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Blog post
The Great Energy Run-Around
Posted Jul 28, 2008 by Richard Heinberg
Coal prices have been rising in many places over past months—in some cases dramatically so. Even in China, where price controls and long-term
contracts for coal and electricity are in effect, spot coal prices have doubled just in the past year.- The reason? Well, there are several; but near the top of the list is higher oil prices. Coal must be transported from mine mouth to power plant, and however it travels—by boat, rail, or truck—it takes fuel to get it there. In many places in the world (the US included), most of the delivered price of coal merely covers transport costs. So as the price of oil goes up, the price of coal goes up, too.
- But as the price of coal goes up, the price of electricity increases, and electricity producers that are constrained by regulations from raising their prices to ratepayers lose money. Some go broke. This is just one of many reasons that countries around the world are seeing blackouts and brownouts, as electricity supply fails to meet demand (another: as glaciers melt due to climate change, there is less runoff, reducing the flow of rivers, and hence hydroelectric capacity).
- So what do cities do when the power companies can’t supply coal- or hydro-generated electricity? They run emergency diesel generators. And this increases the demand for diesel, raising the oil price.
- Return to step 1 and repeat.
Get The End of Growth http://www.postcarbon.org/eog | Watch the animation Who Killed Economic Growth? http://bit.ly/whokilledgrowth
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