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Coal
coal plant

Image: Flickr/Conservations Law Foundation

As You Sow's Coal initiative focuses on mitigating the financial risks of reliance on coal.

Through shareholder resolutions, we advocate for utilities to reduce the financial risks related a continued reliance on burning coal for electricity generation, from regulatory, commodity, and construction risks to the physical impacts of climate change, such as water scarcity.

We have published two white papers outlining the financial risks facing coal-fired utilities and their investors. The 2012 Financial Risks of Investments in Coal, updates a white paper of the same name, and outlines five key risks. These papers are designed to empower investors to exercise enhanced diligence regarding their investments and to encourage coal utilities to proactively manage these risks to protect share value.

In addition to climate change and other related financial risks, university endowments and other large institutional investors have also become aware that investments in fossil fuels may not be aligned with their organizational missions. A growing number are campaigning to divest from coal and other fossil fuels and to reinvest in clean energy and other industries that promote a sustainable future. As You Sow provides investors with resources on both.

>>Recent media for the Coal initiative

Background

Coal in the United States is at a crisis point. Coal's share of the U.S. electric power market is shrinking and coal assets are losing value. In 2011, coal accounted for 42% of this country's electricity generation, down from 52% in 2000. Today, 60% of the U.S. coal fleet is at least 40 years old. These plants are less efficient than newer plants and require significant investments for maintenance and emissions reduction.

A consensus among industry analysts finds that nearly a quarter of U.S. coal-burning generation could be retired in the very near future due to the cost of regulatory compliance and the inability for merchant utilities to recover rates. Replacement resources are likely to come from natural gas, solar, wind, and energy efficiency—not new coal.

Financial risks due to reliance on coal fall along three major factors:

  1. Costs of environmental compliance. Enforcement of existing environmental regulations and proposed new regulations over the useful life of coal plants will impose significant, unpredictable, individual, and cumulative capital and operating costs on these plants.
  2. Commodity risk from increasing price and price-volatility of coal coupled with competition from "unconventional" gas and alternative generation sources. The changing nature of domestic coal markets and the prospect of future increases in the price of coal makes its instability a novel part of the energy calculus in the United States. The price of natural gas makes it often more economical to dispatch gas—rather than coal—generated electricity. In some markets, wind is the benchmark, pushing coal further down in the dispatch order.
  3. Construction and cost-recovery. For new plants, construction costs have risen exponentially and utilities can no longer guarantee that these expenditures will be recovered via rates or electricity sales.

For a full discussion of these risks, read As You Sow's 2012 information sheet (PDF).

 

 


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