Business/Finance

Is coal really dead? Well, yes.

Energy - Coal.jpgWhen the railroad industry decides that coal is dead, it probably is.

For all their imperfections, markets generally do know how to price a pretty broad spectrum of goods and services (nature not so much). So when a substantial and integral player of the US private sector–railroads–decides that coal is dead, it probably is. Keep in mind that North American railroads, including CSX, have made quite a bit of money hauling coal around over the years–it’s largely why Warren Buffett bought Burlington Northern, in fact. And if there’s an industry that has to rely on taking the long view, it’s this one.

There has been considerable anxiety over coal, not just in the US but pretty much everywhere. China and India still build coal plants, but it’s clear they are both moving away from this as soon as they can. Parts of Northern Europe are still grappling with many of the same issues that the coal heartland of the US is dealing with–particularly the loss of jobs. The fact that renewables now account for more jobs in the US than coal is starting to seep through, however, and the more generous safety net found in northern Europe has allowed those governments a bit more time  to deal with these issues. They all know where this is headed.

Which doesn’t mean it will happen tomorrow. What it does mean is that Trump was making it up, or at least in part–coal jobs are just not coming back. (He was right on some of the broader job insecurity issues, though, something Democrats still haven’t figured out.) But it’s pretty much baked in at this point. Before (and even after) Trump pulled the US from the Paris climate Agreement there was a whole lot of handwringing over what the implications of that might be, with considerable consternation over whether or not the deal could fall apart.

Fortunately, it has since become clear that the head of one NGO was correct in his initial assessment–“Who cares?” The economics are what is driving this now–the cost of renewables has come down faster and more extensively than anyone was predicting even four years ago. States and major cities in the US have already indicated that they remain committed to Paris Agreement targets, and indeed there has been speculation that the US will meet these targets anyway even if it’s no longer a signatory.

The UK recently reached a point where no electricity whatsoever was being generated by coal, and the nation’s largest power supplier has indicated that its future is coal free. It may not be an easy transition for some economies, but it’s under way.

1 reply »

  1. I’ve never seen anyone win an argument with the railroads. Perhaps just as pivotal, US electric generators are done with coal. Many (most) coal plants in the US are near or at their expected life span. The US isn’t going to produce enough coal to lower the price to a level where it competes with gas when considered by generators.

    Probably half of a coal plant’s size is dedicated to delivering fuel and cleaning up the smoke. Coal has to be stockpiled, constantly moved so it doesn’t combust, transported above storage bunkers, dried, crushed into a fine powder, and blown into the boiler. Gashas a pipeline spur, a storage tank and a valve.

    Coal plant emissions controls start with an electrostatic precipitator, then go through various bag filters, and now through dry absorbants. Everything removed from the smoke has to be gathered and disposed of. Gas emits CO2 and not much else.

    All that equipment has to be maintained and operated. Equivalent capacity in gas requires less capital to build, less revenue to operate, and fewer people to keep the lights on. And gas plants can respond quickly to grid demand. It takes hours to start a coal boiler and hours to shut it off.

    Add all that to the fact that gas is also cheaper than coal, and generators have an easy decision. They’re making it.

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