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Investors Flap Their Wings, Coal Industry Shudders

May 29, 2015
Karl Cates

The “butterfly effect” comes to mind on seeing what coal-industry executives must have perceived as an unnerving headline yesterday in Business Insider Australia, “A Chill Wind From Norway.” 

The article, by Greg McKenna, follows up on news out of Oslo on Wednesday that Norwegian lawmakers have agreed to require the country’s gargantuan pension fund to divest from billions of dollars in coal holdings. The butterfly effect is the chaos-theory idea that when a lepidopteron flutters its wings it creates tiny ripples that feed bigger ones that lead to hurricanes on the other side of the world.

Norway’s pension fund is no feeble butterfly, of course—it has assets in excess of $900 billion—but no single divestment-minded fund can change the world on its own. Norway is setting an example nonetheless and sending a ripple other investors will note, as IEEFA’s Tom Sanzillo suggests in a commentary this week that expands on what he told the Financial Times on Wednesday: “Norway has led and I suspect they will not be alone for long.”

McKenna sees other butterflies at work as well. He mentions how analysts at Citibank the other day lowered their long-term forecast for thermal coal prices and he reminded readers that China’s “everything-but-coal” energy-growth policy is affecting coal markets everywhere. He comes at it from a deliberately local point of view—it’s the coal-rich Hunter Valley of southeast Australia sensing that chill wind from Oslo, 9,000 miles away.

WRITING ON NEWSMINUTE.COM, A SITE THAT FOLLOWS CURRENT EVENTS IN SOUTHERN INDIA, NITYANAND JAYARAMAN this week cites recent IEEFA research that demonstrates how a proposed coal-fired electricity plant in Tamil Nadu state would damage the local economy.

“A wise electricity planner would abandon this project, and invest time and energy in working out alternatives,” writes Jayaraman, who lays out how the Cheyyur Ultra Mega Power Plant would raise electricity rates and how the project is banking on an unviable business model that has pie-in-the-sky stamped all over it.

“Even in an impossibly ideal world, Cheyyur is not expected to yield electricity before 2021,” Jayaraman cautions. “In five years, much will change in the technology and affordability of generation and storage of wind and solar energy. Already, these renewables are approaching grid parity with coal. Better still, they do not have the associated baggage of hostility by host communities nor the recurring fuel charges.”

THE GREATER BIRMINGHAM MINISTRIES HAS PUBLISHED RESEARCH ECHOING MANY OF THE SAME ISSUES RAISED IN AN IEEFA REPORT a few weeks ago on how the Alabama Public Service Commission operates mostly behind closed doors.

In “What Public Service?” the ministries, a multi-faith/multi-racial organization that dates from the Civil Rights era, argues that the PSC is largely a front for Alabama Power, which it sees as a predatory utility working against the best interests of customers.

An outtake:

“Now more than ever, the PSC institutes policies that are in no way equitable or economical for customers. Instead, they boost the bottom line of monopoly utilities, and in doing so harm Alabama families, especially in low-income communities where the inability to pay utility bills can lead to eviction and homelessness. This most recently came to light in December 2014, when the PSC signed off on an electricity rate hike of 5% for Alabama Power customers. This was business as usual; the decision was made swiftly, with next to zero discussion of whether the expenditures the utility said it needed were prudent or even necessary. In our effort to shed light on the imbalance of the PSC’s decision-making, this report contrasts the lucrative gains that PSC decisions facilitate for Alabama Power—the state’s biggest and most well-connected utility against the growing burden they place on customers, especially low-income earners, who are paying more than ever for services that have little to do with helping them save on their electricity bills.”

THE MISSISSIPPI KEMPER COUNTY ENERGY FACILITY A COUPLE OF HOURS OUT OF BIRMINGHAM GETS THE THIRD DEGREE this week on, where Darren Samuelsohn takes a deep and skeptical look at “one of the most expensive power projects ever built.”

The news hook is that one of the big partners on Kemper has dropped out, and the article describes the project much as IEEFA’s David Schlissel saw it in a commentary published this past November (“Kemper Power Plant, a Debacle That Should Never Have Been”).

The headline—“Billions Over Budget. Two Years After Deadline. What’s Gone Wrong for the ‘Clean Coal’ Project That’s Supposed to Save an Industry?”—poses a question that Samelsohn answers at length as he places Kemper in the greater scheme of U.S. coal industry machinations:

“Most Americans haven’t heard the name, but Kemper represents a survival strategy for coal. Every time the Environmental Protection Agency adopts new standards for pollution at power plants, coal becomes more expensive to burn. This summer’s expected clean-power regulations will for the first time impose carbon dioxide limits on both new and existing units. As the regulations tighten, and coal becomes hemmed in by more and more anti-pollution rules, the Kemper plant—the only new facility to break ground since late 2008—increasingly represents coal’s chance at a future in that new world.”

Samelsohn closes with a telling quote from Bud Albright, the Bush administration Department of Energy official who supervised the development of FutureGen, a federally funded Kemper-like project in Illinois that the Obama administration pulled the plug on earlier this year (and that IEEFA’s Sandy Buchanan wrote about this week).

“I’m not negative on [carbon capture],” he said. “I just haven’t seen it work. Everyone talks about it being ready in two years, in five years. It’s always tomorrow. It’s never today.”

THE HEADLINE OF THE WEEK GOES TO PV-TECH.ORG FOR ‘DUKE ENERGY PLANS MICKEY MOUSE SOLAR PARK,’ the title of an otherwise straight item about Duke Energy announcing it will build a solar installation outside Disney World. The facility will be constructed in three circles to mimic the Mickey Mouse logo and presumably to suggest that the company believes in clean-energy development more than its larger actions indicate.

Left unsaid in coverage of the announcement, which was picked up far and wide, is that Duke has worked diligently to disrupt the spread of rooftop solar nationally, most notably perhaps in North Carolina, where the Charlotte Observer earlier this month published an op-ed under the headline “Duke Energy Should Stop Fighting Solar as a Choice.”

The company, which relies heavily on coal for its power generation, continues to gain North Carolina notoriety for the havoc it has wreaked there, as explored most recently by David Zucchino (“After Duke Guilty Verdict, Fears and Questions Linger About Coal Ash”).

Duke gets some bad hometown press too from the Charlotte Business Journal, where John Downey reports that Norway’s divestment will include its shares of Duke Energy.

“The pension fund is one of Charlotte-based Duke’s largest shareholders, holding 0.76 percent of the company’s 692 million outstanding shares,” Downey writes. “According to information available on the EdgarPro website, the fund would be Duke’s 13th-largest institutional investor.”

The butterflies flap their wings; the winds of change stir.

Karl Cates is IEEFA’s director of media relations.

Karl Cates

Former IEEFA Transition Policy Analyst Karl Cates has been an editor for Bloomberg LP, an editor for the New York Times, and a consultant to the Treasury Department-sanctioned community development financial institution (CDFI) industry.

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