Electricity Production under Carbon Constraints: Implications for the Tenth District

By Snead, Mark C. | Economic Review - Federal Reserve Bank of Kansas City, First Quarter 2012 | Go to article overview
Save to active project

Electricity Production under Carbon Constraints: Implications for the Tenth District


Snead, Mark C., Economic Review - Federal Reserve Bank of Kansas City


Coal is the dominant fuel used to produce electricity in the United States, accounting for almost half of production. Although coal is cheap and abundant domestically, the burning of coal releases greenhouse gases (GHG) and particulates. In response, many states have increased the use of cleaner alternative fuels, primarily natural gas and renewable energy. However, roughly half of the states still rely heavily on coal to generate electricity.

In the Federal Reserve's Tenth District, six of seven states are coal-dependent, generating two-thirds or more of their electricity from coal. Coal-intensive states face regulatory risk from increased restrictions on GHG emissions. Forecasts suggest GHG restrictions would rapidly accelerate the use of cleaner fuels, but would require extensive and expensive changes in the mix of generation capacity in many states.

This article examines the potential impact of national GHG restrictions on Tenth District energy producers and consumers. The findings suggest that GHG restrictions would lead to a structural change in the mix of fuels used to generate electricity in most District states, as well as increase electricity costs to District consumers. District natural gas producers would benefit from increased gas consumption, but not as much as emerging natural gas producers in other areas of the country. District coal producers, particularly in Wyoming, would face sharply reduced domestic demand for coal.

The first section of the article examines trends in electricity production and fuel use in the United States and Tenth District states. The second section describes recent U.S. Department of Energy (DOE) forecasts for energy use and production, including a scenario with national GHG restrictions. The third section examines potential impacts of GHG restrictions on District electricity producers and consumers. The fourth section identifies possible spillover effects for District coal and natural gas producers.

I. U.S. AND TENTH DISTRICT ELECTRICITY FUEL USE TRENDS

Historically, the United States has relied on coal for about half of its electricity needs, with a mix of petroleum, natural gas, nuclear power, and renewable energy accounting for the rest. Shares of these fuels have shifted over time in response to market and regulatory forces. In recent years, the growth of coal consumption has slowed and use of natural gas and renewable energy has grown. In contrast, the Tenth District continues to rely heavily on coal and much less on other fuels than the nation.1

Historical U.S. electricity fuel use patterns

The modern U.S. electricity fuel mix began to take shape in the late 1940s with the use of large-scale generators fired by coal, natural gas, and petroleum (Charts 1 and 2). Coal quickly became the dominant fuel. By the 1950s, it had captured a 50-percent share of U.S. electrical generation. Coal steadily gained share until the late 1960s when petroleum use surged and the nuclear power sector emerged. Coal use accelerated again in the 1980s, despite growing concerns about emissions (Hansen and others 1981). Coal's share peaked in 1987 at 58 percent, but has since declined steadily to around 45 percent under rising regulatory pressure. Today, coal remains inexpensive and abundant. The U.S. Energy Information Administration (EIA) estimates a domestic supply of more than 200 years at current mining rates.

Petroleum-fired generation expanded rapidly in the 1940s, but quickly lost favor to cheaper coal and natural gas. Petroleum surged again in the late 1960s amid strong domestic crude oil production. That trend reversed in the 1970s as global crude prices increased and domestic production declined. By 1985, petroleum was mostly gone from the electricity fuel mix and had been redirected to meet growing demand for transportation fuels.

Natural gas use grew amid increased demand for electricity in the 1950s and 1960s. By 1970, natural gas had a share of 25 percent.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Electricity Production under Carbon Constraints: Implications for the Tenth District
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?