Energy Secretary Ernest Moniz told reporters earlier this month that "there is no war on coal
Read it as you like — as a true statement, or as exactly what you'd expect someone to say who's waging a war on coal. Either way, political warfare is preceding literal explosions, as utilities count demolition and redevelopment as options in a future projected to have reduced reliance on coal, the carbon-based fuel most dangerous to the climate.
Coal-fired power plants, particularly in the United States, are struggling to stave off two major offensives, from markets and governments. Abundant, inexpensive natural gas has made coal-burning less efficient. Government regulation — including U.S. limits on mercury pollution and potential rules on carbon dioxide pollution — can increase operating costs. "To me, that's kind of a vise that's gripping the utility industry on two sides," said Richard Martin, editorial director of Navigant Research.
For these reasons, many coal plants will close in the next several years, according to a Navigant Research report published last week. Engineering, demolition and remediation companies stand to win what's expected to be more than $400 million in revenue this year from coal-plant decommissioning in North America, the Eurozone and the U.K. That revenue stream will top out at more than $1.2 billion in 2016, the study projects, before easing back down as the number of old coal-plants declines.
Navigant Research estimates that there will be 137 plant closures in North America and 144 in Europe by 2020, Martin said, totaling 53 gigawatts and 49 gigawatts, respectively.
Strapping explosives to an obsolete facility is a simple, inexpensive step in the decommissioning process. "In other words, it's pretty easy to blow stuff up," Martin said. Environmental remediation, which can be choreographed by large firms such as TRC Cos. and Amec, is much tougher. "The origin of this report was us kind of looking out there and saying, 'Wow, a lot of these coal plants are retiring. What the hell are they going to do with them? And, whatever they decide, who's going to take care of that?'" Martin said.
Full remediation is likeliest to take place where the land beneath a plant is most valuable, namely older facilities close to cities. Some coal plants might retire in a way that retirees themselves can approve of — by becoming golf courses.
Other shuttered coal plants are slated for commercial development. The poster child here isn't a poster at all but an album cover, London's Battersea Power Station , which Pink Floyd featured on the cover of their 1977 LP, Animals . Malaysia's SP Setia Bhd. and Sime Darby Bhd. led a consortium that bought the facility, which has been vacant since 1982, for about $620 million last year. The new owners are planning to maintain the iconic structure and build residential properties and luxury shopping.
Some coal plants might stay in the power business, just not as pure coal-fired facilities. Utilities can keep the infrastructure and boilers in place and burn natural gas instead. This option might be less common than expected given how inexpensive U.S. gas is now. That's because switching a plant's fuel source can cost as much as building a new plant. Burning both coal and gas, called co-generation, will be an option in some places.
The report, which focuses on decommissioning coal plants, focuses on the U.S. and Europe. Elsewhere, notably China and India, the number of coal plants is growing.
Like the wars on terror , crime , drugs , poverty , cancer , science and Christmas , having a "war on coal" is just the way Americans, or politicians, or media, or somebody, prefer to talk about market transformation and policy debate. The label unites defenders of the coal industry against an imposing enemy. It agitates the presumed belligerents, environmentalists, highlighting their challenge to come up with a counter-slogan as catchy. In the case of regulating mercury pollution from coal plants, "war on air and waterborne neurotoxins of coaly origin" just has less punch.
Naturally, a "war on coal" gives pundits an opportunity to thump bellicose language on a topic considered, often fairly, too boring to bring up without bellicose language. My preference would be for Washington to sober up a bit with its wars on fuels, science, disease and abstract concepts. My preference would be for everybody to get their war on "war on..." on.
Analysis and commentary on The Grid are the views of the author and don't necessarily reflect the views of Bloomberg News.
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