Coal vs. Concentrating Solar
The Days of Cheap Coal are Over!
This past Tuesday, American Electric Power Company agreed to a $4.6 billion settlement over pollution controls at its power plants. The company will also have to shell out $15 million in civil penalties and $60 million in cleanup and mitigation costs.
I don't know, folks. That seems like an awful lot of dough to clean up something that's just going to remain dirty anyway.
Of course, $4.6 billion isn't even close to what it's going to cost to continue operating these things in the future. Because the fact is...
The Days of Cheap Coal are Over!
You may remember a few months ago when Chris Nelder wrote an excellent piece on peak coal . That's right, peak coal!
According to his research, coal reserves have been overstated by as much as 90%, and the peak of world coal production is about 10 to 15 years away.
And as far as cheap?
Well, much like oil, those days are also coming to an end.
But not just because of the basic supply and demand issues attributed to coal's peak.
Thanks to CO2 mitigation initiatives and global warming legislation that--whether you like it or not IS happening--the cost of coal-fired generation is about to increase dramatically. And investors that prefer partisan loyalty and the fat belly laughs that come with mocking clean energy, instead of focusing on the logical evolution of energy markets, are going to miss out on loads of cash.
As it stands, we already have:
- 22 states and the District of Columbia with renewable electricity standards, covering over 40% of U.S. electricity.
- 13 states with global warming reduction targets
- 6 regional climate change and alternative energy initiatives encompassing 28 states
- Five of the nation's top 10 power companies supporting federal CO2 cap-and-trade legislation
- Huge corporations, like Wal-Mart, GE and Google supporting CO2 limits
What does this all mean?
It means that energy generation that is not clean or sustainable will soon be hit with heavy carbon offset costs. And that's going to force coal-fired plant operators to pay a damage bill that, until now, they've been able to avoid like a bad case of herpes.
Now I realize I'm probably going to get a lot of hate mail over this. But before you start drafting that letter, let's at least put this into perspective before the name-calling begins.
As most of us learned at a very young age, if you make a mess, you are responsible for cleaning it up.
It is not the responsibility of anyone else, but you.
So if a coal-generating power plant spews billions of tons of CO2 into the air every year, is it not the responsibility of the operator of that plant to foot the damage bill?
Or should we expect the government, i.e.) the taxpayer, to pick up the tab for that too?
Why not? It seems like those guys in DC are doing a hell of job at throwing our tax dollars around like drunken rappers on a video shoot in the Caribbean.
Sarcasm aside, from day one, ALL costs should've been figured into the equation. And that includes things like CO2 emissions, mercury clean-up and loss of natural capital. What is the top of a mountain worth after you blow it up, anyway?
But in an effort to stay focused here, let's just concentrate on the one issue that we know is going to make life a lot harder for big coal, and a lot of money for those of us that know how to...
Exploit big coal's pain for Green Chip gains
For the same price American Electric Power had to pay for something they should've been paying for anyway, you could build 18.7 concentrating solar power plants, like the Nevada Solar One plant that went online earlier this year.
18.7 of those things could generate more than 1,196 megawatts, but without the additional carbon, natural capital and other pollution costs attributed to coal generation.
In fact, while a 1,600 MW coal-fired plant could run you about $2.9 billion upfront (based on the cost of Peabody Energy Corp's new coal-fired power plant in Southern Illinois), the CO2 bill for an estimated 40-year lifespan will run more than the initial construction costs.
According to the Union of Concerned Scientists, a typical coal plant generates 3.7 million tons of CO2 per year. Based on the December, 2008 contract price on the Chicago Climate Exchange of $22.88 per ton of CO2, you're looking at a bill of $84,656,000 per year.
Multiply that by 40 years, and we can go ahead and tack on another $3,386,240,000 onto that original $2.9 billion price tag...giving us a new total of $6,286,240,000.
Folks, for $6,286,240,000, you can get either a dirty, 1,600MW coal-burning plant that will continue to be nickel and dimed for decades to come, or a 1,600MW concentrating solar power plant, 25 times the size of the most recent Nevada Solar One plant, in the middle of the desert, without NIMBY issues, but near transmission lines...and still have about $36,240,000 leftover.
And by the way, that $6.4 billion for the coal-fired plant is still being extremely generous.
There are a few more issues that still aren't being accounted for.
For instance, a typical 500MW coal plant:
- Draws about 2.2 billion gallons of water each year from nearby lakes, rivers and oceans. (That's enough water to support a city of approximately 250,000 people)
- Generates 170 pounds of mercury. And it only takes 1/70th of a teaspoon in a 25-acre lake to make fish unsafe to eat. Enjoy that freshly-caught trout on your next fly fishing trip!
- Relies on the transportation of coal. A cost that will continue to increase as the price of oil increases. Funny how the two of these things can not only screw us, but each other as well.
Listen: We know that coal is not abundant. And we know that coal is not cheap. But most important, we know that by investing in the companies set to benefit from coal's lunch date with reality, we're going to make a ton of money.
The time to invest in this stuff is not after the fact. The time to invest in this stuff is now, while it's still cheap, and still under the radar.
Unless you're already incredibly wealthy and don't care about making anymore money, there's absolutely no reason not to load up in this sector.
And you can start right now with Green Chip Stocks .
Until next time...