On first blush, the first presidential debate offered voters clear choices for America's energy future. One candidate offers green and alternative energy sources. The other offers energy independence and more coal. Neither candidate objected to the other's sources, but each candidate seemed to be offering different priorities.
On second blush, the candidates do not seem to be that far apart on energy. The transcript reveals the details, and it is clear the message many thought they heard is lost in the breeze.
The strategic plan offered by both candidates is to lead America toward energy independence. The arguments for energy independence are not debatable. Energy independence creates domestic jobs, it lowers the nation's dependence on foreign sources and reduces the threats from rogue states and it could lead to long-term prosperity.
Both candidates confuse the electorate by conflating energy independence with the available energy options. Thermal coal, wind and solar are examples.
Thermal coal, wind and solar are primarily used to produce electric power. For the last decade, the Energy Information Administration (EIA) reports there has been very little oil in the nation's electricity. For all policy and political purposes, the nation's power grids are already energy independent.
It is time to declare victory over one segment of the nation's energy economy, the power sector. Of course, investing in coal, wind and solar provides the nation with important economic benefits. But digging for more coal, adding additional wind farms and slapping on more solar-panel rooftops will not advance energy independence.
Nevertheless, when Mitt Romney mentioned coal in the presidential debate, coal companies jumped the next day. According to Barron's, James River Coal (JRCC) was up 11%, Arch Coal (ACI) was up 7.6%, Alpha Natural Resources (ANR) was up 6.2%, and Consol Energy (CNX) was up 5.7%.
But Romney only mentioned coal three times and he qualified his views. According to the transcript, he said, "And by the way, I like coal. I'm going to make sure we continue to burn clean coal. People in the coal industry feel like it's getting crushed by your policies. I want to get America and North America energy independent, so we can create those jobs."
Notice Romney said he was going to "make sure we continue to burn clean coal." Here is the rub. There are only two clean coal power plants currently operating in North America. TECO Energy's (TE) Polk Power Station and Wabash Valley Power Association's Wabash River are the only two integrated gasification combined cycle (IGCC) clean coal-burning stations currently in operation.
Out of more than thirty proposed, only two new IGCCs currently are under construction in the U.S.: Duke Energy's (DUK) Edwardsport project in Indiana and Southern Company's (SO) Kemper County project in Mississippi. For the next four years, that will be it for clean coal.
While it is true that coal mining and coal power have been crushed by new federal regulations, regulations are not the industries' only challenge. They have also been crushed by the power markets. Recently, with the advent of abundant and cheap natural gas, the power markets have been rewarding natural gas power plants over inefficient coal plants because of the undisputed cost advantage of combined cycle gas turbines.
No matter which candidate wins, the future of coal will likely remain unchanged, at least for the next four years. While it does provide jobs and political cache, coal has little to do with energy independence.
Nuclear power, wind and solar power face similar challenges. All three sources are used exclusively to produce electric power; none has anything to do with energy independence.
In the debate, neither candidate mentioned that North America is already flooded with abundant sources of natural gas. We have so much gas that companies such as Cheniere Energy (LNG) and Dominion Resources (D) are planning to convert their natural gas import terminals to export terminals. In addition, Exxon Mobil (XOM), ConocoPhillips (COP), BP (BP) and TransCanada (TRP) may spend $65 billion to build new pipelines so they can export natural gas from Alaska. The next president does not need to concern himself about incentives to drill new natural gas wells.
When politicians talk about energy or energy independence, most of the time they are really talking about oil. When you hear the word "coal," it is mostly about jobs and maintaining the status quo. When you hear the words "wind power" or "solar power," it is usually about the environment. If you ever hear the words "nuclear power," it is likely about a vague and generalized discussion about the distant future.