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Archive for the ‘Coal’ Category

Paradise (KY) Coal Plant

The Paradise 3 Coal Plant near Drakesboro, Kentucky

Today the Tennessee Valley Authority, the federally-chartered corporation that provides electricity to all or parts of seven southeastern states, will determine whether the Paradise 3 generating station near Drakesboro, KY and the Bull Run station in Clinton, Tennessee, both of which are coal-fired, will be closed. You might well ask why a coal-fired station would be named “Paradise.” If Adam and Eve had lived anywhere near the Paradise 3 station, as pictured above, they probably would have skipped that whole business with the serpent and just left on their own.

If the plants are to be closed, it won’t happen overnight. They’ll be phased out as part of a process that preserves grid reliability. President Drumpf has urged the TVA to keep the two plants open, which would help coal mining companies that contributed to his campaign. It would also help preserve some employment of coal miners, but any claim that keeping these two plants running is “bringing coal back” is absurd. The percentage of coal-fired generation has been on a steady downward march and, as explained in a recent post, that is not due to some alleged “war on coal.”

The reasons for shutting down these two plants shows the problems politicians encounter when their campaign claims to “dig coal” meet the real world. A report commissioned by TVA states that these two plants will have relatively high projected future maintenance costs and environmental compliance expenditures, high forced outage rates and are a “poor generation fit” for TVA’s future power demands.

Forget about air emissions for a moment. When coal is burned, it doesn’t just disappear. Just like the burned-out briquettes in the barbecue the morning after the party, coal leaves ashes behind; coal ash, to be specific. It’s a mess:

Coal Ash Pit

When it rains, water falls onto the open coal ash pit and seeps down through it, percolating into the ground below with bad effects on groundwater resources. When it’s dry, even a moderate wind can pick up coal ash and blow it over a wide area.

Coal-fired generation will be with us for some time yet, but over the long term it’s an 18th- and 19th-century technology that will go the way of the cross-bow, the walled city, and the eight-track tape.

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AOC

Rep. Alexandria Ocasio-Cortez (D-NY, 14th Dist.)

There’s a lot to digest in the Green New Deal Resolution introduced by New York Representative Ocasio-Cortez.

First, though, I have to hand it to Rep. Ocasio-Cortez. Being referred to just by your initials is a mark of high achievement in American politics. Exactly what it means can be debated, but there can be no doubt that it implies some degree of general recognition among the public. We had FDR. We had JFK. Then came LBJ. Eisenhower was called Ike, of course, but he never ascended to the heights DDE. That was probably better for him since those initials are uncomfortably close to DDT. Reagan was never RR. These instances could be multiplied.

Rep. Ocasio-Cortez has been in office for just over a month and she’s already earned her initials: AOC. Whether or not you like her or her views, she’s gained recognition, and some popularity, because she’s correctly viewed as putting the demos back in (little “d”) democracy. Democracy is not equivalent to populism, but that’s a discussion for another day.

Back to the Green New Deal. Section (2)(C) of the GND Resolution calls for meeting 100 percent of the power demand of the United States through “clean, renewable and zero-emission sources…” That could portend some problems for AOC’s supporters because “renewable” and “zero-emission” are not the same. As Voltaire said, “if you wish to debate with me, define your terms.”

Exelon views nuclear generation as zero-emission. Is nuclear generation “clean”? If you formerly lived near Three Mile Island, Chernobyl or Fukushima, your answer is probably a resounding “no!” Likewise, as people who live (or used to live) in those three places will tell you, nuclear power is zero-emission…until it isn’t.

That’s not to say that nuclear should not be part of a balanced power generation portfolio, but, as  I’ve discussed in the Sparkspread over the last several years, two major problems in nuclear generation have to be addressed: spent fuel disposition and regulatory capture. Dealing with those two issues will go a long way to clearing various energy-related poisons from the American political bloodstream. Unfortunately, there has been thus far insufficient political will to deal with either of these issues.

A ten-year schedule to move the U.S. to 100% renewable electricity generation is a laudable goal. But it will be far more ambitious than JFK’s end-of-the=decade moonshot goal of 1961.

If you want more renewable generation, you’ll need more transmission lines – new ones. Not everybody likes new transmission lines, especially when they come to close to their homes and farms, or affect the vistas of nature in America.

Renewables are generation resources, and while renewable generation forecasting has improved with improved meteorology, renewables are not dispatch resources. If a coal-fired or natural gas-fired station goes down, or if its access to the transmission grid is lost for some reason, that incident may occur at a moment when sunlight or wind conditions are insufficient to enable a renewable generating station to supply power to the system.

That is not to say that renewable generation should not be developed, or that it’s worse than coal or natural gas or nuclear, or that there should be no ambitious plan to substantially expand renewable generation over the next ten years. But every form of electricity generation, just like every other discrete product of human ingenuity, has its problems. I’m a big believer in making no small plans, but at the same time don’t get too far away from the known facts.

 

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coal-mining-scene2

Coal mine, early 20th century

“Friendly fire” is one of those euphemisms that’s hard to square with reality. It occurs when some of your troops are out ahead, most likely going toe-to-toe with enemy forces. Reinforcements arrive. But the reinforcements mistake their own troops for the enemy and start firing at them. Whoops.

It’s nothing new. In Britain’s First Afghan War (1839-42), a contingent of Indian troops were arriving by sea at Karachi, Pakistan, the closest port of call to the front lines. They were to join up with other local troops from the Sindh who were also allied to the British. These Sindhi soldiers were stationed at a combination lighthouse-fortress that guarded the mouth of the harbor at Karachi.

When the warship carrying the Indian troops arrived in the harbor, the commander of the fort made the unfortunate decision to greet it with an artillery salute. The ship mistook this for an attack and opened fire. Within a very short time many of their Sindhi allies lay dead underneath the smoking rubble of what used to be a lighthouse and a fort.

And that’s the problem with the war on coal. There is no war on coal, but politicians can use it to get votes. Get people angry. Make them feel like victims. Then they’ll vote for you. Remember “Trump Digs Coal”?

CNN (yes, I know, it’s CNN) put out an interesting clip yesterday on whether Trump has fulfilled his promises on restoring coal mining jobs. Electricity generation is the leading use of coal in the United States, but the fact is that more and more  coal-fired generation is shutting down not  because of any Obama-era war on coal, but because coal-fired generation just cannot compete on price with natural gas-fired generation and, increasingly, with renewables.

But it’s easier to win votes if you can say there’s a war on. Then you have an enemy. In fact, it’s pure economics.

The reason that natural gas is cheaper is because of fracking and the development of reserves in what were previously hard-to-reach (if not impossible-to-reach) shale formations. Fracking and natural gas spurred economic development in Texas and Louisiana, along the Gulf Coast, in an area running through Pennsylvania, Ohio and New York known as the Marcellus shale, and in North Dakota in the Bakken.

Cheap natural gas is good for the manufacturing sector. You need steel to drill for natural gas. With cheaper natural gas, steel manufacturing costs go down. Which makes steel equipment for fracking less expensive. Which makes for more natural gas…and so on.

Cheap natural gas is a feedstock for other products, such as ethylene for plastics. You may not like plastics, but, face it, you use them every day without noticing it.

One of the concerns sparked by the recent death of FERC Chairman Kevin McIntyre is whether natural gas projects, such as pipelines, might be delayed. FERC has tried to allay those fears, but the magnitude of the concern shows one of the economic differences between coal and natural gas: transportation. Natural gas moves by pipeline. Coal moves by railroad. Large portions of the railroad infrastructure in the United States is in a dangerous state of decay, and needs to be rebuilt. In terms of economic returns, railroad repair would be a much better use of $5 billion than a wall along the Rio Grande.

Sure, environmental regulations hamper coal-fired generation, but the real deciding factor is the price of the coal-fired kilowatt-hour.

Coal-fired generation will continue to be used in the U.S., but it will decrease. If the government decides to keep coal alive, that’s a subsidy no matter what it’s called. To the extent you subsidize one player (coal) in a market (electricity), you hurt others (natural gas, renewables), and the other industries that depend on those other fuels — whether in North Dakota, along the Gulf Coast, or in the Marcellus.

And that’s why the war on coal is a war of 100% friendly fire.

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Coal mine, early 20th century

Coal mine, early 20th century.

There are mines and there are trenches, but they’re not the same. The so-called war on coal is a great story, but it’s a complete fiction. If there’s a war on steam coal, then there has to be a war on nuclear generation as well because they’re both in the same wholesale electricity market. You don’t have to look far to see Exelon and other nuke operators begging their state legislatures for additional subsidies for their plants. When wholesale electricity market prices are favorable, then coal mines and coal-fired plants (and nukes) extol the survival of the fittest in the Free Market, where only the most efficient competitors survive. But when that market turns on them, all of a sudden “the market is flawed,” and customers are no longer just customers; they’re “stakeholders.”

Be very afraid when anyone in the energy business starts calling you a “stakeholder.” It’s code for “we need you to pay us more money, but our reasons are really bad, so we have to fool you into believing that we’re all in this together.”

Coal mines are not being shuttered by the EPA or Hillary Clinton. The straight-up fact is that shale play natural gas has brought power prices down to levels not seen in years. Allied to this is the continued weak demand in what the feds tell us is our country’s longest (and slowest) economic recovery. The consequence is that low market electricity prices have persisted for an extremely long time.

The mines are being closed, and coal companies are declaring bankruptcy, not because politicians are waging some sort of trench warfare, but simply because of the price of coal, which varies directly with the price of natural gas.

Without doubt, new environmental rules have played a part in reducing coal-fired generation. But if you kick in the door on a house that’s in the process of falling down, don’t expect to be paid for the demolition job. A small decrease in the price of natural gas has a disproportionately large impact on demand for steam coal, and thus on the question of whether to shut a coal-fired station.

There’s no war on coal, and Don Blankenship, contrary to his claim, is not a political prisoner.

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Coal-fired Power

Coal-fired Power

While the Hillary v. Donald Rumble on Monday night garnered all the media attention, the D.C. Circuit Court of Appeals heard a far more substantive discussion the following morning. An en banc panel of ten federal appellate judges heard oral argument on the Obama Administration’s Clean Power Plan.

It was a “hot bench,” with lots of questions from the judges. And while Hillary and The Donald put down their swords after 90 minutes, the oral argument on the CPP went on for more than seven hours.

West Virginia’s Solicitor General opened with an artillery barrage in the putative war on coal. The CPP sets target emission rates for fossil fuel generators such as coal, and prohibits them from operating if they exceed those limits unless they purchase carbon credits from generators whose emissions are below their assigned limits. He argued that the CPP thus forces coal plant owners into an impossible choice: they either subsidize their renewable energy competitors or shut down prematurely. In his view, that would affect not just West Virginia but the nation as a whole. W. Va. and other opponents argued that the Clean Air Act does not allow the EPA to require plant owners to invest in different generation resources.

The question of the scope of the EPA’s authority got a lot of attention. The EPA and other proponents of the plan countered that this type of regulation is already commonplace in the power industry. They argued that the emissions trading contemplated by the CPP would be the least expensive method of pollution control, especially when compared to setting emissions caps for each plant. EPA argued that the Clean Air Act mandates that it devise the best system of reductions for any particular pollution type, and that’s what the CPP does. They pointed to the Supreme Court’s 2007 ruling in Massachusetts v. EPA, which mandates that the agency act to regulate carbon. And, they continued, the high court’s 2011 ruling in AEP v. Connecticut affirmed the EPA’s regulation of carbon, declaring that because climate change damages were within the EPA’s jurisdiciton, individual states could not sue power companies for climate change harms.

Their opponents argued that other language in AEP casts doubt on the scope of that holding.

Other CPP opponents claimed that because CPP requires major changes to the power grid, that the EPA is infringing on states’ rights because each state is responsible for the reliability of its own electric power system. Numerous shut-downs of coal-fired plants that would follow implementation of the CPP would adversely affect grid reliability.

Once again, it comes down to the Third Branch Default Setting that we’ve seen before in litigation interpreting laws that are both complex and unclear. The almost endless adventures of the 8th Circuit Court of Appeals with the Telecommunications Act of 1996, now forgotten like some long-ago war over an equally forgotten issue, comes to mind. Yet the problem is essentially the same. Congress enacts a law, but because of its own inability to agree on what that law should really say, it gets passed with provisions that don’t add up, or are even contradictory. But those problems are down the road, and it’s more important for legislators to get some earned media at the signing ceremony and have some accomplishment to write home to constituents about. Thus it falls the judiciary, sooner or later, to sort things out. C’est la vie, c’est la guerre.

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Soft-diamond Specials waiting to move out

Soft-diamond Specials waiting to move out.

Argument is scheduled for today in bankruptcy court in St. Louis over Peabody Energy’s request for approval of $16,200,000 in executive bonuses for six top executives (In re Peabody Energy Corp., Bankrtcy., E. Dist. Mo.). Peabody, one of a series of coal company insolvencies over the past few years, filed bankruptcy this past April, attributing its difficulties to declining demand overseas, particularly from China, low market prices for coal, and the loss of electricity generation demand to cheaper shale gas. These factors allegedly rendered the company unable to service its $10.1 billion debt load.

The United Mine Workers pension and benefit funds oppose the plan, saying it’s both inappropriate and unfair to pay bonuses to senior executives when employees are losing their jobs.

Peabody Energy counters that the bonuses are essential to turn the world’s largest private-sector coal company around and offer stakeholders the best possible recovery. The company claims that the bonuses are tied to its achievement of certain performance benchmarks through the end of 2017. Reuters reports that the debtor’s unsecured creditors’ committee supports the bonus plan and that the U.S. trustee has not objected.

Though unseen, the ghosts of AIG retention-bonuses-past usually attend these hearings. A debtor proposing such a plan must show that it is based on pay-for-performance and not just an executive retention program.

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Former Massey Energy Co. CEO Don Blankenship

Former Massey Energy Co. CEO Don Blankenship

Huffington Post has a blog entry on Massey Coal that’s worth reading:

Justice — of sorts — was finally delivered as Donald Blankenship, the former Chairman and CEO of Massey Energy, was convicted (with a maximum fine of $250,000 and up to one year in prison) of conspiring to willfully violate mine safety standards at the Upper Branch Mine in West Virginia, where 29 workers died in April 2010. Here’s a blog I wrote about it a few months after the disaster.

Huffington makes the point that the Upper Big Branch mine explosion is much like the 2008 financial crisis because they both have the same root cause: elected officials who should have been creating a regulatory system that protects workers (or investors, or the public) instead created a system whose first priority is to protect the corporations it was meant to watch over.

Read the full Huff Post entry here.

It’s also the same as the BP Deepwater Horizon, whose regulator was the Minerals Management System, or MMS. The MMS was a bureau within the U.S. Department of the Interior (DOI):

MMS’s biggest problem was agency capture. In 2008, MMS was caught in a scandal in which the Department of Interior’s inspector general found that regulators had “inappropriate relationships with industry that could compromise their objectivity.” Those inappropriate relationships allegedly included sharing alcohol at industry functions, using drugs, and sexual relationships between regulators and industry professionals. [17] The inspector general also characterized MMS as dependent on industry’s greater expertise with the technology of deepwater and ultra-deepwater drilling, and thus reliant on industry’s judgment of appropriate safeguards to incorporate in regulations.[18] Essentially, the oil industry’s deep pockets gave it strong leverage over MMS decisions.

Yep. MMS was literally in bed with the company it was supposed to regulate. And as they said on the bridge of the Titanic, that’s just the tip of the iceberg.

From: Changing Direction: How Regulatory Agencies Have Responded to the Deepwater Horizon Oil Spill (Part I of II)

 

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