Last month, at an American Coal Council event held at the Stein Eriksen Lodge in Park City, Utah, Peabody Energy’s president and CEO Glenn Kellow called for a two-year moratorium on coal plant retirements — presumably, until we can figure out what the hell is going on.
There are a lot of problems with Kellow’s moratorium proposal that I hope would be obvious. But let’s hear out Kellow’s argument.
America’s remaining fleet of coal-fired power plants is too valuable an asset to sacrifice, he said, and the current rate of coal plant retirements threatens the reliability of the nation’s electrical grid. “50 gigawatts of coal retirements through 2021 are far too many,” Kellow said in a printed version of his presentation. “Let’s have the industry focus on cutting that in half and running the fleet harder.”
Run the fleet of aging U.S. coal plants (average age 39 years) harder. What could go wrong?
Wyoming coal remains competitive within the U.S. thermal coal market, making up 40 percent of all coal consumed at U.S. power plants. But utilities are burning less coal overall, replacing it with natural gas, wind and solar energy. Coal’s piece of the utility fuel supply has fallen from more than 50 percent of the fuel mix in the early 2000s to 30.4 percent in 2016.
It makes sense that Peabody, the world’s largest coal company and Wyoming’s top coal producer, wants to halt shrinking demand for its product at U.S. utilities. But to propose accomplishing that through regulatory mandates — the same type of “government overreach” the coal industry has long demonized — hints at a new level of desperation, to say nothing of hypocrisy. Imposing a moratorium on coal unit retirements would amount to one independent business sector force-feeding another business sector a product that is increasingly economically inferior to a growing buffet of options.
Chief among those options is a flush U.S. natural gas supply — another fuel that Wyoming produces — and increasingly competitive wind and solar energy. The wind blows in Wyoming, too, and the current slate of wind energy proposals amounts to nearly $10 billion in construction.
Kellow’s claim that the current rate of coal plant retirements threatens the reliability of the nation’s electrical grid is false, according to the very same grid-reliability study that many political watchers believe was intended to prove Kellow’s point. A draft of the report, commissioned by U.S. Department of Energy Secretary Rick Perry, was leaked earlier this summer. It stated “Numerous technical studies for most regions of the nation indicate that significantly higher levels of renewable energy can be integrated without any compromise of system reliability,” as reported by Reuters.
Some industry analysts argue that the addition of renewable energy provides a more diverse mix of fuel sources, making the grid more reliable, not less. While utilities must continue to update an antiquated grid system to deliver increasing sources of renewable energy, the result is better reliability.
But what about those times when the wind doesn’t blow? A wind-energy promoter once told me that the wind is always blowing somewhere, and as more wind turbines are integrated into the system, the more it adds to baseload generation availability.
Diversifying the U.S. utility fuel mix presents several opportunities for Wyoming, where the No. 1 reason a wind turbine is shut down is because the wind blows too hard. Planners at the Wyoming Infrastructure Authority worked with energy industry leaders to draw up scenarios that include natural-gas backed wind farms — a strategy that plays to the state’s long-standing desire to add value to Wyoming resources here at home rather than simply exporting the raw fuel.
Not all wind proposals in Wyoming will come to fruition. Power Company of Wyoming’s $5 billion Sierra Madre and Chokecherry wind energy project faces a huge challenge. Its biggest target customer, California, wants to fill its renewable energy portfolio with generation within its own borders rather than importing power, as reported by the Casper Star-Tribune.
Chinese developer Goldwin could face a similar challenge with its Wyoming wind energy proposal. Meanwhile, PacifiCorp, with its well-established transmission infrastructure and existing customer base, stands a much better chance of seeing through its $2.2 billion wind investment plans in Wyoming.
Although the “new normal” of a smaller coal mining industry means fewer jobs and decreased revenue from coal in the near term, the long term net result of the current utility fuel shift for the state depends on state lawmakers. Will they embrace the shift to renewable energy or stand in the way?
“I think we need economic development in the state, especially in those areas of the state where those [wind energy] projects are going in,” manufacturing entrepreneur Mike Wandler told WyoFile.
Wandler is president of L&H Industrial in Gillette, a family-owned service and manufacturing company that started out as a small welding shop in the 1960s. L&H expanded its services to play to demand cycles and ultimately went international with manufacturing. Now it’s even serving NASA space missions. You could say L&H Industrial might have starved without coal to fill in the oil-and-gas voids of the 1980s and 90s, or without the flexibility to follow the market.
Wandler said the company still gets a lot more work from the coal industry than the wind industry. Nonetheless, Wyoming should welcome all types of energy development. “When you’ve got a bird in hand you’d be crazy to throw it away.”
Wandler and members of the Wyoming Business Alliance worry that Wyoming lawmakers may impede major new wind energy development through taxation and state regulatory requirements. In a recent op-ed published in the Gillette News-Record, Wandler noted that wind energy proposals in Wyoming offer the state’s manufacturers and energy-industry service providers (centered in Gillette, Casper and Rock Springs) a new source of work that’s more steady than the boom-and-bust cycles of finite energy commodities.
“Our current and future generations of highly skilled workers would have more opportunities to stay in Wyoming, working in high-quality Wyoming jobs,” Wandler wrote.
He added these statistics from a University of Wyoming study of what wind energy could provide to Wyoming:
° More than $7 billion in new economic activity in the state.
° More than $3 billion in new labor income.
° More than $1.9 billion in new tax revenue over the first 20 years of currently proposed projects — primarily paid in property taxes, sales and use taxes, and electricity-generation taxes.
° Nearly 52,000 job-years of new employment — including construction and services jobs that Wyoming’s economy especially needs right now.
Full disclosure: I worked several years as a “helper” and mechanic’s apprentice at L&H in the early 1990s. I learned a lot more than just how to sandblast grease-caked mine parts and how to flame-harden (now an obsolete craft left to urban hipsters) steel pins and cable hoists. I also learned that Wyoming workers appreciate being told the truth rather than lines of BS that come from politicians or corporate headquarters in St. Louis, Missouri.
Truth is, Kellow’s suggestion of a moratorium on coal plant retirements doesn’t only fly in the face of market realities and laws that require utilities to justify their capital investment plans to public utility commissions for the sake of consumer protection. It contributes to the narrative of false expectations. Expectations like there’s 250 years worth of mineable coal supplies in the Powder River Basin, and that a Democratic presidential administration would shut down coal in a single term while a Republican administration can save it.
A moratorium on coal-plant retirements was just one of several action items Kellow included in his presentation to the American Coal Council at the Stein Eriksen Lodge in Park City, Utah. But it’s indicative of a narrative spun by an international corporation that would like to blame federal overreach for its own failures to react to market realities while offloading tons of debt and laying off hundreds of dedicated Wyoming employees.
I believe Kellow’s moratorium idea is misguided and ill-intentioned. Though I don’t think we’ll see anything like it enacted anytime soon. Rather than give Wyoming miners and lawmakers false hope and expectations, Peabody Energy should learn from its recent miscalculations and shoot straight with the people of Wyoming.