Unrealistic Expectations for Coal’s Future – 1/4/17

Even Robert Murray, CEO of Murray Energy Corp., the largest underground coal mining company in the U.S., does not expect coal’s mining jobs or new coal-fired power plant construction to make much of comeback.

“I’ve asked President-elect Trump to temper his comments about bringing coal miners back and bringing coal back. It will not happen,” Murray said in a recent interview with POWER. “The destruction that has happened is permanent.”

In 2007, coal accounted for more than 48.5% of net generation, according to the U.S. EIA. Through the first nine months of 2016, only 29.9% of the county’s net generation was from coal. Murray doesn’t see that going up much in the future.

He points out that electricity generated by natural gas as a particularly insurmountable barrier to a revival in coal. Historically, electricity from natural gas has cost about 15¢/kWh to produce, but with the boom in hydraulic fracturing ballooning gas supplies, the price of the power has fallen to about 5¢/kWh, giving it a competitive advantage over coal.

Murray also expressed doubts about the future of carbon capture and sequestration (CCS), saying it isn’t going to fix coal’s fundamental problems. He speaks as someone who helped build the Great Plains coal gasification plant, the largest carbon dioxide (CO2) capture project in the world.

“Carbon sequestration is not practical. It is not economic. It’s a pseudonym for ‘no coal,’ ” Murray said.

Yet, CCS plants could soon get a financial lifeline thanks to the President-elect’s interest in clean-coal initiatives as a way to preserve mining jobs.

The biggest winner could be Southern Co.’s Kemper County power plant, a facility designed to capture about 65% of its carbon-dioxide emissions and sell it to oil companies. Construction and technology issues have doubled the cost of the Kemper project since it was approved in 2010, to nearly $7 billion.

Proposals set for debate in Congress over coming months are largely aimed at increasing tax breaks for capturing CO2.

One of the bills, filed by Republican Rep. Mike Conaway of Texas, seeks to raise subsidies and continue them indefinitely rather than have them expire once 75 million metric tons of carbon dioxide have been captured, a threshold expected to be reached by 2019.

Another bill supported by Sens. Heitkamp and Sheldon Whitehouse — co-sponsored by Republican leader Mitch McConnell — would increase the current tax credit of $10 a ton of carbon emissions captured to $35 a ton for the first 12 years a plant operates.

Brett Wingo, a former project manager for the Kemper plant, presents a harsh critique of the project. He predicts Kemper wouldn’t make its year-end completion target, missing out on $250 million in depreciation expenses this year. Earlier delays have already resulted $2.6 billion in Kemper-related charges. Southern also had to refund $412 million in subsidies to the federal government as construction dragged on.

When the people actually managing companies in the coal industry tell you to get more realistic about coal’s future, then it might be time to listen.

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