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Uncertainty: one nail in #coal’s coffin

March 8th, 2017 · No Comments

Mark Sumner, someone who made his career in the coal mining industry, has penned (keystroked?) a thoughtful “Open letter to America’s Coal Miners & America“. This very respectful missive lays out the powerful ‘team’ reliance reality of coal-mining, highlights that coal powered America (and the globe) for a century, and lays out that any attack on coal is perceived by miners (by those more broadly in the industry) as a fundamental attack on them and their self-worth.  The reality that coal — essentially uniquely — powered America, Sumner discusses, is no longer the reality and is less true with each passing day.

This is the hard truth. In 2000, coal generated almost 53 percent of all the electricity in the United States. By 2009, that was 45 percent. In 2014 it was 39 percent. One year later, it was 33 percent.

Look at that last number. Coal’s contribution to the electrical picture dropped by 6 percent in a single year.

Sumner calls for miners to recognize that

you’re being used as props in a war that’s not just bad for the nation, it’s bad for you and your families. You’re being sold a bill of goods

Sumner lays out that mining jobs have been disappearing for a long time and that this atrophying will continue — whether or not Trump successfully destroys environmental policy.

The core element for coal’s fall from glory in Sumner’s narrative:  natural gas, in particular: fracked natural gas.

It happened because fracking for natural gas has made that fuel extremely abundant, and generators of electricity would much, much rather deal with gas than coal.

Now, within that discussion of natural gas, he writes;

Better still, from the point of view of the people making electricity, gas generators are cheaper. You can buy them small and add on power gradually. Coal plants are big. They take a huge amount of money up front and don’t start making money for decades after construction.

This is an important economic argument and business case reason for moving away from coal toward gas that  is also true for nuclear power (like coal) and for wind/solar (like natural gas).

  • First group (nuclear, coal)
    • requires large upfront investments,
    • take a long time (decade+) to develop/build, and
    • move from 0 to 1000 (from 0 kilowatts of production to 100s to 1000+ mw hour production) at a flip of a switch.
    • And, btw, are seen as at risk to changed public perception, protests, priorities, and regulation (such as climate) as they are under construction.
  • Second group, natural gas/wind/solar,
    • can be built & brought on incrementally,
    • have (relatively) shorter timelines; and,
    • are seen as having relatively minor other certainty risks.

These differences are huge for planners amidst a disrupted electricity marketplace — uncertainty as to future demand (think efficiency, economic turmoil), massive technological change (LED lights, solar panels, smart grid, electric cars), changing business models and relationships (such as increased ‘behind the meter’ generation and storage), etc.  With such uncertainty, committing $billions to a decade-long process for adding a gigawatt of production to the grid suddenly is a risk that requires significant mitigation (locking in rate structures that likely will disadvantage customers) that might not be possible to secure.

This business risk is a too-often overlooked reason for why there businesses (including to utility) are looking to natural gas, wind, and solar while “why there are no new coal plants under construction anywhere in the United States. None.”

 

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Tags: business practice · coal

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