. If coal and gas turbines or gas combined-cycle and gas turbines are used to back up the wind power, carbon dioxide emissions are reduced mainly due to the lower carbon dioxide emissions produced from natural gas generators as compared to coal generators. This is best seen by examining the last bar in the chart below where the lowest carbon dioxide emissions result when natural gas combined-cycle plants are solely used to replace coal.

An interesting consequence of this analysis is that certain areas of the world where wind is integrated into a system that is primarily coal-based may result in an increase in total carbon dioxide emissions from using wind in their generating sector. That is, in these circumstances, wind would not be providing an offset in carbon dioxide emissions, but would actually be providing an increase in those emissions. China, for example, relies on coal for 80 percent of its generation and natural gas for only 2 percent. [11] China also added the most wind power of any country in 2009, 13 gigawatts,[12] ranking third in the world in total wind capacity, with the United States first and Germany second.[13] Since China’s wind would primarily be backed up by power from coal-fired generating units, it is no wonder that China’s carbon dioxide emissions increased by 9 percent in 2009.[14]

Conclusion

As more wind units are built and data become available regarding their integration into conventional energy systems, we will learn more about the effects of wind units on the operation of conventional plants. A few studies have been done showing that the effect of wind integration on both fuel consumption and emission reductions can in fact be negative. Further evaluation of our current wind units and their effects on fuel consumption and emissions should be done before increasing the penetration of renewable energy to the 20 and 30 percent levels currently mandated by some state renewable portfolio standards, and before a national renewable portfolio standard is considered for enactment.

[2] Institute for Energy Research, Energy Regulation of the States: A Wake-up Call, www.instituteforenergyresearch.org/states/

[3] Bentek Energy LLC, How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market, http://www.bentekenergy.com/WindCoalandGasStudy.aspx

[4] Institute for Energy Research, Energy Regulation of the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/colorado/

[5] American Wind Energy Association, http://www.awea.org/projects/projects.aspx?s=Texas

[6] Institute for Energy Research, Energy Regulation of the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/texas/

[7] Energy Information Administration, Electric Power Monthly, March 2010, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf

[8] The Wall Street Journal, Natural Gas Tilts at Windmills in Power Feud, March 2, 2010, http://online.wsj.com/article/SB10001424052748704188104575083982637451248.html?K

[9] The impact of wind generated electricity on fossil fuel consumption, C. le Pair and K. de Groot, http://www.clepair.net/windefficiency.html

[10] Wind Integration: Incremental Emissions from Back-Up Generation Cycling (Part V: Calculator Update), Kent Hawkins, February 12, 2010, http://www.masterresource.org/2010/02/wind-integration-incremental-emissions-from-back-up-generation-cycling-part-v-calculator-update/#more-7271

[11] Energy Information Administration, International Energy Outlook 2010, Tables H10, H12, and H13, http://www.eia.doe.gov/oiaf/ieo/pdf/ieoecg.pdf

[12] Global Wind Energy Council, Global wind power boom continues amid economic woes, March 2, 2010, http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=247&tx_ttnews[backPid]=4&cHash=1196e940a0

[13] Global Wind Energy Council, http://www.gwec.net/index.php?id=13, and Global Wind Energy Council, Global wind power boom continues amid economic woes, March 2, 2010, http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=247&tx_ttnews[backPid]=4&cHash=1196e940a0

[14] Reuters, China top carbon emitter for second year running, June 9, 2010, http://alertnet.org/thenews/newsdesk/LDE6580Y1.htm

Various legislative and other proposals have promoted policies that would tax or place a price floor on petroleum-based transportation fuels such as gasoline because as President Obama stated in his recent address, “we’re running out of places to drill on land and in shallow water.”[1] Their object is to spur conservation and promote the manufacture of more efficient vehicles, as well as reduce greenhouse gas emissions, increase national security (by lessening our dependence on foreign oil), and decrease congestion. But such policies assume that oil is unduly scarce, even though current worldwide oil reserves are the highest ever. And reserves are only a fraction of potential oil resources, not to mention that technology is continually unlocking new resources.  Moreover, as the experience of Europe has shown, setting an artificially high price for petroleum-based transportation fuels will not change the growth of U. S. carbon dioxide emissions, which are the largest component of greenhouse gas emissions. In any case, lessened U.S. carbon dioxide emissions would be dwarfed by future increases in those emissions from developing countries, particularly China, making unilateral action problematic.

Introduction

Numerous policy proposals advocate higher prices on gasoline and other transportation fuels in order to spur conservation by both producers and consumers. Advocates of such policies believe that charging customers a “fair” or “socially optimal” price for their use of a “depleting fuel” will promote the manufacture of more efficient vehicles and foster consumers’ use of mass transit, carpooling, home relocation, or other fuel-reducing endeavors. An example of such a policy is the tax on gasoline in the American Power Act, a legislative proposal by Senators Kerry and Lieberman to reduce greenhouse gas emissions.

Another proposal appears in a paper by Thomas Merrill and David Schizer,[2] where they advocate a plan that would both increase the stability of the price of transportation fuels by not allowing them to fall and be revenue neutral. According to the plan, a fee would be added to the price of transportation fuels, and that fee would rise if the price of crude oil fell, but fall if the price of crude oil rose. In theory, this would keep the price of transportation fuels more stable by setting a dynamic floor on the price. In any case, the price of transportation fuels would never fall below the prices they had when the plan was launched, since the fee would keep rising to offset any decline in the price of crude oil. In order to ensure revenue neutrality, and thus to sell the policy politically, the stabilizing fee would not be kept by the government but would be rebated back to citizens, minus administrative costs. The fee, however, would not be rebated back to purchasers but would be distributed to all persons of driving age, so that those who used mass transit or drove less than the average amount would garner a sizable share.

The goals of these policies are to reduce greenhouse emissions, improve national security by decreasing oil imports, and hopefully reduce road congestion. But another reason for promoting such a proposal is to “help the economy adjust to a future of scarce petroleum”. That is simply not an issue, as will be seen below. In addition, as history has shown and as forecasters continue to show, carbon dioxide emissions, the largest component of greenhouse gas emissions, will continue to grow despite increasing crude oil prices and thus despite any such policies.

Global Oil Reserves vs. Oil Resources

Almost as long as people have been using oil, people have been declaring that we are running out of it.  Ronald Bailey, science correspondent for Reason Magazine, writes:[3]

Predictions of imminent catastrophic depletion are almost as old as the oil industry. An 1855 advertisement for Kier’s Rock Oil, a patent medicine whose key ingredient was petroleum bubbling up from salt wells near Pittsburgh, urged customers to buy soon before “this wonderful product is depleted from Nature’s laboratory.” The ad appeared four years before Pennsylvania’s first oil well was drilled. In 1919 David White of the U.S. Geological Survey (USGS) predicted that world oil production would peak in nine years. And in 1943 the Standard Oil geologist Wallace Pratt calculated that the world would ultimately produce 600 billion barrels of oil.

During the 1970s, the Club of Rome report The Limits to Growth projected that, assuming consumption remained flat, all known oil reserves would be entirely consumed in just 31 years. With exponential growth in consumption, it added, all the known oil reserves would be consumed in 20 years.

Some other interesting factoids from the past regarding oil depletion are:[4]

• In 1885, the U.S. Geological Survey indicated that there was little or no chance of discovering oil in California.
• In 1914, an official of the U.S. Bureau of Mines estimated total future production at 5.7 billion barrels. (By 1984, more than 34 billion barrels had been produced.)
• In 1920, the Director of the U.S. Geological Survey predicted that the U.S. had nearly reached peak production. (By 1984, production was over four times the 1920 rate.)
• In 1939, the Interior Department predicted U.S. oil supplies would last thirteen years.
• In 1949, the Secretary of the Interior predicted that the end of U.S. oil supplies was almost in sight.

On the other hand, and more currently:

• Edward L. Morse, an energy official in Carter’s State Department, indicates that the world’s deep-water oil and gas reserves are significantly larger than was thought in the 1990s, and high prices have spurred development of technologies  for extracting them. The costs of developing oil sands are declining, so projects that were not economic last year with the price of oil under $90 a barrel are now viable with oil at $79 a barrel.[5]
• Daniel H. Yergin, co-founder and chairman of Cambridge Energy Research Associates, writes “careful examination of the world’s resource base . . . indicates that the resource endowment of the planet is sufficient to keep up with demand for decades to come.” [6]

According to the Journal of Oil and Gas, global proved oil reserves as of January 1, 2009, were 1,342 billion barrels,[7] the highest level ever, and about 10 billion barrels higher than in 2008. Thus, enough reserves were found in 2008 to meet demand in that year and to add 10 billion barrels to the global reserve level. The Middle East holds the majority of proved oil reserves at 746 billion barrels,[8] followed by North America with 210 billion barrels. Canada with 178 billion barrels (85% of the North American share)[9] is second in rank only to Saudi Arabia with 267 billion barrels of proved oil reserves.

Proved reserves of crude oil are the estimated quantities that geological and engineering data indicate can be recovered from known reservoirs with existing technology and current economic and operating conditions. That is, they are quantities of oil that can be retrieved by producing companies to meet demand in the near future, without needing new technology or having to explore and develop a totally new oil well.  As such, they represent the lowest estimate of petroleum supplies. Estimates of proved reserves are developed from data reported to the U.S. Securities and Exchange Commission,[10] foreign government reports, and international geologic assessments.

Thus, the term ‘proved reserves’ refers to oil deposits that have actually been discovered and carefully estimated. Although it is true that every barrel of oil removed from the ground reduces the physical total by one, the economically relevant fact is that humans historically go out and find more usable oil reserves in order to keep pace with consumption.

The Institute for Energy Research put together a table of global oil reserves beginning with the year 1971 (when proved reserves were at a level of 521 billion barrels) and continuing through 2007 (when they were at 1,317 billion barrels).[11] Between 1971 and 2007, the world consumed 910.3 billion barrels of petroleum[12], which would have made the reserve total 2,227 billion barrels were they not used. As the table shows, in this 36-year time span, proved oil reserves worldwide have grown by a factor of 2.5, while global oil demand over the same period has grown by a factor of 1.7.  Thus, at the 2007 level of global demand, 31.3 billion barrels per year,[13] proved oil reserves were capable of meeting that demand for 42 years. As the table indicates, there have been periods during which global oil reserves have increased more than 200 billion barrels.[14] One such period occurred early this decade with the addition of Canadian oil sands reserves. Currently, the U.S. benefits from these reserves from our northern neighbor, but proposed government policies (such as a low-carbon fuel standard[15] or legislation enacting a cap-and-trade policy on greenhouse gas emissions[16]) could endanger this source of proved reserves, allowing other countries without such policies to benefit instead.

U.S. Oil Resources

Proved oil reserves are a subset of the oil resource base, which includes estimated quantities of both discovered and undiscovered oil that have the potential of being classified as reserves in the future. These oil resources may be difficult to produce with current technology or their access may be limited by government policy. Thus, new technologies and better government oil recovery policies, as well as “risk mitigation” incentives, could help industry convert the higher-cost, undeveloped domestic oil resources into economically feasible reserves. Access to additional offshore, Alaskan, and public-land resources could be accelerated rather than stalled, as under the current Administration.[17]

The U.S. Department of Energy estimates that light and heavy oil resources in the United States total 1,124 billion barrels, with 40% believed to be recoverable.[18] In addition, the U.S. has a world-leading 2,118 billion barrels of in-place oil shale,[19] of which 800 billion barrels is estimated to be recoverable.[20] Other estimates have the recoverable shale oil number even higher, at approximately 1.38 trillion barrels.[21] That’s five times the oil reserves in Saudi Arabia.

Oil shale is found largely in Utah, Colorado, and Wyoming, and the best sources are believed to be on public lands. Oil producers need to have access to these resources in order to demonstrate that they can produce shale oil at current prices with technologies they believe will work. However, access is currently being stalled by the owner of the public lands, the federal government. [22]

The Denver Post carried an article that addressed this issue:[23]

Colorado is sitting on a bounty of oil shale that could make energy cheaper in America and free it from the whims of Middle Eastern oil barons. Unfortunately, it looks like oil companies can’t do the work necessary to extract the fuel because of political roadblocks. And this attitude seems to go all the way to the top. Interior Secretary Ken Salazar, one of Colorado’s two U.S. senators until he joined the Obama administration this year, tossed the latest obstacle into the path to progress in February when he canceled leases for oil-shale development in Colorado, Utah and Wyoming. Salazar’s backward thinking is typical of the politicians who embrace environmental hysteria. They seem to despise fossil fuels and want to stop Americans from using them.

Price Stabilization Policy Formulation

Analysts, such as Merrill and Schizer, who advocate policies that would stabilize transportation fuels, know that they need to make their fee formulation easy to implement and as free of administrative burden as possible. That is why they advocate having the IRS handle the fee: that agency collects the Federal taxes on gasoline. They also advocate that the fee should be based on the price of crude oil, since that is the largest component of the price of transportation fuels and is determined by global forces of supply and demand, making it less amenable to manipulation by domestic producers, refiners, and retailers. But one pitfall in their plan is that the price of the petroleum product does not always follow the price of crude oil, as can be seen by the following chart for gasoline.

The price of gasoline is based on four price components: crude oil, Federal and State taxes, refining operations and profits, and distribution and marketing.[24] In 2008, crude oil represented 69 percent of the gasoline price while the refining component represented only 7 percent. That was not typical of the past 9 years, however, when the refining component represented an average of 15 percent. Generally, there are certain times of the year when the refining component spikes gasoline prices. One example is in the spring, when refiners switch from winter grade gasoline to summer blends. This switch takes place the end of April and in May, causing the price of gasoline to spike, as seen in the chart for the years 2006 and 2007. Another phenomenon that affects the refining component is weather, and in the fall of 2005 the price of gasoline increased because many of the Gulf of Mexico refineries were shut in, owing to hurricane Katrina.

Another factor to note is that a price stabilization policy could in fact inflict a higher fee on petroleum transportation fuels than a likely cap-and-trade policy would provide. For example, if the price stabilization policy had been in effect in 2008, the world oil price increase would have resulted in a fee of about $2.50 per gallon, while according to EIA’s analysis of H.R. 2454, the American Clean Energy and Security Act of 2009, the “tax” on gasoline would have been closer to 35 cents per gallon.[25] Also, as we saw in 2008, the higher prices for petroleum-based transportation fuels had a secondary impact on consumer spending, increasing food prices and other products requiring transportation to move them to market.

The question remains whether a price stabilization policy or a gasoline tax will have the desired affects of limiting greenhouse gas emissions and increasing national security by reducing oil imports. To evaluate these issues, we’ll examine three oil price scenarios that the Energy Information Administration’s Annual Energy Outlook 2010 forecasts using different prices of crude oil.[26] The cases are the reference case, the high oil-price case, and the low oil-price case. They are depicted in the graph below:

In the reference case, the crude oil price rises gradually, until by 2035 it reaches $133 per barrel (in 2008 dollars), about $60 per barrel more than the current price. In the low price case, the crude oil price decreases to $51 per barrel during the next several years and remains there through 2035, the end of the forecast period. In the high price case, the crude oil price increases to $209 per barrel (in 2008 dollars) by 2035. Both the high price case and the reference case could very well represent a price stabilization scenario since the price of crude oil never falls and steadily rises.

The following graph depicts the carbon dioxide emissions, the largest component of greenhouse gases, in the 3 scenarios. Note that in each of the three cases, U.S. carbon dioxide emissions increase over time and by 2035 range from 2.5 percent to 12.5 percent higher than they were in 2007.

Another way to look at this issue is with the European experience in mind. Since World War II, European countries have had a hefty tax on gasoline to encourage the use of more efficient transportation fuels. Over the past 25 years, carbon dioxide emissions in Europe have ranged between 4,300 and 4,750 million metric tons, and in 2008 they were 5.5 percent higher than in 1983.[27]

The next graph depicts the net petroleum import share for each of the three price cases. The imported amount varies with the demand for liquid fuels, which is dependent on the price of crude oil, and which in 2035 varies by less than 4 million barrels per day across the three cases: 20.8 million barrels per day in the high price case and 24.5 million barrels per day in the low price case.

The petroleum import share also varies with the amount of ethanol production, which is mandated by the Energy Independence and Security Act of 2007 (EISA2007). That Act mandates the production of 36 billion gallons of biofuels, such as ethanol, by 2022.[28] It also requires the sale of flex-fuel vehicles that can burn E85, a blend of 85 percent ethanol and 15 percent gasoline—a much higher percentage of ethanol than the 10 percent blend that conventional gasoline vehicles can safely use without causing damage to the vehicle.

A further factor is the stricter mandates for Corporate Average Fuel Economy. EISA2007 requires the fuel efficiency of the combined fleet of all new passenger cars and light trucks sold in the U.S. in model year 2020 to be equal to or exceed 35 miles per gallon, 34 percent higher than the current fleet average of 26.4 miles per gallon.[29] In none of the three cases are petroleum imports at a level that is independent from foreign oil, and in fact, in none of the cases is the U.S. independent of petroleum imports from non-North American countries. In the high price case, where petroleum imports are the least, the higher oil prices increase the penetration of biofuels and the use of flex fuel vehicles.

World Implications

The Energy Information Administration provides forecasts of the next 18 months in their Short-Term Energy Outlook.[30] The next chart shows world demand for petroleum and the annual change in demand for the United States, China, and the rest of the world from 2003 through 2011. In 2008 and 2009, U.S. demand for petroleum declined. However, China’s petroleum demand increased in both 2008 and in 2009, even though the U.S. and the rest of the world’s demand decreased in 2009, and its demand is expected to continue to increase. Thus, any reduction in U.S. petroleum consumption will be made up by China or other countries.

As can be seen from the next chart, China’s domestic oil production is fairly flat, but its oil consumption is increasing at a fast pace, making its reliance on oil imports grow. The growth in oil consumption is primarily to provide for its expanding transportation sector. From 1996 to 2006, growth in the combined length of China’s highways averaged 11.3 percent per year. With this level of highway construction, China is on track to exceed the United States in total highways in the next decade.[31]

Infrastructure projects in China account for 15 percent of China’s gross domestic product, which grew by 8.7 percent in 2009, when the economies of the United States and Europe did not grow at all. Besides highway construction, their inventory projects include almost 100 new airports, some in isolated cities, and dozens of subways.[32]

In 2006, China became the world’s second-largest vehicle market, after the United States, and in 2009, it has overtaken the U.S market in vehicle sales.[33] New passenger car sales rose 55 percent in February of this year from a year earlier, following a 116 percent increase in January, aided by the extension of government incentives to boost purchases of smaller vehicles and spur rural demand for cars.[34]

In 2007, China produced nearly 8.9 million motor vehicles, an increase of 22 percent over production in 2006. The country is now the third largest vehicle producer in the world, after Japan and the United States. According the Energy information Administration, China’s passenger transportation use per capita is projected to triple by 2030.[35]

China is not endowed with a lot of oil resources. Its oil reserves totaled 16 billion barrels in January 2009.[36] As a result, China has spent nearly $200 billion on oil deals during the past few years, joining with more than 19 countries —including Russia, Turkmenistan, Kuwait, Yemen, Libya, Angola, Venezuela and Brazil[37]— and paying for exploration, production, infrastructure construction, as well as “loans for energy” deals.[38] Recently, China’s Sinopec International Petroleum Exploration and Production Company agreed to buy, for $4.65 billion, the 9 percent interest that ConocoPhillips holds in Syncrude,[39] a Canadian business involved in the production of oil sands (an asphalt-like heavy oil). .It is even pursuing buying leases in U.S. waters, in the Gulf of Mexico.[40]

During the first quarter of this year, China set records with huge year-over-year increases in oil demand.  In February, China’s oil demand rose 19.4 percent over a year earlier, the second fastest rise on record.  China is the world’s second largest oil user (second to the United States).[41] China’s oil imports were up 13.8 percent in March over February, reaching 4.95 million barrels per day, according to preliminary data from China’s General Administration of Customs.[42] In part, these large oil increases are fueling China’s passenger car fleet.

China’s economic and energy profile can be summarized as follows:[43]

• Between 2000 and 2008, China’s real gross domestic product averaged 10 percent per year. While its economic growth in 2008 and in the first half of 2009 is less than this average rate, its $586 billion economic stimulus package is expected to stimulate more normal growth in the second half of 2009 and in 2010.
• China is the world’s most populous country and the second largest energy consumer behind the United States.  Rising oil demand and imports have made China a significant factor in world oil markets.
• China is the world’s second-largest consumer of oil behind the United States, and the third-largest net importer of oil after the U.S. and Japan.
• China’s largest oil fields are mature and production has peaked, leading companies to focus on developing largely untapped reserves in the western interior provinces and offshore fields.
• In 2006, 93 percent of China’s energy consumption was from fossil fuels. (See figure below.)

China is the largest producer and consumer of coal in the world, with 70 percent of its demand for energy coming from coal. In the late 1980s, China surpassed the U.S. in coal consumption and the Energy Information Administration expects China’s coal consumption to be 4.5 times that of the U.S. by 2035.[44] Many of China’s large coal reserves have yet to be developed. 

• China’s electricity generation is dominated by fossil fuel sources, particularly coal. In 2007, coal-fired generators produced 80 percent of China’s electricity and the Energy Information Administration predicts that, by 2035, coal-fired generators will produce 74 percent of its electricity, with mainly wind and nuclear power making up the difference in coal’s lower share.[45] (See figure below.)

Because of China’s large population, high economic growth rate, and large consumption of fossil fuels, it is the world’s largest emitter of carbon dioxide, which is the largest component of greenhouse gas emissions. China surpassed the United States in emissions of carbon dioxide in 2006 and is expected to emit over twice as much carbon dioxide than the United States in 2035.

Since 2002, the average annual increase in China’s carbon dioxide emissions has been over 550 million metric tons.[46] In 2009, U.S. carbon dioxide emissions from transportation uses were 1,851 million metric tons.[47] Thus, if China continues its high level of economic growth and its use of fossil fuels as forecast, in just over 3 years, its increase in carbon dioxide emissions will equal the total carbon dioxide emitted from the U.S. transportation sector. Small, incremental changes in U.S. transportation emissions will not have an effect on overall global greenhouse gas concentrations.

And while China has professed that it will meet renewable generation goals, it will not partake in meeting targets for greenhouse gas reductions that will hurt its projected economic growth and its future status as a major world power.[48] Instead, China is willing to make reductions in greenhouse gas intensity (greenhouse gas emissions per unit of GDP), a measure proposed by the U.S. almost a decade ago, that allows for both economic growth and lower emissions per unit of GDP from improved efficiency and technology.[49]

Conclusion

Concerns about traffic congestion, greenhouse gas emissions, and the use of foreign oil are valid concerns, but increasing the price of oil does not do a good job of addressing those concerns. Policies that artificially raise the price of petroleum-based transportation fuels will have the desired effects of limiting usage and reducing demand. But even with the price of crude oil at a $200 per barrel (in 2008 dollars) the U.S. will still increase its carbon dioxide emissions and will still be dependent on non-North American sources of imported oil. Reductions of petroleum demand in the United States will just make crude more available for other countries to use, with little progress in reducing global carbon dioxide emissions.

The U.S. has transitioned to other sources of energy in the past without the need for government policies. The picture below from a 1910 Midwestern town depicts the transition from horse and buggy transportation to the horseless carriage. The smoke from the early autos was felt to be far less polluting than the horse excrement and carcasses on the street. Early autos were noisy and belched smoke, but they kept the streets clean of tons of waste and dead bodies of thousands of horses.[50] Now, of course, technology has improved automobile engines so that they are more powerful, efficient, and cleaner than those of the past, supporting our thirst for increased transportation, better mobility, and a higher quality of life—all at reduced emissions of criteria pollutants. The “ultimate resource” of human ingenuity has indeed improved the economic and environmental characteristics of petroleum.

[2] Thomas Merrill and David Schizer, “Advancing Energy Policy Goals in an Economic Downturn: A Proposed
Petroleum Fuel Price Stabilization Plan”, November, 2009.

[3] Ronald Bailey, “Peak Oil Panic”,  May 2006, http://reason.com/archives/2006/05/05/peak-oil-panic

[4] William M. Brown, “The Outlook for Future Petroleum Supplies,” in Julian Simon and Herman Kahn, eds., The Resourceful Earth (Malden, MA: Blackwell, 1984), p. 362.

[5] www.foreignaffairs.com

[6] www.foreignpolicy.com

[7] “Worldwide Look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48, December 22, 2008, pp. 23-24.

[8] Since the Middle East has had a high concentration of global oil reserves for decades, its reserve level is not an indicator of market share.

[9] A large portion of Canadian reserves are oil sands, which cannot be produced at the same rate as conventional oil, so the 178 billion barrels of Canadian reserves are not functionally equivalent to 178 billion barrels of conventional oil.

[10] Companies whose stocks are publicly traded on U.S. stock markets are required to report their holdings of domestic and international proved reserves to the SEC.

[11] Institute for Energy Research, August 26, 2008, www.instituteforenergyresearch.org/2008/08/26/has-oil-reached-its-peak/

[12] Energy Information Administration, Annual Energy Review 2008, Table 11.10, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec11_21.pdf

[13] In 2007, the U.S. demand for petroleum was 20.68 million barrels per day or 7.548 billion barrels per year, approximately one-fourth of the world total. See Energy Information Administration, Annual Energy Review 2008, Table 5.1, www.eia.doe.gov/emeu/aer/petro.html

[14] The increase in Middle Eastern oil reserves in the late-1980s is somewhat controversial and has been questioned by some to be, in part, paper increases.

[15] A Low Carbon Fuel Standard reduces the carbon intensity of transportation fuels by requiring that the mix of fuels sold reaches pre-specified targets of carbon reduction. Since oil sands yield heavier crude, more energy is required for producing and refining it, thus giving that crude a higher carbon intensity than conventional crude.

[16] H.R. 2454 is a cap-and-trade proposal that the House of Representatives has passed to reduce future levels of greenhouse gas emissions. It requires that lower targets for emissions be met by manufacturers and other producers, either by reducing emissions themselves or by purchasing emissions permits from producers that can economically reduce their emissions at lower cost. The American Power Act is the Senate’s version of H.R. 2454 that proposes a cap and trade regime on electric utilities and later (in 2016) on industrial sources, and taxes gasoline consumption.

[17] Greenwire, “Oil and Gas: Industry knocks Obama admin claims on Utah leases,” November 20, 2009, www.eenews.net/Greenwire/2009/11/20/archive/9?terms=salazar;  and Land Letter, “Oil and Gas: Interior agencies showing marked shift in leasing policies”, November 19, 2009, www.eenews.net/Landletter/2009/22/19/archive/3?terms=salazar ; Greenwire, Offshore Drilling: Lift shallow-water moratorium, Landrieu tells Obama admin, May 20, 2010, http://www.eenews.net/Greenwire/2010/05/20/archive/6?terms=offshore+oil+moratorium,  the Washington Post, “Obama presses for action on energy bill”, June 16, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/06/15/AR2010061505595.html?sub=AR , and the Wall Street Journal, Crude Politics, The drilling experts speak out on the Obama deepwater moratorium, June 17, 2010, http://online.wsj.com/article/SB10001424052748704198004575311033371466938.html?mod=WSJ_Opinion_LEADTop

[18] U.S. Department of energy, Office of Fossil energy, “Undeveloped Domestic Oil Resources: The Foundation for Increasing  Oil Production and a Viable Domestic Oil Industry,” February 2006, http://www.fossil.energy.gov/programs/oilgas/publications/eor_co2/Undeveloped_Oil_Document.pdf

[19] The U.S. Geological Survey recently updated its assessment of the Piceance Basin in western Colorado and found it to have oil shale resources that are 50% higher than the previous estimate of 1 trillion barrels. That resource update would increase the total U.S. shale oil resources to 2.6 trillion barrels. See http://www.usgs.gov/newsroom/article.asp?ID=2182

[20] Strategic Unconventional Fuels Integrated Program Plan, February 2007, http://www.unconventionalfuels.org/publications/reports/executiveSummary.pdf

[21] The Congressional Research Service, October 20, 2009, http://epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=01feb68b-ef57-4748-8f5c-d88c0e7d6bd5

[22] E&E Publishing, “Oil and Gas: Industry chafes over Interior’s revised oil shale leases,” October 29, 2009, www.eenews.net/Landletter/2009/10/29/archive/1?terms=oil+shale

[23] The Denver Post, “Oil shale opponents aren’t just evil—they’re just wrong,”’ November 23, 2009, http://www.denverpost.com/commented/ci_13846941?source=commented-

[24] Energy Information Administration, “Factors Affecting Gasoline Prices,” http://tonto.eia.doe.gov/energyexplained/index.cfm?page=gasoline_factors_affecting_prices

[25] Energy Information Administration, “Energy market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009,” August 4, 2009, www.eia.doe.gov/oiaf/servicerpt/hr2454/index.html

[26] Energy Information Administration, Annual Energy Outlook 2010, www.eia.doe.gov/oiaf/aeo/index.html

[27] Energy Information Administration, http://tonto.eia.doe.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=90&pid=44&aid=8

[28] Energy Information Administration, Annual Energy Outlook 2010, http://www.eia.doe.gov/oiaf/aeo/leg_reg.html

[29] Ibid.

[30] Energy Information Administration, Short-Term Energy Outlook,  June 2010, www.eia.doe.gov/emeu/steo/pub/contents.html

[31] The Washington Post, China may have dug a financial hole, June 18, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/06/17/AR2010061705794.html

[32] Ibid.

[33] “China’s Car Sales Down in October—To 80 Percent Growth”, November 7, 2009, http://www.thetruthaboutcars.com/china%E2%80%99s-car-sales-down-in-october-%E2%80%93-to-80-percent-growth/

[34] Reuters, China oil demand rise second fastest, inventories drag, March 22, 2010, http://in.reuters.com/article/oilRpt/idINTOE62L01Z20100322?sp=true

[35] Energy Information Administration, International Energy Outlook 2009,  http://www.eia.doe.gov/oiaf/ieo/index.html

[36] “Worldwide Look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp. 23-24.

[37] For example, Venezuela signed a deal with China under which the latter would invest $16 billion over three years. The deal could raise oil output by several hundred thousand barrels a day. http://www.eenews.net/Greenwire/2009/09/18/. China National Petroleum Corp. received a $30 billion low-interest loan from a state-run bank to finance overseas acquisitions, Beijing’s latest bid to secure mineral resources to fuel the country’s burgeoning economy. http://www.eenews.net/Greenwire/2009/09/09/. CNOOC and Sinopec have agreed to buy a 20 percent stake in an oil field off the coast of Angola for $1.3 billion, the latest in a series of Chinese acquisitions of overseas energy and mining assets. http://www.eenews.net/Greenwire/2009/07/20/

[38] Politico, To compete with China, U.S. must tap natural gas, April 13, 2010, http://www.politico.com/news/stories/0410/35689.html#ixzz0kyYru8gb

[39] Reuters, China bags oil sands stake, not finished yet, April 13, 2010, http://www.reuters.com/article/idUSTRE63C17X20100413 and www.conocophillips.com

[40]David Pierson, “China’s push for oil in the Gulf of Mexico puts U.S. in awkward spot,” Los Angeles  Times, http://www.latimes.com/business/la-fi-china-oil22-2009oct22,0,2776603.story?track=rss.

[41] Reuters, China oil demand rise second fastest, inventories drag, March 22, 2010, http://in.reuters.com/article/oilRpt/idINTOE62L01Z20100322?sp=true

[42] Reuters, Oil falls as demand, inventories weigh, April 12, 2010, http://www.reuters.com/article/idUSTRE6142V820100412

[43] Energy Information Administration, Country Analysis Brief on China, www.eia.doe.gov/emeu/cabs/China/Background.html

[44] Energy Information Administration, International Energy Outlook 2010,  Table A7, http://www.eia.doe.gov/oiaf/ieo/pdf/ieorefcase.pdf

[45]Energy Information Administration, International Energy Outlook 2010, Appendix H, http://www.eia.doe.gov/oiaf/ieo/pdf/ieoecg.pdf

[46] Energy Information Administration, Annual Energy Review 2008, Table 11.19, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec11_39.pdf, and International Energy Outlook 2010

[47] Energy Information Administration, U.S. Carbon Dioxide Emissions in 2009: A Retrospective Review, May 5, 2010, http://www.eia.doe.gov/oiaf/environment/emissions/carbon/index.html

[48] Institute for Energy Research,  Lost in Translation,   http://www.instituteforenergyresearch.org/2009/07/28/lost-in-translation/.

[49]http://online.wsj.com/article/SB125409730711245037.html

[50] Robert L. Bradley, Jr. and Richard W. Fulmer, Energy: The Master Resource (Kendall/Hunt Publishing Company, 2004), page 49.

China Setting Records: China Oil Demand, Coal Production and Vehicle Sales Up in 2010

During January, February, and March of this year, China was again setting records with huge year-over-year increases in oil demand.  In February, China’s oil demand rose 19.4 percent over a year earlier, the second fastest rise on record. According to Reuters, China is the world’s second largest oil user (second to the United States) and consumed 8.65 million barrels of oil per day in February, an increase of 9.4 percent or 604,000 barrels per day over January’s consumption.[i] Oil imports were up 13.8 percent in March over February, reaching 4.95 million barrels per day, according to preliminary data from China’s General Administration of Customs.[ii] In part, these large oil increases are fueling China’s passenger car fleet. New passenger car sales rose 55 percent in February from a year earlier, following a 116 percent increase in January, most likely aided by the extension of government incentives to boost purchases of smaller vehicles and spur rural demand for cars.  [iii]

China has spent nearly $200 billion on oil deals during the past few years, joining with more than 19 countries —including Russia, Turkmenistan, Kuwait, Yemen, Libya, Angola, Venezuela and Brazil— and paying for exploration, production, infrastructure construction, as well as “loans for energy” deals.[iv] Recently, China’s Sinopec International Petroleum Exploration and Production Company agreed to buy, for $4.65 billion, the 9 percent interest that ConocoPhillips holds in Syncrude,[v] a Canadian business involved in the production of oil sands (an asphalt-like heavy oil).[vi] Approval from the Canadian and Chinese governments is expected in the third quarter of this year.

Along with China’s Canadian oil pursuits, long thought to be a safe and secure supply for U.S. oil demand, the state-owned China Development Bank has promised to lend $20 billion to Venezuela to build new power plants, highways, and other projects, which will be repaid with Venezuelan crude oil. Venezuela’s President Hugo Chavez has long complained about the United States’ standing as the largest buyer of Venezuelan oil, and so he is more than pleased to offer his country’s oil to China instead.[vii] Both the Canadian crude and the Venezuelan crude are heavy oils, and the United States owns most of the refineries that can process heavy crude oils. So, to prepare itself for future heavy oil supplies, China has approved plans for construction of such a refinery. As the United States loses neighboring oil supplies to China, one wonders how the U.S. will meet future oil demand, especially as the Obama Administration has been slow to open new offshore areas to oil development (claiming further study is needed) but speedy at advocating climate legislation and a low-carbon fuel standard, both policies aimed at reducing the demand for fossil fuels without providing comparable energy substitutes.

Oil resources are not the only target on China’s energy wish-list. It also plans to increase its consumption of natural gas; last year, its liquefied natural gas imports rose by two-thirds, to 5.53 million tons or 7.7 billion cubic meters.[viii] China also continues to consume large quantities of its primary fuel, coal, in its industrial and electric generation sectors. According to China’s National Bureau of Statistics, the country’s coal output grew more than 28 percent, to well over 751 million tons in the first quarter of 2010. A report by China’s National Coal Association estimates China’s total coal production capacity exceeds 3.6 billion tons.[ix] This is in sharp contrast to coal mining in the United States, where the Environmental Protection Agency (EPA) has issued a new policy aimed at curbing mountain top removal mining[x] and is scrutinizing surface coal mine permits.  EPA is revoking or blocking Clean Water Act permits for mountain top mining citing irreversible damage to the environment. Some of the permits were awarded years ago.[xi]

Seventy percent of China’s energy comes from coal,[xii] the most carbon-intensive fossil fuel. China already consumes more than twice the coal as  the United States, and by 2030, China is expected to consume 3.7 times as much coal.[xiii] As a result, China emits more carbon dioxide than any other country in the world including the United States, and by 2030, it is expected to release 82 percent more carbon dioxide emissions than the United States.[xiv]

China’s Race to Electrification; U.S. Stagnation

Between 2004 and 2008, China added 346 gigawatts of generating capacity, of which 272 gigawatts were conventional thermal power (mostly coal) and 66 gigawatts were hydroelectric power. This compares to a total installed US hydroelectric capacity of 77 gigawatts.  China is estimated to have added an additional 85 gigawatts in 2009, reaching a total of 874 gigawatts,[xv] about 15 percent less than the total capacity in the United States. Of the 85 gigawatts added in 2009, 51 gigawatts were conventional thermal, again mostly coal, 25 gigawatts were hydroelectric, and 9 gigawatts were wind power.[xvi] Many of China’s wind turbines were funded by the U.N.’s Clean Development Mechanism,   under which wealthy countries fund projects in developing countries and receive carbon credits so long as those projects would not have been accomplished otherwise.[xvii]

In contrast, the United States added only 47 gigawatts of generating capacity from 2004 to 2008 (14 percent of the capacity China added), of which 26 gigawatts were natural gas-fired units and 18 gigawatts were wind turbines. New coal-fired capacity additions are practically non-existent in the United States primarily owing to objections regarding emissions of carbon dioxide. Coal-fired projects in the United States have either been cancelled or delayed because of permitting problems, reviews and re-reviews by EPA and resulting financing problems. While the United States has more coal than any other country in the world, with over 200 years of reserves at current usage rates, coal’s share of new U.S. generating markets has been replaced by natural gas and renewable units that are  more politically in vogue.

China’s Economic Growth and Export Market
China’s economy, the second-largest in the world in terms of purchasing power, is currently about half the size of the U.S. gross domestic product. According to China’s central bank, the country’s economy grew at an annual rate of 10.7 percent in the fourth quarter of 2009,[xviii] a rate almost twice the U.S. rate of 5.6 percent for the same time period.[xix] And in the first quarter of 2010, China’s economy grew by 11.9 percent. Forecasters predict that China’s economy will exceed that of the United States in 10 to 15 years.[xx]

China became the world’s largest exporter last year, edging out Germany and the United States. Despite a decline in total world trade, China’s exports fell less than those of other big powers. A report by the World Trade Organization calculates that the total value of merchandise exports fell by 23 percent in 2009. Among the top ten exporters, Japan’s shipments were the worst affected, falling by 26 percent. Because China’s exports fell by only 16 percent, it is now the single largest exporter. The World Trade Organization expects trade to rebound by nearly 10 percent this year.[xxi]

Lessons to Be Learned

Many environmentalists and politicians seem to believe that China is winning the green energy race, but nothing could be further from reality.[xxii] China is in a race for energy—all forms of energy—to fuel its growing economy. The size and scope of its investments in conventional forms of energy dwarf their commitment to “green energy.” It is providing loans around the world to invest in future oil projects, and it cares not that the oil is less than the lightest and sweetest. Canadian oil sands and Venezuelan heavy crude are perfectly fine. China is building a coal-fired generating plant each and every week on average, and increasing its coal mining capacity to fuel them. This belies any stated concerns about increasing their carbon dioxide emissions, already the highest of any country in the world. China is building wind turbines too, but if wealthy countries are willing to pay—why not? It matters not at all that the transmission capacity is not yet there to operate almost a third of these wind turbines. And China’s large-scale hydroelectric projects are engineering feats par excellence, built regardless of environmental concerns.

China is ensuring energy supplies will be available to fuel its growing economy. The United States should take note.

[ii] Reuters, Oil falls as demand, inventories weigh, April 12, 2010, http://www.reuters.com/article/idUSTRE6142V820100412

[iii] Reuters, China oil demand rise second fastest, inventories drag, March 22, 2010, http://in.reuters.com/article/oilRpt/idINTOE62L01Z20100322?sp=true

[iv] Politico, To compete with China, U.S. must tap natural gas, April 13, 2010, http://www.politico.com/news/stories/0410/35689.html#ixzz0kyYru8gb

[v] Reuters, China bags oil sands stake, not finished yet, April 13, 2010, http://www.reuters.com/article/idUSTRE63C17X20100413 and www.conocophillips.com

[vi] Syncrude, http://www.syncrude.ca/users/folder.asp?FolderID=5753

[vii] The Wall Street Journal, China’s $20 Billion Bolsters Chavez, April 18, 2010, http://online.wsj.com/article/SB10001424052748703594404575191671972897694.html

[viii] Reuters, China bags oil sands stake, not finished yet, April 13, 2010, http://www.reuters.com/article/idUSTRE63C17X20100413

[ix] China Daily, China’s coal output up 28.1% in Q1, April 15, 2010, http://www.chinadaily.com.cn/bizchina/2010-04/15/content_9736151.htm

[x] Environmental protection Agency, New Releases, EPA issues comprehensive guidance to protect Appalachian communities from harmful environmental impacts of mountaintop mining, April 1, 2010, http://yosemite.epa.gov/opa/admpress.nsf/d0cf6618525a9efb85257359003fb69d/4145c96189a17239852576f8005867bd!OpenDocument
[xi] Associated Press, Arch Coal sues EPA over veto of W.Va. mine permit, April 2, 2010, http://news.yahoo.com/s/ap/20100402/ap_on_bi_ge/wv_epa_coal_lawsuit
[xii] Energy Information Administration, China, http://www.eia.doe.gov/emeu/cabs/China/Background.html

[xiii] Energy Information Administration, International Energy Outlook 2009, http://www.eia.doe.gov/oiaf/ieo/index.html

[xiv] Energy Information Administration, International Energy Outlook 2009, http://www.eia.doe.gov/oiaf/ieo/index.html

[xv] http://en.wikipedia.org/wiki/Energy_policy_of_China

[xvi] China’s power generation goes greener with total capacity up 10%, January 7, 2010, http://news.xinhuanet.com/english/2010-01/07/content_12771880.htm

[xvii] http://www.instituteforenergyresearch.org/2010/03/24/kyotos-clean-development-mechanism-is-it-producing-results-for-whom/

[xviii] Politico, To compete with China, U.S. must tap natural gas, April 13, 2010,  http://www.politico.com/news/stories/0410/35689.html#ixzz0kyYru8gb

[xix] http://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

[xx] Energy Information Administration, International Energy Outlook 2009, http://www.eia.doe.gov/oiaf/ieo/index.html

[xxi] China overtakes Germany to become the biggest exporter of all, March 31, 2010, http://www.economist.com/daily/news/displaystory.cfm?story_id=15836406&fsrc=nwl

[xxii] http://www.instituteforenergyresearch.org/2010/03/15/the-u-s-in-the-world-race-for-clean-electric-generating-capacity/

Washington, DC – Responding to an Environmental Protection Agency (EPA) decision this afternoon on the future of coal mining in Appalachia, Thomas J. Pyle, president of the Institute for Energy Research issued the following statement:

“Today’s EPA announcement will bankrupt the coal industry and cause electricity prices to “necessarily skyrocket,” fulfilling two more promises President Obama made while running for office. The magnitude of this EPA decision on new and renewal permits in Appalachia will cost American jobs and put mom and pop operators out of business.

“In fact, according to EPA Administrator Lisa Jackson there will be “no, or very few, valley fills that are going to meet this standard.” In other words, no new coal mining permits will likely be approved under this unilateral decision rendered today by the EPA.”

Click HERE for the EPA announcement.

#####

FOR IMMEDIATE RELEASE:
March 31, 2010

CONTACT:

Patrick Creighton: 202.621.2947
Laura Henderson: 202.621.2951

China has already made its choice.  China is spending about $9 billion a month on clean energy.  It is also investing $44 billion by 2012 and $88 billion by 2020 in Ultra High Voltage transmission lines.  These lines will allow China to transmit power from huge wind and solar farms far from its cities.  While every country’s transmission needs are different, this is a clear sign of China’s commitment to developing renewable energy.

The United States, meanwhile, has fallen behind.

– U.S. Secretary of Energy, Steven Chu

In an attempt to generate support for implementing a cap on carbon dioxide, Energy Secretary Steven Chu and others paint a very dire picture of the U.S.-vs.-China race for clean energy, implying that China is quickly outstripping us in that race.[i] However, all the facts are not on the table. In both 2008 and 2009, the U.S. added more non-hydroelectric renewable capacity than it added traditional capacity (natural gas, coal, oil, and nuclear).[ii] At the end of 2009, the U.S. ranked first in wind capacity in the world with China’s wind capacity about 30 percent less than the U.S. level. At the end of 2008 (the most recent data available), the U.S. ranked fourth in solar capacity, with only Germany, Spain, and Japan having a larger amount. Where China is outstripping us in domestic construction is in coal-fired, nuclear, and hydroelectric generating technologies. Because of U.S. legal and regulatory red tape, it is much harder to build these energy technologies in the U.S. than in China.

What Does the Capacity Data Show for Wind and Solar Power?

According to the Solar Energy Industries Association, the U.S. ranks fourth in the world in solar capacity with 8,800 megawatts at the end of 2008.[iii] Germany, Spain, and Japan, in that order, had larger amounts of solar power at the end of 2008 than the U.S.[iv] China had just 0.3 megawatts of installed solar PV capacity at the end of 2009[v] or 0.003 percent of the solar capacity of the U.S.

According to the Global Wind Energy Council, the U.S. leads the world in wind generating capacity, with 35.2 gigawatts at the end of 2009; Germany is second with 25.8 gigawatts, and China is third with 25.1 gigawatts.[vi] In 2009, the U.S. installed almost 10 gigawatts of wind capacity, a record,[vii] and China installed 13 gigawatts.[viii]

Why is China Building Wind and Solar Capacity?

China builds wind and solar because ratepayers in other countries are paying them to do so. China has been taking advantage of the Clean Development Mechanism (CDM) under the Kyoto Protocol to obtain funding for its solar and wind power.[ix] Under this program, administered by the United Nations, wealthy countries can contribute funds and get credit for “clean technology” built elsewhere as long as it is additional, that is, as long as that technology would not have been built otherwise. China is the world’s largest beneficiary of the program and has benefited to the point where 30 percent of its wind capacity is not operable because it is not connected to the grid.[x] However, in mid 2009, the U.N. started questioning whether the Chinese CDM program was in fact “additional,” because the U.N. found that China was lowering its subsidies to qualify for the program.[xi] That is, China was reducing its own government’s support in order to get international subsidies.

How Do the U.S. and China Electric Construction Programs Compare?

While China is building non-hydro renewable slightly faster than the United States, overall it is building new electrical generation much, much faster than the United States. The most comparable international database on electric generating capacity is found on the Energy Information Administration (EIA) website.[xii] Comparing the electric generating capacity data by technology type for the two countries, at the end of 2007 (the last year of comparable data), the Chinese had a total of 716 gigawatts of generating capacity, about 280 gigawatts less than the 995 gigawatts of capacity in the U.S.

The U.S. has been building generating capacity at a very slow rate, adding between 8 and 15 gigawatts a year since 2004. The Chinese in contrast, to fuel their bulging economy, have added between 75 and 106 gigawatts a year, from 2004 to 2007. Based on Secretary Chu’s comments, one might think that the additional capacity that China was adding was all non-hydroelectric renewable and nuclear capacity. However, that has not been the case. Between 2004 and 2007, the Chinese have added 226 gigawatts of fossil fuel generating capacity, 40 gigawatts of hydroelectric capacity, 2 gigawatts of nuclear capacity, and only 6 gigawatts of non-hydro renewable capacity.

What are China’s Electric Construction Plans?

Both China’s generating sector and its industrial sector rely heavily on coal, with 79 percent of its electric generation being coal-fired.[xiii] According to the National Energy Technology Laboratory (NETL), from 2004 through 2007, China has been building 30 to 70 gigawatts of coal-fired power a year, and has about 70 gigawatts more under construction. NETL sees China building over 185 gigawatts of coal-fired plants in the future.[xiv] (See figure below.)

According to Australia, China is planning to build 500 coal-fired plants over the next ten years.[xv] That means: every week or so, for the next decade, China will open another large coal-fired power plant.[xvi] Australia has just signed a $60 billion deal with China to build a coal mine in Queensland and a 311-mile rail way for transporting the coal to the coast for export to China’s power plants.[xvii]

While China has been slow in adding nuclear power plants, it currently has 20 nuclear reactors under construction and more starting construction this year.[xviii] Four AP 1000 reactors are under construction at 2 different sites: Haiyang and Sanmen.[xix] These are the same reactors that the U.S. Nuclear Regulatory Commission (NRC) has ruled need additional analysis, testing, or design modifications of the shield building to ensure compliance with NRC requirements before they can be constructed in the U.S.[xx] China expects to achieve a total nuclear capacity of 60 gigawatts by 2020, and 120 to 160 gigawatts by 2030,[xxi] surpassing the total nuclear capacity of the United States.

China has a goal to produce 15 percent of its energy from renewables by 2020.[xxii] To help meet this goal, China is planning to build the world’s largest wind farm in the northwest part of the country. The plan is for 5 gigawatts in 2010, expanding to 20 gigawatts in 2020, at a cost of $1 million per megawatt,[xxiii] or $1,000 per kilowatt, about half the cost of an onshore wind unit in the U.S., according to the Energy Information Administration.[xxiv]

What about the U.S.?

The U.S. has made it difficult to build generating plants in this country, particularly coal-fired and nuclear power plants. According to NETL, only eight coal-fired plants totaling 3,218 megawatts became operational in the U.S. in 2009, the largest increase in coal-fired capacity additions in one year since 1991.[xxv] Prospects of cap-and-trade legislation, reviews and re-reviews by the Environmental Protection Agency, direct action protests, petition drives, renewable portfolio standards in many states, competition from wind power, and lawsuits have slowed the construction of new coal-fired plants.[xxvi] As of late February, activists had derailed 97 of the 151 new plants that were in the pipeline in May 2007. According to the Sierra Club, 126 coal plants have been stopped since 2001.  And, for the first time in more than 6 years, not one new coal plant broke ground in 2009. The graph above compares the coal-plant additions in the U.S. to that of China, showing only a handful of coal plants under construction in the U.S.  With new coal-fired plants extremely limited by the above, some are purporting that the current direction for activists may be to phase out the existing fleet of coal-fired power plants.[xxvii] Because the capital cost of most of our coal-fired plants has been paid, that fleet produces almost 50 percent of our electricity at very little cost. Average production costs for coal-fired generators in 2008 were only 2.75 cents per kilowatt hour, second to our nuclear plants at 1.87 cents per kilowatt hour.[xxviii]

No nuclear plant has started up in the U.S. since 1996,[xxix] and no construction permits have been issued since 1979.[xxx]NRC requirements, financing difficulties, and slow fulfillment of the nuclear provisions of the Energy Policy Act of 2005 have slowed the construction of new nuclear power reactors. However, as part of the 2005 Energy Policy Act, President Obama announced last month that his administration is offering conditional commitments for $8.33 billion in loan guarantees for nuclear power construction and operation. Two new 1,100 megawatt Westinghouse AP1000 nuclear reactors are to be constructed at the Alvin W. Vogtle Electric Generating Plant in Burke, Georgia, supplementing the two reactors already at the site. The two new nuclear generating units are expected to begin commercial operation in 2016 and 2017 at a cost of $14 billion. As part of the conditional loan guarantee deal, the U.S. Nuclear Regulatory Commission must determine if the AP1000 fulfills the regulatory requirements for a construction and operating license.[xxxi] (These are the same units permitted, licensed, and being constructed in China right now.) But, as a recent Wall Street Journal energy conference noted, loan guarantees are “meaningless in the absence of regulatory certainty.” Further, Obama’s budget cutbacks for Yucca Mountain, the proposed nuclear waste repository, are yet another signal that President Obama may not “walk the talk.”[xxxii]

Natural gas and wind power are the technologies that seem best able to surmount the financial, regulatory, and legal hurdles of getting plants permitted and operational. In 2008, the U.S. added over 15,000 megawatts of electric generating capacity, of which 4,556 megawatts was natural gas-fired and 8,136 megawatts was wind power.[xxxiii] However, organized local opposition has halted even some renewable energy projects by using “not in my back yard” (NIMBY) issues, changing zoning laws, opposing permits, filing lawsuits, and bleeding projects of their financing.[xxxiv]

The Energy information Administration projects that the U.S. will need 200 gigawatts of additional generating capacity by 2035 to replace capacity that will be retired and to meet new electricity demand.[xxxv] Of that amount, EIA expects that 13 percent will be coal-fired, 53 percent natural gas-fired, 4 percent will be from nuclear power, and 29 percent from renewable power (23 percent is expected to be wind power), assuming that no changes would be made to current laws and regulations.[xxxvi]

Conclusion

China realizes that it needs affordable energy to fuel its economic growth, and is building all forms of generating technologies at breakneck speed. By contrast, the electric generating construction program in the United States has slowed tremendously, owing to regulatory, financial, and legal problems. Without reasonably priced energy, it will be difficult to achieve high levels of economic growth in the U.S., and industry will move offshore where energy is more affordable. Will Secretary Chu’s policies get us to affordable energy, or will the administration’s policies divert us from obtaining the energy that we need to fuel our economy?

[ii] Renewable Energy Policy Network for the 21^st Century, Renewables Global Status Report 2009 Update, May 13, 2009, http://www.ren21.net/pdf/RE_GSR_2009_Update.pdf

[iii] http://www.seia.org/cs/about_solar_energy/industry_data

[iv] Ibid.

[v] Center for American Progress, Out of the Running, March 2010, http://www.eenews.net/public/25/14571/features/documents/2010/03/04/document_cw_01.pdf

[vi] Global Wind Energy Council, http://www.gwec.net/index.php?id=13, and Global Wind Energy Council, Global wind power boom continues amid economic woes, March 2, 2010, http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=247&tx_ttnews[backPid]=4&cHash=1196e940a0

[vii] American Wind Energy Association, U.S. Wind Energy breaks all records, January 26, 2010, http://www.awea.org/newsroom/releases/01-26-10_AWEA_Q4_and_Year-End_Report_Release.html

[viii] Global Wind Energy Council, Global wind power boom continues amid economic woes, March 2, 2010, http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=247&tx_ttnews[backPid]=4&cHash=1196e940a0

[ix] CNN, U.N. halts funds to China wind farms, December 1, 2010, http://edition.cnn.com/2009/BUSINESS/12/01/un.china.wind.ft/index.html

[x] The Wall Street Journal, “China’s Wind Farms Come with a Catch: Coal Plants”, September 28, 2009, http://online.wsj.com/article/SB125409730711245037.html

[xi] CNN, U.N. halts funds to China wind farms, December 1, 2010, http://edition.cnn.com/2009/BUSINESS/12/01/un.china.wind.ft/index.html

[xii]http://tonto.eia.doe.gov/cfapps/ipdbproject/iedindex3.cfm?tid=2&pid=34&aid=7&cid=r1,&syid=2004&eyid=2008&unit=MK

[xiii] Energy information Administration, International Energy Outlook 2009,  http://www.eia.doe.gov/oiaf/ieo/index.html

[xiv] National Energy Technology Laboratory, Tracking New Coal-fired Power Plants, January 8, 2010,  http://www.netl.doe.gov/coal/refshelf/ncp.pdf

[xv] http://windfarms.wordpress.com/2009/01/29/china-building-500-coal-plants/

[xvi] The New York Times, “Pollution From Chinese Coal Casts a Global Shadow”, http://www.nytimes.com/2006/06/11/business/worldbusiness/11chinacoal.html?_r=1

[xvii] Australia Signs Huge China Coal Deal, http://windfarms.wordpress.com/2010/02/06/australia-signs-huge-china-coal-deal/

[xviii] Nuclear Power in China”, World Nuclear Association, November 6, 2009, www.world-nuclear.org/info/inf63.html

[xix] Westinghouse News Releases, “Westinghouse and the Shaw Group Celebrate First Concrete Pour at Haiyang Nuclear Site in China”, September 29, 2009, http://westinghousenuclear.mediaroom.com/index.php?s=43&item=200

[xx] Westinghouse Statement Regarding NRC News Release on AP1000 Shield Building, http://westinghousenuclear.mediaroom.com/index.php?s=43&item=203

[xxi] Nuclear Power in China, World Nuclear Association, November 6, 2009, www.world-nuclear.org/info/inf63.html

[xxii] USA Today, “China Pushes Solar, Wind Power Development”, http://www.usatoday.com/money/industries/energy/environment/2009-11-17-chinasolar17_CV_N.htm

[xxiii] The Wall Street Journal, “Wind Power: China’s Massive and Cheap Bet on Wind Farms”, July 6, 2009, http://blogs.wsj.com/environmentalcapital/2009/07/06/wind-power-chinas-massive-and-cheap-bet-on-wind-farms/

[xxiv] Energy information Administration, Assumptions to the Annual Energy Outlook 2009, Table 8.2, Electricity Market Module, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html

[xxv] National Energy Technology Laboratory, Tracking New Coal-fired Power Plants, January 8, 2010,  http://www.netl.doe.gov/coal/refshelf/ncp.pdf

[xxvi] A messy but practical strategy for phasing out the U.S. coal fleet, http://www.grist.org/article/death-of-a-thousand-cuts/

[xxvii]Ibid.

[xxviii]http://www.nei.org/resourcesandstats/documentlibrary/reliableandaffordableenergy/graphicsandcharts/uselectricityproductioncosts

[xxix] “Nuclear Power: Outlook for new U.S. Reactors”, Congressional Research Service, March 9, 2007, www.fas.org/sgp/crs/misc/RL33442.pdf

[xxx] Energy Information Administration, Annual Energy Review 2008, Table 9.1, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec9_3.pdf

[xxxi] Environment News Service, Obama Backs First New U.S. Nuclear Plant with $8.3 Billion, February 16, 2010, http://www.ens-newswire.com/ens/feb2010/2010-02-16-091.html

[xxxii] The Wall Street Journal, An Energy Head Fake, March 11,2010, http://online.wsj.com/article/SB10001424052748704784904575112144130306052.html?mod=WSJ_Opinion_AboveLEFTTop

[xxxiii] Energy Information Administration, Electric Power Annual, Tables 1.1 and 1.1.A, http://www.eia.doe.gov/cneaf/electricity/epa/epa_sum.html

[xxxiv] For a repository of stalled and stopped energy projects, see U.S. Chamber of Commerce, “Project No Project Energy-Back On Track”, http://pnp.uschamber.com/

[xxxv] Energy Information Administration, Annual Energy Outlook 2010 Early Release, Table A9, http://www.eia.doe.gov/oiaf/aeo/pdf/appa.pdf

[xxxvi] Ibid.

Washington, DC – In anticipation of President Barack Obama’s return from Asia, the free-market Institute for Energy Research (IER) today released and delivered a policy brief for the president and his advisors on China’s booming energy economy and growth.

Thomas J. Pyle, president of IER, issued this statement:

“By all accounts, the president’s trip to Asia was a successful one, and we welcome him home. However, it’s critical to highlight the commonsense energy policies that China is pursuing. Because of China’s aggressive pursuit for affordable, reliable and secure energy – of all forms – their nation continues to be one of the world’s most powerful economic engines. And our team of experts have prepared a compelling outline of ways the U.S. can learn from China and once again make energy a top priority in this country.

“China is manufacturing coal-fired power plants by the week, nuclear plants every few months, the largest hydro-electric dams on earth, windmills and solar panels for export, and securing up oil and gas reserves around the world. They understand that affordable energy is key to economic activity, growth and prosperity.

“Unfortunately, policymakers in Washington are working to increase the cost of energy and limit access to our most affordable resources while others work tirelessly to shut down our nation’s power plants, regardless if it results in the loss of jobs and higher energy costs. Litigation and inaction from federal bureaucracies continues to delay responsible offshore energy exploration. And while China is deploying next generation nuclear technologies, our government continues to say no to low-carbon nuclear energy.

“We hope someday that expensive and unreliable alternative and renewable energy forms can exist in the market place without significant taxpayer assistance and government mandates. And we hope the president reads this paper with an open mind.”

NOTE: Click HERE to view the briefing paper sent to the President today.

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