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Thursday, February 14, 2013

Prospects for Coal in Electric Power and Industry



Richard J. Campbell
Specialist in Energy Policy

Peter Folger
Specialist in Energy and Natural Resources Policy

Phillip Brown
Specialist in Energy Policy


For most of the twentieth century, the primary use of coal in the United States was for electric power generation, and for most of the history of power generation in the United States, coal has been the dominant fuel used to produce electricity. Even as recently as 2011, coal was the fuel used for almost 42% of power generation in the United States accounting for 93% of coal use. Industrial uses represented the remaining 7%. However, in April 2012, coal’s share of the power generation market dropped to about 32% (according to Energy Information Administration statistics), equal to that of natural gas. Coal was the fuel of choice because of its availability and the relatively low cost of producing electricity in large, coal-burning power plants which took advantage of coal’s low-priced, high energy content to employ economies of scale in steamelectric production. However, coal use for power generation seems to be on the decline, and the magnitude of coal’s role for power generation is in question. Two major reasons are generally seen as being responsible: the expectation of a dramatic rise in natural gas supplies, and the impact of environmental regulations on an aging base of coal-fired power plants.

A recent drop in natural gas prices has been enabled by increasing supplies of natural gas largely due to horizontal drilling and hydraulic fracturing (i.e., fracking) of shale gas formations. If the production can be sustained in an environmentally acceptable manner, then a long-term, relatively inexpensive supply of natural gas could result. Decreased natural gas prices are lowering wholesale electricity prices, stimulating a major switch from coal to gas-burning facilities. The electric utility industry values diversity in fuel choice options since reliance on one fuel or technology can leave electricity producers vulnerable to price and supply volatility. However, an “inverse relationship” may be developing for coal vs. natural gas as a power generation choice based on market economics alone, and policies which allow one fuel source to dominate may come at the detriment of the other.

Coal-fired power plants are among the largest sources of air pollution in the United States. More than half a dozen separate Clean Air Act programs could possibly be used to control emissions, which makes compliance strategy potentially complicated for utilities and difficult for regulators. Because the cost of the most stringent available controls, for the entire industry, could range into the tens of billions of dollars, some power companies have fought hard and rather successfully to limit or delay regulations affecting them, particularly with respect to plants constructed before the Clean Air Act Amendments of 1970 were passed. The expected retirement of approximately 27 GW of coal-fired capacity by 2016 has been reported to the Energy Information Administration (EIA) by coal plant owners and operators, accounting for approximately 8.5% of U.S. coal-fired capacity. While the costs of compliance with new Environmental Protection Agency regulations are a factor, several other issues are cited by coal plant owners and operators as contributing to these retirement decisions including the age of coal-fired power plants, flat to modest electricity demand growth, the availability of previously underutilized natural gas combined-cycle power plants, and the lower price of natural gas due to shale gas development. Even coal plants which have made significant modifications to meet existing EPA regulations are being closed or mothballed due to a combination of low natural gas prices, and the inability to sell power into other markets.

EIA expects coal to be a significant part of the U.S. power generation industry’s future to well past 2030. But given price competition from natural gas, and emerging environmental regulations, that role will likely be smaller than in recent decades. Coal-fired generation is likely to face a challenging future.



Date of Report: February 4, 2013
Number of Pages: 21
Order Number: R42950
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U.S. and South Korean Cooperation in the World Nuclear Energy Market: Major Policy Considerations



Mark Holt
Specialist in Energy Policy

A South Korean consortium recently signed a contract to provide four commercial nuclear reactors to the United Arab Emirates (UAE), signaling a new role for South Korea in the world nuclear energy market. The $20 billion deal indicates that South Korea has completed the transition from passive purchaser of turn-key nuclear plants in the 1970s to major nuclear technology supplier, capable of competing with the largest and most experienced nuclear technology companies in the world. The South Korean government reportedly has established a goal for South Korea to capture 20% of the world nuclear power plant market during the next 20 years, and the importance placed by Seoul on the UAE contract was underscored by South Korean President Lee Myung-bak’s presence at the signing ceremony in the UAE.

In the 1970s, South Korea launched its nuclear power program through the government-owned Korea Electric Company (now Korea Electric Power Corporation, KEPCO), which purchased the country’s first nuclear power units from Westinghouse. In the early years of the Korean nuclear program, Westinghouse and other foreign suppliers delivered completed plants with minimal Korean industry input. After the first three units, Korean firms took over the construction work on subsequent plants, although the reactor systems, turbine-generators, and architect/engineering services continued to be provided primarily by non-Korean companies. In 1987, KEPCO embarked on an effort to establish a standard Korean design, selecting the System 80 design from the U.S. firm Combustion Engineering as the basis. Combustion Engineering won the competition for the Korean standard design contract by agreeing to full technology transfer, according to KEPCO. The technology transfer program resulted in the development of the APR- 1400 power plant, which is the design purchased by the UAE.

In the UAE deal, the South Korean consortium is headed by KEPCO and includes other major Korean industrial companies that are involved in Korea’s rapidly growing domestic nuclear power plant construction program. The consortium also includes Pittsburgh-based Westinghouse Electric Company, which currently owns the U.S. design on which the Korean design is based, and the Japanese industrial conglomerate Toshiba, which now owns most of Westinghouse. Because the AP-1400 is based on a U.S. design, U.S. export controls will continue to apply.

U.S.-Korean nuclear energy cooperation is conducted under a “123 agreement” required by Section 123 of the Atomic Energy Act of 1954. The current agreement was signed in 1973 and will expire on March 19, 2014. A new 123 agreement does not require congressional approval, but it must lie before Congress for 90 days of continuous session before going into effect.

As with most U.S. 123 agreements, the existing U.S.-Korean agreement requires U.S. consent for any reprocessing or enrichment activities related to U.S.-supplied materials and technology. Korea is requesting that the new 123 agreement include U.S. advance consent for future Korean civilian reprocessing and enrichment activities. The United States has opposed the idea, on grounds of general nonproliferation policy and the complications that such activities might pose for other security issues on the Korean peninsula. To comply with the 90-day congressional review requirement, a new agreement probably needs to be submitted to Congress by spring 2013. Any lapse in the agreement could affect exports of U.S. nuclear materials and reactor components to Korea, potentially affecting ongoing construction of the UAE project.



Date of Report: January 28, 2013
Number of Pages: 21
Order Number: R41032
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Wednesday, February 13, 2013

Electric Power Sector: A Compendium



This Compendium contains a wealth of information on topics including energy tax incentives; energy storage for power grids and electric transportation; privacy and cybersecurity for smart meter data; EPA’s mercury and air toxics standards; lighting industry trends; federal agency authority to contract for electric power and renewable energy supply; potential energy sources qualifying under the Clean Energy Standard; EPA’s proposed rule for cooling water intake structures; and a discussion of whether biopower is carbon neutral.

The electric power industry is in the process of transformation. Since 1978, technology improvements, changes in the economics for generating electricity, and new federal laws and regulations (such as the Public Utility Regulatory Policies Act of 1978, the Energy Policy Acts of 1992 and 2005, the Energy Independence and Security Act of 2007, and Federal Energy Regulatory Commission (FERC) orders, have created a new competitive landscape for electricity. Competition is occurring on the wholesale level, and some states have moved toward retail competition. Other states have retreated from open markets due to concerns over impacts on power prices. Congress continues to face the issue of how much to intervene to ensure a reliable and affordable supply of electricity throughout the United States.

The electric utility system is vulnerable to outages due to system operator errors, weather-related damage, terrorist attacks, and shortages of transmission and generating capacity. The blackout of 2003 in the Northeast, Midwest, and Canada highlighted the need for operations improvements and greater standardization of operating rules. Pursuant to the Energy Policy Act of 2005, FERC named the North American Electric Reliability Corp. as the electric reliability organization required by the act. The ERO is developing mandatory and enforceable standards for the sector to ensure bulk power reliability.

Another provision in EPACT05 required the Secretary of Energy to study congestion on the transmission system. A competitive bulk power market depends on adequate infrastructure. Transmission systems were developed for limited movements of electricity, not the regional power transfers that have become common. Even though transmission of electricity is considered interstate commerce, siting transmission lines remains the responsibility of the states. EPACT05 gives the Secretary of Energy the federal power of eminent domain to obtain rights-of-ways for transmission lines in designated areas if states do not act to site them. Congress is expected to continue oversight on the implementation of EPACT05.

The electric power sector is dependent on adequate fuel supply. The power system has become increasingly dependent on natural gas to fuel new power plants, raising concerns about dependence on a fuel sometimes viewed as supply-limited and subject to price volatility. The most abundant domestic fossil fuel is coal, but the future use of coal is uncertain due to global warming concerns. Greater use of nuclear power may be constrained by the cost of building new plants and the availability of federal financial supports. One answer may be renewable power, but these technologies are still under development and are dependent on federal financial incentives. The resolution of these types of issues, which raise concerns over what kinds of new power plants should be built and how they should be fueled, may ultimately turn on congressional decisions on climate change.

Up-dated January 30, 2013

Date of Report: January 30, 2013
Number of Pages: 438
Order Number: C12012
Price: $79.95

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Electrical Power: Overview of Congressional Issues



Richard J. Campbell
Specialist in Energy Policy

The electric power industry is in the process of transformation. The electricity infrastructure of the United States is aging, and uncertainty exists around how to modernize the grid, and what technologies and fuels will be used to produce electricity in the future. Congress will likely be faced with policy issues regarding how the modernization of this vital industry will unfold.

For most of the 20
th century, coal has been the dominant fuel used to produce electricity. In 2011, coal was the fuel used for almost 42% of power generation in the United States. However, coal use for power generation seems to be on the decline. In April 2012, for the first time in history, the amount of electricity generated from natural gas equaled that of coal (according to Energy Information Administration statistics) with each fuel claiming about 32% of the market. The future of coal as a fuel for power generation seems to be in question. Two major reasons are generally seen as being responsible: the expectation of a dramatic rise in natural gas supplies, and the impact of environmental regulations on an aging base of coal-fired power plants. The electric utility industry values diversity in fuel choice options since reliance on one fuel or technology can leave electricity producers vulnerable to price and supply volatility. However, an “inverse relationship” is developing for coal vs. natural gas as a power generation choice based on market economics alone, and policies which allow one fuel source to dominate may come at the detriment of the other.

Upgrading the nation’s transmission system to accommodate current and future uses, and ensuring the reliable functioning and the security of the grid, has been a major concern for the federal government. Federal law has already tasked the Federal Energy Regulatory Commission with responsibility for enforcing reliability standards for the bulk electric system, including cybersecurity, but protection from natural hazards continues as a key issue. The recent damage sustained to the electrical grid by Hurricane Sandy in New York and New Jersey and difficulty in restoring electricity service underscore the age and fragility of the power system, and how electricity service might benefit from hardening and modernization of various power systems. Growing concerns over greenhouse gas (GHG) emissions, other environmental costs associated with burning fossil fuels, and existing or anticipated state and federal policies addressing these issues are leading some utilities and energy providers to deploy more renewable energy technologies to meet power demands, and potentially increasing the need for new transmission lines to incorporate clean energy sources.

New environmental regulations under development would impose new requirements on coal-fired power plants. Some of these rules would be implemented at the federal level, while others would be implemented at the state level. The Environmental Protection Agency (EPA) also issued standards for greenhouse gas emissions which would require all new power plants to restrict carbon dioxide emissions. EPA has yet to propose rules for GHG emissions from existing power plants, as is required by court order. Much attention has focused on the resulting finalization of these regulations, and their potential to contribute to power plant retirements, with some in the electric power industry expressing concern that reliability could be impacted.



Date of Report: January 30, 2013
Number of Pages: 14
Order Number: R42923
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Monday, February 11, 2013

Electric Power Sector: A Compendium



This Compendium contains a wealth of information on topics including energy tax incentives; energy storage for power grids and electric transportation; privacy and cybersecurity for smart meter data; EPA’s mercury and air toxics standards; lighting industry trends; federal agency authority to contract for electric power and renewable energy supply; potential energy sources qualifying under the Clean Energy Standard; EPA’s proposed rule for cooling water intake structures; and a discussion of whether biopower is carbon neutral.

The electric power industry is in the process of transformation. Since 1978, technology improvements, changes in the economics for generating electricity, and new federal laws and regulations (such as the Public Utility Regulatory Policies Act of 1978, the Energy Policy Acts of 1992 and 2005, the Energy Independence and Security Act of 2007, and Federal Energy Regulatory Commission (FERC) orders, have created a new competitive landscape for electricity. Competition is occurring on the wholesale level, and some states have moved toward retail competition. Other states have retreated from open markets due to concerns over impacts on power prices. Congress continues to face the issue of how much to intervene to ensure a reliable and affordable supply of electricity throughout the United States.

The electric utility system is vulnerable to outages due to system operator errors, weather-related damage, terrorist attacks, and shortages of transmission and generating capacity. The blackout of 2003 in the Northeast, Midwest, and Canada highlighted the need for operations improvements and greater standardization of operating rules. Pursuant to the Energy Policy Act of 2005, FERC named the North American Electric Reliability Corp. as the electric reliability organization required by the act. The ERO is developing mandatory and enforceable standards for the sector to ensure bulk power reliability.

Another provision in EPACT05 required the Secretary of Energy to study congestion on the transmission system. A competitive bulk power market depends on adequate infrastructure. Transmission systems were developed for limited movements of electricity, not the regional power transfers that have become common. Even though transmission of electricity is considered interstate commerce, siting transmission lines remains the responsibility of the states. EPACT05 gives the Secretary of Energy the federal power of eminent domain to obtain rights-of-ways for transmission lines in designated areas if states do not act to site them. Congress is expected to continue oversight on the implementation of EPACT05.

The electric power sector is dependent on adequate fuel supply. The power system has become increasingly dependent on natural gas to fuel new power plants, raising concerns about dependence on a fuel sometimes viewed as supply-limited and subject to price volatility. The most abundant domestic fossil fuel is coal, but the future use of coal is uncertain due to global warming concerns. Greater use of nuclear power may be constrained by the cost of building new plants and the availability of federal financial supports. One answer may be renewable power, but these technologies are still under development and are dependent on federal financial incentives. The resolution of these types of issues, which raise concerns over what kinds of new power plants should be built and how they should be fueled, may ultimately turn on congressional decisions on climate change.

Date of Report: January 22, 2013
Number of Pages: 438
Order Number: C12012
Price: $79.95

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