Will Coal Get Left in the Cold?

With the very foundation shifting beneath the feet of the energy sector, the industry’s players are trying to figure out their next moves. As with any economic transition, the changes are unsettling, bringing both hope and pain.  

And no where was the phenomenon put on display more than at the Public Utilities Fortnightly magazine conference on disruptive technologies. It featured speakers, representing a variety of energy segments, who are positioning themselves to win in this New Energy Economy, which stresses low-emissions fuels and the economic opportunities to flow from them.

“Energy security done right breeds national security and economic security,” says Tom Fanning, chief executive of Southern Company, at the conference. “How do we do that?

“I get what EPA is trying to do but it does not have the lens we in business do,” he adds. “It needs to create incentives, not sticks – incentives to a balanced portfolio that preserves clean, affordable and reliable electricity. I can do that better than the EPA and still preserve jobs and economic vitality.”

For Southern’s part, it is one of the nation’s largest owners of renewable energy assets. It is also building two nuclear units while it is also developing a carbon capture and sequestration project in Mississippi.

“It is clear to me that regulations are forcing us to move away from coal,” says Fanning. “But we have to do this in a way that does not destroy the livelihoods of those who work in the industry. The human consequences are enormous of shutting down plants.” In Putman County, Georgia, he says that the plant closures will affect 19 percent of its tax base.

It’s also clear to CEO Fanning and the rest of the industry that natural gas is the bridge to the future and that it will replace coal’s historical role. To that end, Southern is buying Atlanta-based gas company AGL Resources for $12 billion.

If coal gets left out in the cold, Murray Energy’s Bob Murray said that the nation will be making a terrible mistake. And while he knows that new technologies are making other fuel options feasible, he said that coal can still compete in today’s markets. As for coal’s troubles, he puts the blame on President Obama.

“The primary reason is the regulatory rampage of the Obama administration,” says Murray, at the Fortnightly conference. “What they are doing here is a political power grab. It has nothing to do with the environment. If you wanted to transform America, you get control of the availability of electricity and you have just centralized the federal government.”

He said that prior to President Obama taking office, coal provided 52 percent of the  fuel used to make nation’s electricity. Now that figure is 37 -- one that he expects to drop to 30 percent, and stay there. In 2008, 1.2 billion tons of coal were produced and now it is 700 million.

To try and stop the Obama administration’s Clean Power Plan, Murray has filed suit against the EPA. It calls its efforts to close down the country’s plants a “power grab” that is unconstitutional.

Meanwhile, the coal sector’s biggest utility clients like Southern Company, American Electric Power and Duke Energy are closing down their older coal-fired units and replacing them, generally, with those that run on natural gas. While the major coal-producing regions of Southern West Virginia and Kentucky are feeling the economic pinch, the major gas producing pockets of the country are booming -- the Barnett Shale, Marcellus Shale and Utica Basin, to name three.

Ken Silverstein is Editor-in-Chief of Public Utilities Fortnightly. Contact him at ksilverstein@fortnightly.com.