Warren Buffett, probably the world’s most successful investor, a man noted for the conservatism of his investment policy and aversion to high tech, wants out of coal? Buffett’s Berkshire Hathaway controls a string of electric utilities that, in the past, burned plenty of coal.
One of his largest utility holdings, PacifiCorp controls coal burning utilities throughout the west. It wants to phase out coal-burning power stations in Wyoming. Reason: according to a PacifiCorp official, a combination of renewables and energy storage is “really lower-cost than continuing to operate some of our existing fleet.” Notice the wording. The official did not say that the renewable package is cheaper than building a new coal station. He said that is was cheaper than running their largely depreciated coal plant built at low costs decades ago. “Our customers would… save money… by pursuing these… alternatives…” the executive added.
The reason utilities are hiding intermittent/transmission costs and pushing this is because they are able to recoup up to 10% on return on equity on the more money they spend. When they spend more, they make more. An attached is a link of a University of Chicago draft white paper that shows 29 Renewable Portfolio States (RPS) are 17% higher in cost/KWH than the other states. This can easily be verified when you look at the EIA data that shows many of the high wind penetration states (Iowa, Kansas, Minnesota, Colorado, California, and Colorado have gone up an average of 28% over the past ten years where the national average is about a 11% increase. A good thing that Coal and Natural Gas Prices have gone down significantly since that time or costs/KWH for these states would be a lot higher.
I am a natural gas advocate. Wyoming has plenty of natural gas available and should switch to it. They have natural gas and so do the Dakotas. They can also ship it, and use it for heating, transportation, etc.
In terms of the straight cost of producing power, renewable energy is now at parity with natural gas, not considering the need for renewables to lean on stand-by power from fossil fuel. I believe true parity comes when renewable energy is stored suffieciently to handle time-of-day, weather and seasonal power-producing shortfalls.
I find it interesting that power planners are placing a high degree of confidence in future electric storage. Engineers, I assume, are extrapolating out storage cost and capacity development and projecting that it's will be adequate to meet future demand.
We need to make this plan work. In addition we need adequate clean power for electric vehicles. We desperately need a clean transportation sector after years of progress in cleaning up energy use in buildings.
Steven Soychak cites the U of Chicago draft, which says that prices went up 17% in the 12 years from beginning of the renewable portfolio standard (RPS), an increase of about 1.3% per year. (not that prices were 17% higher than in other states). It also criticizes the efficiency of the RPS. in terms of cost per ton of greenhouse gas (GHG )removed. I can’t quarrel with either of those two points made by the Chicago researchers, although I don’t think their “likely” explanations were that convincing. As to the comment about the motivations of utility managements, (basically the the Averch-johnson thesis), there is another issue here. PacifiCorp filed an Integrated Resource Plan (IRP), which is suppose to integrate all costs into decision making, and they did so in a state that depends on fossil fuels, not a friendly jurisdiction to attempt to dump coal in favor of renewables. They can’t make their case if all the factors cited by Mr Soychak overwhelms the perceived savings from moving from coal to renewables.
Ronald Wagner believes Mr Buffet is switching from coal to burnish his reputation. Subsequent to our article, he indicated that he does things like this because they pay. PacifiCorp, in the IRP, will have to demonstrate that the proposed actions make economic sense, so let us not prejudge. I would be surprised if PacifiCorp would file it did not have a strong case.
Lee James is correct to put so much emphasis on storage. and the need to get decarbonization right. Consider this: electric generation accounts for roughly one quarter of GHG emissions and transportation another quarter. Since the basis of most GHG removal plans involves electrifying the economy, if the electric industry is not decarbonized first, there is not much point to doing anything.
But this is just getting away from the main point of the article, which is that when a coal-burning utility in a coal-mining state with its plants on top of coal mines thinks it should close down those facilities in favor of renewables, we need to pay attention.