Clarifying Moment: Wind Passes Coal in Generation

April 24, 2020

Jeremy Deaton for Nexusmedianews:

This story is published as part of Covering Climate Now, a global journalism collaboration strengthening coverage of the climate story.

Inthe normal course of business, healthy companies succeed and sickly companies fail. But the coronavirus has interrupted the normal course of business, putting even successful firms on life support as they struggle to pay for sidelined workers and shuttered storefronts. The government’s goal, in theory, should be to keep these companies alive without lending a dime to firms that were already going under.

But the Federal Reserve could fall short of this aim by giving a jolt to fossil fuel companies that were failing before the coronavirus. Through its recently announced debt buyout programs, the Fed could end up giving aid to energy companies whose financial woes predate the pandemic by at least half a decade.

“If you listen to the oil industry, you might think that its crisis began in March, and that’s what they want everyone to believe,” said Clark Williams-Derry, an analyst at the Institute for Energy Economics and Financial Analysis. “They want everyone to forget about the last six years.”

Over the last decade, fracking unlocked new reserves of oil and gas. For a time, business seemed promising. But as firms flooded the market with cheap fuel, prices began a swift and precipitous decline, dropping from more than $100 a barrel in 2014 to around $30 in 2016. The market never fully recovered. Oil and gas companies took a hit and — because low-cost natural gas edged coal off the power grid — mining companies did as well.

“Fracking has literally broken the business model of the entire fossil fuel sector,” Williams-Derry said.

Today, fracking operations are plagued by bankruptcies, and oil and gas stocks are imperiled by the divestment movement. In the last month, with would-be drivers huddled indoors and Saudi Arabia and Russia each dumping cheap oil on the market to undercut the other, supply so outpaced demand that the price of a barrel of oil briefly fell below zero.

Coal is in even worse shape. Eleven coal companies have filed for bankruptcy since President Trump took office, and the future of the industry looks increasingly dim. Nearly half of all coal plants worldwide will lose money this year, stymied by cheap renewables and natural gas. And the coronavirus isn’t helping. With power demand in a lurch, utilities are leaning more on wind and solar power, which have no fuel costs. On a few days recently, wind turbines supplied more electricity nationally than coal.

The grim reality of fossil fuels has made it hard for coal miners and oil and gas drillers to raise money on Wall Street, so companies have tried to raise capital by selling corporate bonds. Companies pay interest to bondholders until the bond is due, at which point they pay back the full value of the bond.

This is where the Fed comes in. Through its debt buyout programs, the Fed is empowered to buy new bonds issued by any corporation that has a decent credit rating — a score given to companies based on how likely they are to pay their debts. To make sure they only aid companies that were healthy before the coronavirus, they are buying bonds from firms that had a credit rating of BBB- or higher from as of March 22.

“You can’t lend to a corporation that is for sure going to fail. That is not reasonable,” said Wenhao Li, assistant professor of finance and business economics at the University of Southern California. Though, there is no firm line between healthy and unhealthy. “Investment grade BBB- already has a lot of risks,” he said.

“A better investment strategy than putting money into that ETF in 2014 would have been to take your money, burn half of it, and put the other half under your mattress,” Williams-Derry said. “In 2014, the kooky divestment activist was actually a savvy investor compared to the rest of Wall Street.”

ClimateWire:

Wind generated more electricity nationally than coal on three separate days over the past six weeks, according to an E&E News review of federal data.

Such a milestone would have seemed unthinkable a decade ago, when coal accounted for almost half of U.S. power generation. But the last 10 years have seen coal’s position steadily erode due to a combination of slack electricity demand, mounting concern over climate, and increased competition from natural gas and renewables.

The novel coronavirus only has intensified the industry’s pain. Steve Cicala, a professor who studies power markets at the University of Chicago, reckons that electricity demand is down 8% as a result of the economic lockdowns designed to halt the virus’s spread.

Coal has borne the brunt of that decline. Wind and solar generation has been largely unaffected because they have no fuel costs — meaning that utilities turn to them when available. Natural gas prices, meanwhile, are mired near historic lows. That has left coal as the fuel to be curtailed.

Coal represented 16.4% of U.S. power generation over the last month, down from 22.5% the same time last year, according to the Rhodium Group, an independent research firm. Wind and solar generation, by contrast, rose from 10.7% of generation this time last year to 12.2%.

“I think in a lot of ways it’s just sort of fast-forwarding to the future of our grid,” Cicala said.

There now appears to be days when wind generates more power than coal on its own. On March 8, wind output was almost 1.4 million megawatt-hours, according to U.S. Energy Information Administration data. Coal generation that day was 1.3 million MWh. The feat was repeated on March 28 and April 12.

Joe Daniel, a power sector analyst at the Union of Concerned Scientists, said the development mirrors trends in the United Kingdom, where wind generation quickly overtook output from coal plants. There are now days when the British grid is coal-free.

“This is the natural progression from an energy system making the transition from fossil fuels to cleaner forms of energy,” Daniel said.

There are several caveats to consider with the wind surge. Coal generation typically falls in the spring, when electricity demand fades. Many utilities plan scheduled maintenance for the spring months. And coal generation still regularly exceeds wind.

Wind’s new, if brief, parity with coal nevertheless demonstrates the long-term challenges facing the coal industry, said Mark Dyson, who tracks the power sector at the Rocky Mountain Institute. Coal plants are expensive to maintain. Those costs get harder for utilities to justify when they run less and less.

“We anticipate coal generators to continue the trend of announced retirements and perhaps faster than they otherwise would have, because they have been run less,” Dyson said.

15 Responses to “Clarifying Moment: Wind Passes Coal in Generation”

  1. Sir Charles Says:

    Most shale plays, except maybe the Permian Basin where companies are fracking most recklessly, are only paying off at an oil price above $75/barrel. And now another new study confirms skyrocketing methane emissions from the Permian Basin. This proves again that shale gas is worse for the climate than burning coal!

    For more than four years we were compiling scientific articles and other solid evidence that shale gas and oil is not only wrecking people’s lives, it’s also the worst climate wrecking fossil fuel along with tar sands => Shale Gas Bulletin Ireland

    Last decade, the US shale industry burnt an estimated $1 trillion in investments. But hardly anybody wanted to talk about it. “Drill, baby, drill” my butt!

    • Sir Charles Says:

      Ingraffea et al – Reported Methane Emissions from Active Oil and Gas Wells in Pennsylvania 2014−2018

      ABSTRACT: Oil/gas well integrity failures are a common but poorly constrained source of methane emissions to the atmosphere. As of 2014, Pennsylvania requires gas and oil well operators to report gas losses, both fugitive and process, from all active and unplugged abandoned gas and oil wells. We analyze 589,175 operator reports and find that lower-bound reported annual methane emissions averaged 22.1 Gg (−16.9, +19.5) between 2014 and 2018 from 62,483 wells, an average of only 47% of the statewide well inventory for those years. Extrapolating to the 2019 oil and gas well inventory yields well average emissions of 55.6 Gg CH 4 . These emissions are not currently included in the state’s oil and gas emission inventory. We also assess compliance in reporting among operators and note anomalies in reporting and apparent workarounds to reduce reported emissions. Suggestions for improving the accuracy and reliability in reporting and reducing emissions are offered.

      There are many more analyses and studies in the Shale Gas Bulletin Ireland which confirm that the US EPA is grossly underestimating Methane emissions from the oil and gas industry and that this sector is very likely responsible for the global spike of atmospheric methane in the atmosphere.

      • Gingerbaker Says:

        Those 55 Gt alone are equal to about 2/3 of total global livestock methane release to put it into perspective. Plus, these 55 Gt are new CH4, previously sequestered, while livestock methane is part of the natural carbon cycle present for billions of years.

        Yet the public hears almost nothing about this extra fracking methane, while hundreds of articles every year, entire new processed food industries, and a full court press for new nutritional guidelines have sprung up in response to the hype about methane associated with meat.

        Sorry to derail the topic slightly to one of my my bugbears, but scale and perspective are important. End of rant.

    • Sir Charles Says:

      Keep in mind that methane is a greenhouse gas which is at least 87 times as potent as CO2 over a 20-year timescale.

      Remember: Time is running out to keep global warming below 2°C!


  2. Yet another GreenCrock promoting Big Wind with boatloads of missing context, like natural gas being the only reason many “wind” projects can produce continuous power.

    Gas has temporarily overtaken coal but coal is still vital in the fossil fuel chain. and shale gas will peak, just as shale oil fracking will, and wind power capacity will peak when its backup is lost. If the backup becomes nuclear, we may as well dump the wind and focus on SMR alone. Scenery and wildlife will benefit from a moratorium on ruined open space.

    You really ought to watch the new Moore/Gibbs documentary that takes on this blog’s quasi-green propaganda. It’s free at: https://youtu.be/Zk11vI-7czE

    A prominent segment shows land cleared for the Lowell Mountain, Vermont wind project, with people directly comparing it to the mountaintop removal you only ascribe to coal mining. The main difference is that less rock and soil is removed, but you end up with something wholly unnatural looking, with degraded ecosystems. The tops of mountains are actually the bottoms of food chains in many ways. Environmentalists used to care about that.

    • Sir Charles Says:

      As Emily Atkin writes in her brilliant non-review of the film, “I’m tired of having to spend hours consuming and debunking messy-yet-blockbuster climate reporting from dudes who seemingly woke up a few mornings beforehand and decided they were climate journalists.”


      • That non-reviewer needs to take a snark-break and actually watch the film. They’ll realize (if paying attention) that the whole point is that climate change is NOT THE biggest environmental problem. Economic growthism is, and that includes population growth.

        The obsession with the atmosphere as THE only thing we really need to “solve” is allowing a massive new wave of industrialization to break over land and sea. Big Wind is the most blatant form of it, therefore it gets the most backlash.

        Sincere environmentalists understood this the first time they saw photos of Lowell Mountain or the Alta Wind Energy Center (a random, small fraction of current wind power sprawl). The rest of you are posers who want to prop up economic growth at any aesthetic cost.

        You’re the types who sit around idling your engines while surfing your phones for “sustainably sourced” foods to put in your giant new fridge in a smug $700k LEED house. Slap a magnet on it with cartoonishly small wind turbines and keep pretending nothing’s wrong.

        https://falseprogress.home.blog/2019/03/10/the-green-new-deal-is-a-raw-deal-for-scenery-wildlife-and-rural-ambience/

    • Gingerbaker Says:

      “Big Wind”. LOL.

      As soon as you say it, you lose the internet.


      • No, I lose the support of shallow eco-posers like you. Real environmentalists get it. Big Wind, Big Oil and Big Coal have a lot in common.

        View the image-searches below to see what wind-zealots want half the world to look like wherever a breeze blows strong enough to pass a tower test.

        http://google.com/search?tbm=isch&q=wind+turbines+mountain
        http://google.com/search?tbm=isch&q=wind+turbines+ocean

        And it’s not just direct sites that lose their naturalness. Viewshed sprawl from Big Wind is literally tainting millions of acres already. You phonies would line the rim of the Grand Canyon with turbines if you could get away with it. The Crescent Peak wind project in Nevada (shot down by the BLM, but it ain’t over yet) is a prime example of areas wind-pushers want to trash. They tried something similar at Steens Mountain, Oregon, and those are just two random cases.

        Before wind got so big, I never knew there were so many eco-traitors who put people’s endless energy-wants above nature’s physical legacy. John Muir is spinning in his grave as his Sierra Club spins terms like “installed capacity” to describe spiked mountaintops with red lights flashing all night.

    • rhymeswithgoalie Says:

      … with boatloads of missing context, like natural gas being the only reason many “wind” projects can produce continuous power.

      I’m sorry, does having natural gas fill in the dips mean that the joules provided by wind magically cease to exist?

      Time-sharing multiple power sources (like wind/solar/hydro shifting) will be a feature of the multidirectional adaptive electricity grid.


      • Of course I’m not saying wind doesn’t contribute some electricity, I’m saying its damned ugliness is NOT worth it, especially for the relatively paltry contribution it makes. The total number of turbines to make a significant dent would exceed the ugly scale exponentially.

        A big takeaway from the recent Moore/Gibbs documentary is that biomass (mainly cutting down more trees) is the bulk of what’s called “renewable” energy today. That film gave a big boost to honest environmentalism, and the phonies reject it because they know their goal was never really protecting nature. Many “sustainability” experts and urban planners are cut from that cloth; far more interested in the appearance of conservation than the real thing.

        Terms like “multidirectional adaptive electricity grid” and “installed capacity” (describing ruined scenery) are the very sort of mealy-mouthed land-rape denial we don’t need more of on this over-engineered planet.

        Any environmentalist with soul in the cause wouldn’t need the blatant crassness of industrial wind power constantly explained to them. I used to think maybe 20% of the population had sincere interest in protecting nature’s physical legacy, but Big Wind support makes me think it’s 5% at most.

        https://falseprogress.home.blog/2016/11/03/windschmerz-wind-energy-is-not-green/

  3. neilrieck Says:

    From Gwynne Dyer :: Is For the global oil industry, it has been a double whammy. First a foolish price war between two of the world’s three biggest producers, Russia and Saudi Arabia, drove the price per barrel down from almost $70 in early January to under $50 in early March. They were fighting each other for market share, and they were also hoping that lower prices would kill off US shale oil, whose production costs are higher. Then the second whammy: the Covid-19 lockdowns that started spreading across the world in early March cut total demand for oil by 30 per cent in the next six weeks. By last weekend a barrel of ‘Brent crude’ was selling for only around $20. (There are two oil prices: ‘West Texas Intermediate’ mainly for US oil and ‘Brent’, always a few dollars higher, for the rest of the world.) Actually, on Monday the US oil price briefly dropped another $60, to -$40, because demand has dropped so far below supply that the world is running out of places to store the excess oil. The producers can’t just pour it on the ground and it’s very expensive to shut wells down, so they’ll pay somebody who still has storage capacity to take it away. This is currently a problem mainly for inland producers in the US, Canada and Russia, because they are far from the ports where you can still hire supertankers (for up to $350,000 a day) to store the oil offshore. But that cannot be a long-term solution anywhere, so we are starting to see productive wells being ‘shut in’ (closed down) because that’s cheaper than paying for long-term storage of unwanted oil. This solution has two drawbacks. One is even if the smaller oil producers don’t go bankrupt (they generally carry high loads of debt), their leases will cancel quickly if they stop producing oil. The other is that it will be too expensive to reopen many of the shut-in wells unless much higher prices return —and if they stay inactive for years, the production flow may be permanently impaired. Last week’s agreement between all the major oil producers to cut oil production by 20 per cent by the end of June does not begin to address the glut of oil. Global production, at 100 million barrels per day (bpd) last month, will fall to 80 million bpd in the next two months, but global demand is already down around 70 million bpd. Nor is there much hope in sight. Oil demand may drop further, and even in the long run it may never return to pre-January levels. “This is very reminiscent of a time in the mid-1980s when exactly the same situation happened — too much supply, too little demand, and prices of oil stayed low for 17 years,” said John Browne, the former head of British Petroleum. ‘Peak oil’ ceased to be a subject for debate some time ago. More and more countries are committing to net zero emissions by 2040 or 2050, and everybody knows that quite a lot of oil (and coal and gas) will be left in the ground forever. So the topic of concern for the industry is now ‘peak demand’ — and some industry analysts think that it is already past. “The virus will bring forward peak demand for fossil fuels,” Kingsmill Bond of Carbon Tracker told The Guardian three weeks ago. “Peak emissions was almost certainly 2019, and perhaps peak fossil fuels as well. It will be touch and go if there can be another mini-peak in 2022, before the inexorable decline begins.” So the stock market valuations of most oil majors have halved since January, and the ‘golden dividends’ of 20 per cent or more are gone forever. The rate of return on new oil and gas projects is now about the same as on wind or solar power projects, so where is the smart money going to go? Oil is ‘low return, high risk, high carbon’, so don’t touch it. This collapse of production and investment in the industry is hard on the millions of people who make their livings from it (including some entire countries), but the writing has been on the wall for some time now. The sensible and humane course is to support them as they seek different ways of making a living, but climate, not Covid-19, is the real crisis of our time. The jobs cannot and should not be saved. As for the investors, they deserve little sympathy. They are paying the price of not reading the writing on the wall. The real trick in all forms of gambling is knowing when to pick up your winnings and walk away from the table. And the real question is: what does the decline of oil mean for our civilisation’s prospects for dealing with climate change without a global calamity? That, however, is a subject for another article.


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