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2 May 2019

“Resistance is useless,” even Wyoming coal country needs renewables

US energy utility PacificCorp has said it will close down a number of coal fired electricity plants early by 2022. The plants are all based in Wyoming, and the reason is purely economic –  keeping them open will cost too much money. This is despite local laws again coal closures, in what is a state that violently opposes renewable energy.

PacificCorp has plans to replace the coal plants with a combination of wind, solar and batteries and reckon it will save the company $248 million. PacificCorp is owned by Warren Buffet’s Berkshire Hathaway and operates as Rocky Mountain Power in Wyoming, Utah and Idaho and has around 1.9 million customers.

Warren Buffett continues to tie money up in fossil fuel activity, and this week he got into a bidding war, backing Occidental Petroleum to the tune of $10 billion, in a fight for control of Anadarko Petroleum. Chevron is a rival bidder there and has proposed a $33 billion buyout of Anadarko.

Interestingly Buffet has a broad series of investments in both fossil fuels and insurance – both could suffer irreparable harm from climate change, and the emergence of renewables, but he offers no opinion on climate change, only on investments.

However in this instance the management team at PacificCorp, have finally come around to the idea that saving money is about making rational decisions around renewable energy. It will retire four of its least economically competitive coal units in Wyoming by 2022 and this is way ahead of those assets being depleted – they are simply uneconomic.

The company revealed that it could end up close as many as nine coal units in Wyoming and Colorado all of which would lead to savings not losses, over a 20 year timeframe.

Interestingly the decision relies on data provided by Burns & McDonnell Engineering Company, which carried out an assessment of both solar and wind last October as an internal resource for PacificCorp’s planning. Those were based on pricing and efficiency for a 200 MW plant built with 3.6 MW turbines and 80-meter hub heights, so based on the Vestas V136-3.6 and the GE 3.8-137 models. Given that there are more efficient devices which scale all the way up to 10 MW throughout their product lines, this seems unnaturally conservative. Pricing for PV panels were redacted in that report but were supplied after the US tariffs imposed in the Chinese trade war.

Although PacificCorp has only said it will close four plants, it might extend that to nine and yet it still has 22 coal plants. It revises its position every two years and most of the plants will reach the end of their depreciable lives at various points over the next 20 years, which should lead to a shift entirely to renewables if these price trends continue.

“We continuously examine the costs and benefits of how the company generates electricity to ensure we are making the best decisions for customers,” said Rick Link, PacifiCorp vice president of resource planning and acquisitions. “The study reflects the ongoing changing economics for coal driven by market forces.”

The company anticipates issuing a preferred portfolio for input from regulators and stakeholders before submitting a final plan to state regulators this August.

This is pretty much the pattern you would expect throughout the US, failing incentives introduced by government to shift to renewables – a continued use of sunk costs in coal for as long as it makes economic sense, and a 20 year investment in renewables.

However given the Wyoming is an intrinsically coal friendly state, you would both expect this move to happen last there, and for it to be challenged by the state. There are fresh state laws on which presents obstacles to selling or shutting coal plants there – ostensibly to preserve jobs, but of course this actually damages jobs, as renewable installations replace payments for raw consumables like coal with more and better paid jobs.

One of the obstacles put in place by the new laws is the requirement for vastly larger batteries than a replacement might logically need. In the engineering assessments batteries from 1 MW up to 15 MW with 2 hours, 4 hour 6 hour and 8 hour capacity were all assessed and priced, with both Lithium Ion and Vanadium Flow technologies, priced, and potentially tiered with Lithium to store solar and wind spare energy, and Vanadium flow to push it to the grid. Something close to 300 MW or more may end up being commissioned.