Correction to This Article
Earlier versions of this article, including in the print editions of The Washington Post, incorrectly said that completing the East Kentucky Power Cooperative's now-canceled Smith Unit No. 1 coal plant would have cost an estimated $819 million in addition to the $150 million already spent. The $819 million estimate is for the total cost, including the $150 million. This version has been corrected.
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Coal's burnout: Have investors moved on to cleaner energy sources?

"Coal will remain the dominant source for electricity generation for the foreseeable future," he says. "So the big problem with the 'death of coal' message is that it is not, as we say, reality-based."

It's the economy

Even if coal is not dead, developments of the past two years have dimmed its future.

The fate of the long-planned Smith Unit No. 1 coal plant in Kentucky is one example. The East Kentucky Power Cooperative announced plans five years ago to build the 278-megawatt plant, and it obtained permits from the Kentucky Public Service Commission. But environmental groups, joined by critics of federally subsidized loans to rural electric cooperatives, fought the project.

Then the recession hit and tipped the scales. A couple of months ago, the cooperative slashed 9 percent from its forecast of electricity demand among the half-million customers it serves.

As a result, East Kentucky Power canceled the Smith coal plant construction on Nov. 18, even though it has spent about $150 million stockpiling steel and parts. "And that's almost entirely due to the economy," says Nick Comer, the cooperative's manager of external affairs. The total cost of finishing the plant was estimated to be $819 million.

"Back in 2006-07, the economy was roaring. In our service territory we were seeing growth at about twice the national rate," Comer says. "There were a lot of new houses, new businesses; even manufacturing was expanding."

But, Comer adds, "a lot of that has changed today. Housing starts are down. Manufacturers have cut back. So we expect demand for electricity is going to be down from what we had projected for a while."

The story is the same across the nation. Coal consumption in the electric power sector during the first nine months of 2010 was up from 2009, but still down 5.7 percent from 2008's near-record levels, according to EIA figures.

East Kentucky Power also signed a settlement with environmental groups under which it will install additional pollution control devices and further explore renewable energy options.

Cheap natural gas

American Electric Power, the nation's largest generator of electricity, is also taking a cautious approach. The only plant AEP has under construction is the highest efficiency model, known as "ultra supercritical." Under the new EPA guidelines, these high-efficiency plants could become the standard, reducing coal use.

"We have no other coal-fueled generation planned at this time," says Pat D. Hemlepp, a spokesman for AEP. "The decline in demand has delayed the need for additional new generation."

If AEP does need new generation capacity, it will turn to natural gas. In 2010, the wellhead price of natural gas has averaged $4.25 a thousand cubic feet, about 40 percent below the average price from 2005 to 2009 and well under half the peak price.


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