Tag Archives: Metallurgical Coal

Coal Myths and Legends: North Valmy as Dinosaur in the Coal Mine

The applause line “I dig coal” may play well in certain West Virginia venues, but it’s not playing all that well with Idaho Power:

“Idaho Power says its coal plants still generate capacity during high-demand periods, but baseload from the facilities has been declining—a trend it sees continuing in the region, and nationwide.

“The decline in baseload energy production is primarily viewed as driven by low natural gas prices and the expansion of renewable generating capacity,” the utility writes in its IRP. “Because of the low natural gas prices and expanded renewable generating capacity, wholesale electric market prices over recent years have frequently been too low to merit economic dispatch of coal generating capacity.”

Idaho Power is giving serious consideration to retiring its North Valmy plant in Nevada early; notice the references to natural gas prices and the expansion of renewable generating capacity.  In short, coal isn’t coming back, anywhere.

Why? Probably because capitalism works.  

“Coal has been crushed by the shale boom, which has made natural gas — coal’s biggest competitor — extremely cheap. The price that U.S. power plants have been paying for natural gas plunged 71% between 2008 and 2016, the Columbia report found. Coal prices were down just 8% in that same period.

At the same time, coal faces new competition from the rise of renewable energy, including wind and solar. The falling cost of solar energy combined with federal tax credits have created a boom in solar jobs. The solar industry ended 2016 with 260,000 workers, according to the Solar Foundation.” [MoneyCNN]

Why would a utility, or any other business for that matter, purchase supplies from a higher priced vendor when cheaper supplies are at hand?  If you want an example of how the “market works” this is it.  Utilities are increasingly using natural gas and renewables because those sources are (1) cheaper or (2) going to be cheaper in the long run.

A second point should be made — there are two coal markets: Metallurgical coal is used primarily in steel production; Thermal coal is used for electrical production.  Prices for metallurgical coal, also called Met Coal or Coking Coal, have increased as seaborne coal (from Queensland) tightens, and as supplies from Chinese mines diminish as their mines come under increased scrutiny about safety concerns.  The price of Met Coal is a function of not only American mines, but of Australian and Chinese sources.  The price of Thermal Coal has been declining since 2012 and doesn’t show any signs of reversing that five year trend anytime soon.  This is not a case of “if you mine it they will come,”  even with the decline in Thermal Coal prices, the price of natural gas and renewables are still putting pressure on the market.

The Columbia Study (pdf) explains, once again, how capitalism works.  What are the causal factors in the collapse of the coal mining sector of the economy?

“US electricity demand contracted in the wake of the Great Recession, and has yet to recover due to energy efficiency improvements in buildings, lighting and appliances. A surge in US natural gas production due to the shale revolution has driven down prices and made coal increasingly uncompetitive in US electricity markets. Coal has also faced growing competition from renewable energy, with solar costs falling 85 percent between 2008 and 2016 and wind costs falling 36 percent.”

Thus, bolstering the contention made previously that prices matter, and if lower prices are available for some commodity, then that’s where the “market” will go.  There are other factors: (pdf) A slowdown in Chinese manufacturing demands; deregulations may not have any significant effect on mining if the prices for natural gas and renewables continue to decrease; and, while we might expect a modest recovery to 2013 levels — that’s probably all that can be squeezed from this market.

So, Idaho Power/NVEnergy’s decision to concentrate on production using more renewables and natural gas is likely to be sound economically for long term corporate health — and the old coal-fired North Valmy plant sits like a Jurassic Creature in Pumpernickel Valley.

As for employment prospects, coal mining isn’t a growth industry: (pdf)

A plausible  range of US coal mining employment in these scenarios ranges from 70,000 to 90,000 in 2020, and 64,000 to 94,000 in 2025 and 2030 — lower than anything the US experienced before 2015.

Thus, basing economic policy on a sector which includes only 0.03% of our national economy makes precious little sense.  It makes even less sense to look backwards:

“When it comes to electricity generation in the US, the Department of Energy’s 2017 Energy and Employment Report suggests that the solar industry now employs more people than coal, oil, and gas combined. Oil still employs the largest share when including jobs related to fuels, however.

“Our findings would lead us to believe that the right place to invest dollars are in renewable energy rather than fossil fuels,” Delaney says. “These jobs are widely geographically distributed, they’re high paying, they apply to both manufacturing and professional workers, and there are a lot of them.”

How about job training for those seeking to move from a declining sector to sectors with more hiring prospects?  The Trump administration has lauded the prospects of job re-training and apprenticeship programs, but the money isn’t where the mouths are:

“Trump has proposed cutting the Labor Department’s budget by 21 percent in fiscal 2018.  That includes a 40 percent cut to the Labor Department’s Wagner-Peyser Employment Service, which supports about 14 million job seekers annually and last year helped nearly 6 million people find jobs. The proposed cuts also include a $1.3 billion reduction to programs that operate under the Workforce Innovation and Opportunity Act, which Congress reauthorized in a bipartisan move three years ago.”

Drilling down to “coal communities,” the impact is patently worse:

“Based on the limited information provided by the blueprint, President Trump’s FY 2018 budget would cut at least $1.13 billion from these programs and offices, including several in their entirety—a total that may increase when the full budget is released in May.2 Through the POWER Initiative, offices and programs targeted by the cuts funded more than $115.8 million in economic development, job training, and other grant projects targeting coal communities in more than 20 states from 2015 through early 2017.”

It is egregiously unseemly to give pep talks about “digging mining,” in coal country while slashing budgets for economic development and job training for the people facing declining employment prospects in the mining sector in those communities.  Indeed, the current administration gives every impression of saying “we love you,” to coal country residents while allowing greater pollution of their cities and towns, and cutting job training opportunities for residents seeking employment in faster growing sectors of the regional economies.

Meanwhile, the North Valmy plant stands in Pumpernickel Valley.

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