The Energy Information Administration (EIA) estimates that coal reserves in the United States could last as long as 200 years. However, a recent report from the Clean Energy Action (CEA) is disputing this claim.
The CEA feels that the U.S. has already seen the peak coal extraction and many of the areas have already reached maturity. The CEA is forecasting that the United States has roughly 20 years of economically viable coal reserves.
Unless existing EPA regulations and coal mining technology dramatically change, the United States will not be able to mine deep enough to reach the rich reserves that the EIA have included in their forecast. The United States Geological Survey (USGS) also supports the economic viability of recoverable coal reserves to roughly 20 years.
Coal is not the only source of electrical production. The U.S. also uses hydroelectric, solar, nuclear, and wind turbines for power. Of the four, hydroelectric presents the greatest potential to meet consumer demands. According to the Department of Energy hydroelectric generation accounts for roughly 6%-8% of the nation's electricity. This is the true potential that hydro presents as an alternative to fossil fuels for energy production.
The Department of Energy surveyed roughly roughly 2,500 hydropower producing dams and found that they account for only a fraction of energy production in the United States. This is in contrast to roughly 80,000 non-powered dams (NPD) that potentially have the ability to provide consumers with affordable and sustainable electricity. The United States has been using hydroelectric facilities for over 100 years.
The hydroelectric sector is growing. The U.S. hydroelectric supply chain has seen growth primarily from the modernization of non-power producing dams. Hydroelectric production is seen as a sustainable and renewable source that is found across the United States. This is in contrast to other sources of electric generation, which tend to be located in pockets across United States. Access to hydro is easier for the market and will keep prices lower as long as infrastructure is maintained.
Companies to watch
If the CEA forecasts are accurate and U.S. coal reserves are dwindling, companies that have a divested portfolio will be able to decrease their risks from market shifts. The pitfalls of relying on companies that rely heavily on fossil fuels range from the real potential for tighter environmental regulations to a lack of availability. If a company is engaged in renewable energy ventures it stands a better chance of capitalizing on policies and availability constraints. Investors should also consider the looming tech boom that will help develop the renewable energy industry. As renewable energy becomes more popular the need to make it perform against consumer demand becomes driving factor.
Duke Energy (NYSE:DUK), based in Charlotte, North Carolina, is an energy provider that has a diverse portfolio ranging from nuclear to hydroelectric.
Duke has become one of the policy proponents of green energy leading the way with realistic and viable renewable energy solutions.
The Cowans Ford hydroelectric station located near Huntersville, North Carolina, is capable of producing 350 MW of power. This is an example of a long-standing power station that began operations in 1963. The generator is powered by the largest man-made body of water in North Carolina.
The Cowans Ford station is a top producer of electricity. Although hydroelectric accounts for only a small percentage of the total electricity produced, it is essential for covering peak periods of demand.
If Duke is able to further develop its hydro generation facilities, it will be able to offset any shortages from dwindling coal reserves. This will allow Duke to provide investors a degree of security and potential profit.
Peabody Energy (OTC:BTUU.Q) is the largest coal producer in the world, and one of the top producers in the United States. In 2010, Peabody accounted for nearly 10% of electricity produced in the United States.
Unlike Duke, Peabody deals exclusively in coal mining. With dwindling supplies in the U.S., Peabody will be forced to revisit this decision and consider alternative investments.
Can hydro meet future consumer needs?
Dwindling fossil fuel reserves will force many companies to rethink their investment strategies. Energy companies that have a diverse portfolio will be well-placed to weather any foreseeable shortages in the near future. Hydroelectric generation has not yet been developed to a point that can meet the needs of consumer demands. Policy initiatives that favor the further development of hydroelectric generation and other sustainable green sources of power production do exist, providing a market niche. Alternative fuel sources will become more economically viable in the near future. As technology evolves and becomes more efficient, companies that initially invested in green tech will be poised to take full advantage of market changes.