Ten years after coal began losing substantial electricity market share – primarily to natural gas – electricity prices have not risen at all, the U.S. Energy Information Administration (EIA) reports. In inflation-adjusted dollars, electricity prices are lower now than they were a decade ago. Inflation averaged 1.6% per year during the past decade, yet electricity prices rose at an average pace of less than 1%. Just as importantly, energy costs now comprise a smaller portion of consumer budgets than has ever been recorded.
The lessons from the decade of coal’s decline bode well for America’s energy future. Energy prices are extremely important for American living standards. Not only do the costs of gasoline and electricity have a direct impact on consumer budgets, but energy costs also impact the costs of virtually everything else we buy and sell. When energy prices are low, Americans have more money available for education, nutrition, healthcare, retirement savings, and consumer goods.
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A decade ago, presidential candidate Barack Obama campaigned against coal based on exaggerated environmental concerns. At the time, there was no source of electricity as affordable and as widely available as coal. Even candidate Obama admitted that if his restrictions on coal were implemented, electricity prices would “necessarily skyrocket.”
As Obama was making these predictions, however, new natural gas discoveries, along with technological advances in how to recover them, brought the price of natural gas power below the price of coal power.
Coal powered 48% of American electricity in 2008. Now coal powers only 30%. Yet despite the fears expressed at the time by Obama and conservatives alike, electricity prices have not skyrocketed.
According to the EIA, natural gas gained the largest share of coal’s lost market share. Natural gas power rose from 21% of American electricity production in 2008 to 32% in 2017. Non-hydro renewables rose from 1% to 10%. Hydro power and nuclear power remained essentially unchanged.
For environmentalists, the decline in coal power has brought the air quality gains and the carbon dioxide reductions they desired. Natural gas emits only a small fraction of the air pollutants, and only half the carbon dioxide, as coal power. Real-time air pollution monitoring shows the United States enjoys some of the cleanest air among industrialized nations. At the same time, U.S. carbon dioxide emissions have declined by more than 10% during the past decade.
Moving forward, there is additional opportunity to lower electricity prices, air pollution, and carbon dioxide emissions. Replacing more coal power plants with natural gas power will likely lower electricity prices still further. Even if environmentalists successfully advocate for more wind and solar power, the cost savings of more natural gas power continue to offset the higher costs of wind and solar power. For people like me who are skeptical that humans are creating an imminent climate crisis, reducing carbon dioxide emissions is not a high priority. Then again, if more affordable energy alternatives to coal exist, and if those alternatives also happen to reduce air pollution and carbon dioxide emissions, this is a path that benefits everyone, regardless of one’s views on global warming.
[This article first appeared at Forbes.com.]