From Issue 10, May 2008

Once relatively inexpensive and plentiful, coal fuels half the nation’s electricity.(3) Around 90 percent of U.S. coal production is used to generate electrical power, a number that has been steadily increasing since the late 1940s.(4) However, environmental concerns over greenhouse gas emissions and the subsequent loss of federal financing have forced some American utilities to abandon plans for coal-burning power plants.(5) The Agriculture Department’s Rural Utilities Service has suspended a low-interest lending program for rural electric cooperatives seeking to build such plants, according to The Washington Post.(6) Meanwhile, The New York Times reports that we have become a major exporter of coal to countries like Germany and Japan.(7) Consequently, domestic buyers now must compete with foreign buyers, causing prices to rise. Prices for two American grades of coal rose by 93 percent and 64 percent in the last year alone. Because American utility companies buy almost all their coal on long-term contracts, locking in prices for several years, most consumers have yet to feel the impact of rising coal costs. But when those contracts come up for renewal, they will likely incorporate price increases, and consumers can expect higher utility bills.

Possible Implications for Kentucky: As the demand for and cost of coal rises, utility prices may adversely affect business and industry profits and household budgets. Rising demand for coal may also create more coalfield jobs, giving rural economies a much-needed boost. This short-term boon, however, comes with long-term consequences, from local concerns about mine safety and moutaintop removal to the global threat of a warming planet.

Contributing Writers Michael T. Childress and Billie S. Dunavent.

Sources:

3  U.S. Department of Energy (DOE), Energy Information Administration, Electric Power Annual 2006, Nov. 2007.

4 DOE.

5  Associated Press, “‘Clean coal’ plant loses funding,” Los Angeles Times, 29 January 2008.

6 Steven Mufson, “Government Suspends Lending for Coal Plants,” washingtonpost.com, 13 March 2008.

7 Clifford Krauss, “An Export in Solid Supply,” The New York Times 19 March 2008.