Nobody's buying coal

In 2015, coal plants are shutting down, and renewables are taking their place.

In 2015, coal plants are shutting down, and renewables are taking their place.

Fossil fuel divestment is a campaign that’s snowballing—if you’ll excuse a mixed metaphor. In just the last month San Luis Obispo, California, and Corvallis, Oregon, have voted to divest. The University of Hawaii and the Rhode Island School of Design have done the same. And the University of Washington decided to divest from coal, as did the $900-billion Government Pension Fund of Norway.

Coal, in fact, is the easy one. No fossil fuel is more harmful to health, more destructive of the environment, or more of an accelerant to global warming. So it’s great news that many institutions not yet ready to make the leap to total carbon divestment are purging their portfolios of coal companies.

This week the California Legislature took a giant step in that direction. Senate Bill 185, which has cleared the state Senate, was overwhelmingly approved by the Assembly Retirement Committee. If enacted, the bill would require the two largest state pension funds in the US to divest from coal.

Coal is a bad investment

There is one additional fact about coal that sometimes gets lost in the flurry of describing its murderous impact: coal is a bad investment. And it’s been moving in a negative direction for some time.

Almost two years ago, in fact, the Bureau of Land Management (BLM) scheduled a sale of coal leases on federal land in the Powder River Basin of Wyoming, and it received no bids. Even at the going fire-sale rate of one dollar a ton for lease fees, not one coal company thought it could make money. Cloud Peak Energy Inc., which owned the mine that had first asked the federal government to lease the coal tract, released a statement saying mining the coal wasn’t economical.

And now? David Weiskopf of NextGen Climate reports that the lease price is still falling, but the BLM is, unfortunately, still trying to sell its coal. It has just approved the sale of “42 million tons of taxpayer-owned coal at the ridiculously subsidized rate of 41¢ per ton.” The fire sale continues, even though there are few takers.

Renewables are replacing coal

And that’s the good news, as Weiskopf goes on to relate. Even at low lease prices, nobody’s buying. Coal power plants are closing fast, and they’re being replaced by green energy:

Since 2010, about a third of our aging coal power plants have finally shut down or committed to shut down for good. As Melissa McHenry, American Electric Power’s director of external communications told the Washington Times recently, “that coal generation is gone, and it’s not coming back. The economics [of coal] don’t work” in today’s energy landscape.

In 2015 alone, about 13GW worth of coal plants … are scheduled to shut down. This capacity will be replaced by almost exactly the same amount of wind, solar, and other renewables.

Furthermore, China, once thought to be unalterably committed to coal-based energy, is cutting back. Weiskopf again: “Last year, China cut coal imports for the first time in over a decade, and as a result, actually reduced its carbon pollution this year by as much as the entire United Kingdom emitted over the same time period.”

If nobody buys coal, the law of supply and demand ensures that the price drops. If it drops far enough, coal companies can’t make money. And that’s exactly what’s happening. Peabody Energy, one of the largest American coal companies, was valued at $20 billion in 2011. Today, its market capitalization is less than $700 million, a loss of 97%. It’s so bad, as RL Miller reports, that the company is being dumped from the S&P 400 MidCap index. I hope you got rid of your Peabody stock four years ago. I wish CalPERS and CalSTRS had done that too.

Just to make sure that our California pension funds don’t lose any more money on this worthless (and dangerous) commodity, let your California Assembly Member know how important it is to vote for SB 185. Sign our petition here.

The divestment campaign may be snowballing, but some people don’t yet realize that getting rid of coal investments is an easy choice, a simple, black-and-white decision.

UPDATE, 6/29: This morning’s Supreme Court ruling delaying EPA regulations of coal-fired power plants makes the passage of SB 185 even more urgent. Looking on the bright side, David Roberts writes that the ruling is likely to stall implementation of the regulations by no more than a year, and the long-term legal effects are minimal—and therefore, we hope, so are the environmental effects.

Peabody Energy investors, however, in a burst of irrational exuberance, boosted the stock price by 9.6% today. Peabody’s total devaluation since 2011 is now 96.5%, while yesterday it was 97%. No, Antonin Scalia has still not turned coal into a good bet.

Cross-posted at 350 Bay Area