I wrote previously on Xcel Energy’s plans to lock into long-term coal contracts for coal that, well, didn’t seem to exist.
Well, the hype continues. Most recently, Peabody Energy announced plans to invest $200 million to move its Twentymile coal mining operations in northwestern Colorado to the new Sage Creek coal, which boosters claim will produce 12 million tons of new coal a year. Of course, this would make it the biggest coal mine ever in Colorado, which is surprising given that according to U.S. Energy Information Administration coal production reports, no mine in the State has ever produced more than 10 million tons annually.
According to both Peabody and Xcel, the new coal investment will fuel long-term contracts for 40 million tons of coal from the Sage Creek mine to keep the Hayden coal-fired power plant in northwestern Colorado burning for 16 years.
Putting aside the hyperbole, though, including the fact that Peabody still doesn’t have its crucial federal coal lease to ensure its long-term supply, all I can say is, really?
Both Xcel and Peabody are digging in, literally, in what has to be one of the most backward investments in the U.S. right now. Just in terms of air impacts, economists are saying that coal-fired electricity costs us up to more than 5 times the value that it provides. And the trend for coal right now? To paraphrase The Economist, it’s not good.
And as I wrote before, even Xcel admits that so far to date, coal costs for the Hayden plant have climbed by 70%. This is on top of the $170 million the company and the other owners of the plant intend to spend on clean air retrofits at Hayden. Even then, the company plans to shutter half of Hayden by 2025 and the other half by 2036.
It’s an admirable goal of retrofitting the plant with up-to-date pollution controls. But with costs and uncertainty mounting, the only thing that seems certain is that this investment is fast becoming a toxic asset.
Even Peabody seems to be hedging its bets, claiming that coal from Sage Creek will also fuel exports to Europe. So much for homegrown energy.
Xcel claims that retrofitting Hayden, in other words making its coal plant cleaner, is the lowest cost alternative for meeting Clean Air Act. Yet at the same time, the company is distancing itself from renewable energy development. This is the epitome of a self-fulfilling prophecy.
Despite all the hype, the signs aren’t good for Sage Creek and the Hayden power plant. Peabody and Xcel can justify millions in short-term coal investments all they want, but in the end, it seems like wasted money and wasted opportunity.
The Sage Creek coal mine area near Hayden, Colorado (photo by John F. Russell).