Coal vs. Solar: Considering All the Costs

Some coal mining companies are getting a bargain on federal land and skirting export royalties, buoying their profits at the expense of taxpayers, according to a report released by the Senate Energy and Natural Resources Committee earlier this month.

Initiated last year by committee chairman Sen. Ron Wyden (D-Ore.), who will soon step down to join the Senate Finance Committee, the report found that several state Bureau of Land Management (BLM) offices sold tracts at below-market prices to mining companies and also shared information with the companies during the leasing process, which would violate protocols for the “blind lease” process used to get taxpayers a fair deal on public land sales. The same report also found that coal companies in several Western states booked coal exports through trading desks, thereby skirting the 12.5 percent export royalty payments due to taxpayers.

A separate report from the Government Accountability Office released earlier this month found that the BLM’s federal coal leasing program lacks sufficient oversight and sometimes fails to properly value the land it sells to mining companies, costing taxpayers an estimated $200 million in lost revenue.

Besides raising serious questions about federal and state employee misbehavior, the revelations also beg the question: How much does coal, the cheapest and most used energy source, really cost U.S. taxpayers? If we look at all the ignored costs of coal--preferential land leases, direct subsidies, not to mention collateral damage to public health and the environment--is this fuel source really the cheap, patriotic option that we should continue to subsidize, and how do the costs, all considered, stack up against renewable energy sources?

Let’s focus on solar, since that industry has received significant subsidies and also the most scrutiny of all renewables, post Solyndra-gate.

In 2010, direct federal subsidies to the renewable energy industry totaled $14.6 billion, up from $5.1 billion in 2007. Solar installers received $1.1 billion of those 2010 subsidies, according to the EIA.

To give these numbers some perspective, the coal industry has been receiving subsidies since 1932, and in 2007 the industry benefited from about $4 billion in direct government assistance. In 2010 this number shrank to just $1.4 billion. However, estimates on current coal subsidies vary widely, depending on how one accounts for indirect benefits like railroad subsidies that cut transportation costs. The Environmental Law Institute puts total coal subsidies from 2002 through 2010 at $25.4 billion. The price of generating electricity using coal has steadily risen since the 1970s and the cost of coal (including taxes) per million Btu increased 90 percent in the 10 years since 2002, hitting $2.38/million Btu in 2012.

Meanwhile in the renewable energy world, the cost of solar energy has dropped 50 percent since 2008, driven in part by falling solar panel prices as demand grows and the technology gets more efficient. While solar remains an expensive option for many areas, overall the industry is nearing cost competitiveness with stalwarts like coal, even without federal subsidies.

Variations in state subsidies for both industries, plus changes in solar capacity in different geographic areas, make nationwide apples-to-apples comparisons for coal- and solar-generated electricity difficult. But, a recent analysis by Lazard, a financial advisory firm, put utility-scale solar generation within range of the cost of coal power by 2015. Without subsidies, the levelized cost of energy (the cost of producing electricity, including capital costs, fuel and other operating costs) from utility-scale solar plants in 2013 ranged from $89 to $104 per megawatt-hour. But the firm estimates that the bottom end of this range will hit $64 per MWh in 2015 due to the continuing drop in solar panel and system costs. By comparison, coal generation costs between $65 to $145 per MWh.

Coal remains by far our biggest source for electricity, fueling 37 percent of the country’s power. Solar accounts for 1 percent (overall, renewable energies make up 12 percent).

There are pros and cons for every fuel sourced and used in America, and industry advocacy groups on both sides will always spin the numbers to their benefit and make the energy portfolio debate more simplistic than it is in reality.

But there are a few undeniable facts that might start to reshape the energy debate over the next few years: climate change is a very real problem, the environmental risks of clean coal are now better understood (just ask West Virginians in the wake of the Elk River spill) and renewable energy companies aren’t going away anytime soon--subsidies or no subsidies.

Image Credit: greatlettuce, Flickr