Price on carbon will determine coal's future

WASHINGTON, D.C. - With growing demand, power firms are going to have to build new baseload but whether they will choose coal or nuclear power isn't known, panelists said at the EIA's 2008 Energy Conference.

The answer depends on how the federal government decides to treat carbon prices, said President of the Alfred P Sloan Foundation and MIT Professor Paul Joskow.

In the now unlikely event that the government doesn't put a price on carbon, coal would win out in most areas since it costs far less to build.

But if the country is serious about cutting greenhouse gases by 60% to 80% by mid-century, the high price on carbon that would result would make nuclear the best option.

Hitting those targets would require carbon prices that average between $50 and $100 dollars.

A $27 price on coal would double the cost of coal, while a $50 price would triple it.

Dominion decided on nuclear to meet rising baseload demand in its regulated Virginia territory, said the firm's Vice President of Nuclear Development Eugene Grecheck.

PJM projects that by 2017 the area will need of 4,000 mw more power than it has now.

Just the data centers going up in the Washington, DC suburbs of Loudon County are enough to eat up the production from a new nuclear plant, he added.

With uncertainty on carbon prices and loan guarantees from the federal government taking out a lot of the risk, nuclear is the way to go, said Grecheck.

His firm is building a coal plant in southwest Virginia that the state all but mandated - but even that project is under heavy opposition and Dominion doesn't want to deal with similar issues at voluntary coal plants.

Once the uncertainty of carbon prices is over and if they come in low enough, coal could still be the default choice for baseload, said Jamie Heller, president of Hellerworx.

If carbon prices are at $10 with relatively low fuel prices, coal is less expensive than gas but once those values rise, coal begins to lose out to natural gas, he predicted.

Thus far, the market has been deciding against coal in light of carbon uncertainty. Some 17,000 mw were canceled last year and the Sierra Club claimed 65 victories in the war on coal.