By Mark Perry
July 5, 2017 - The coal industry has faced headwinds for the past decade. Burdensome regulations and competition from cheap natural gas have taken their toll. Conventional wisdom now suggests the sun is setting on the U.S. coal industry, but the assumptions driving that thinking are far from certainties.
Energy experts point to falling costs for renewables and the nation's vast and low-cost supply of natural gas as signs that coal's market share will continue to erode. But why should we assume renewable energy technology improves faster and more disruptively than fossil fuel technology? There are also good reasons that natural gas might not remain cheap.
Natural gas has a well-documented history of price volatility. As demand for natural gas continues to grow – from electricity generation, from heavy industry and now from exports – and as public opposition to drilling and new pipeline projects seemingly grows as well, demand might well overtake supply. We are left with far more questions than satisfactory answers.
Conversely, even if renewable technologies do continue to improve and natural gas prices stay low, don't count out advanced coal technology. Breakthroughs and cost reductions with advanced coal technology – such as supercritical coal combustion and carbon capture; utilization; and storage – could upend perceptions about coal's environmental impact. If that seems improbable, look no further than our recently discovered abundance of natural gas from the shale revolution as evidence that the improbable happens regularly when it comes to energy.
The energy industry has a long and distinguished history of having the strongest assumptions and most carefully constructed and conservative projections turned on their head. The arrival of the shale revolution is a perfect example of unexpected energy serendipity.
Less than a decade ago, domestic demand for natural gas was far outpacing production. Experts were confident that the U.S. was poised to rival Japan as the world's largest liquefied natural gas importer. Liquefied natural gas import terminals, with price tags in the billions, were built in anticipation of our inevitable dependence on gas from overseas. But that inevitability never arrived. Instead, the revolutionary twin technologies of hydraulic fracturing and horizontal drilling unlocked supplies of natural gas and oil long thought inaccessible and uneconomical. And now the U.S. is the world's largest natural gas producer, and no one saw it coming.
This change did not come overnight. Experimental fracking on shale deposits had been taking place since the 1970s. One new technology after another – everything from 3-D seismic imaging to horizontal drilling and new mixtures of sand and fracturing fluids – finally came together for a breakthrough 20 years later.
The shale revolution, and its origin, offer two powerful reminders. First, experimentation with technologies that may seem like a dead end can wind up being game-changers when private industry gets support from our national labs and the Department of Energy. While it was petropreneurs and private companies that finally cracked the shale code, they did it with assistance from government researchers, grants and tax credits.
Second, despite our best analysis, projections about our energy future remain nothing more than guesses. There are always technologies in the pipeline, some nothing more than ideas on a piece of paper at first, but some are destined to upend how we produce and consume energy.
In that tradition of continual advances in technology, don't count out coal just yet. For all the well-publicized work happening on advanced solar panels or battery technology, the same kind of innovation is happening with advanced coal technologies. And these technologies could possibly be far more important to meeting global environmental goals than anything happening with renewables.
While coal is in retreat here in America, it remains the world's mainstay for electricity generation. The need for advanced coal technologies is greater than ever. The very technologies we should be investing in to help reduce emissions in China and India could well be the technologies that ensure affordable energy and energy security right here at home in the decades ahead.
Mark J. Perry is a scholar at The American Enterprise Institute and a professor of economics at the Flint campus of The University of Michigan.