“Celebrating” 150 Coal Plant Closures

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It's no surprise that old and inefficient coal power plants are being shut down and are, generally speaking, being replaced by natural gas and renewable energy options. The coal industry is well aware of this long-term trend, but is probably less concerned than you might think.

Number 150
The Sierra Club issued a release celebrating the announced closure of the Brayton Point Power Station in Massachusetts. That pending closure brings the total to 150 since 2010, according to the group. While the American Coalition for Clean Coal Electricity was less than enthusiastic about the closure, the trend toward reduced use of coal isn't new. 

For example, coal-heavy American Electric Power (NYSE: AEP  ) , which gets about 60% of its electricity from coal, has plans to reduce coal to about 45% of its fleet by the end of the decade. Duke Energy (NYSE: DUK  ) has been working to reduce coal from 55% of capacity in 2005 to 38% by 2015, with natural gas picking up the lost share.

While historically low natural gas prices have been a big impetus for the shift, the relatively dirty nature of coal was an important aspect, too. In fact, it was only after this shift started that new Environmental Protection Agency (EPA) regulations were announced. If enacted in their present form, the rules would make it that much harder for American Electric Power and Duke Energy to build new coal plants that they weren't interested in building anyway.

Unfortunate, not shock and awe
So while coal opponents are making a big deal out of closures and the new EPA rules, there's no shock and awe in coal land. For example, Alpha Natural Resources' (NASDAQOTH: ANRZQ  ) count of coal plant closures or conversions actually totals 212 units. The impact, according to Alpha will be disproportionately felt in the Northeast, but the closures on its radar span 28 states.

Industry giant Peabody Energy (NASDAQOTH: BTUUQ  ) , meanwhile, expects around 70 gigawatts of coal power to be retired over the next three years alone. But there are mitigating factors. For example, in the company's third quarter earnings review it noted that coal use has increased this year while natural gas use has fallen. If so many coal plants have been or are going to be shut, how is that possible?

The answer is that the U.S. coal fleet isn't running at capacity. Peabody estimates that coal plant utilization is around 60% today, but could go as high as 80%. It was at 55% last year, so there's clearly room for utilities like American Electric Power and Duke to continue closing plants and for coal demand to remain stable. In the end, fuel prices will remain the bigger near-term determinant of fuel choice. That will help coal miners like Peabody and Alpha.

Some get hurt more than others
Interestingly, because of the heavy concentration of closures in the Northeast, eastern thermal coal miners are likely to feel the biggest impact over the long-term. Fewer nearby coal plants will reduce demand and shipping costs to other locations will be a competitive disadvantage. Alpha gets about 45% of its top line from its eastern thermal operations and only around 10% from its western business, so that's a long-term concern for the company. Peabody is more broadly diversified.

One of the best positioned for the shift is probably Cloud Peak, which only mines for coal in the west. That said, the company isn't pinning its future on flat domestic demand any more than Peabody or Arch. Like all U.S. miners, Cloud Peak is setting up for increasing foreign demand, particularly from Asia.

Already preparing
While a nice round number like 150 draws attention, the news isn't new or particularly exciting. Some miners will face more challenges from the well-known trend away from coal, but others are fairly well positioned for it.  

Another play on natural resources
The most precious resource in the history of the world isn't gold or oil. In fact, it’s more valuable than both of them. Combined. And here’s the crazy part: one emerging company already has the market cornered… and stands to make in-the-know investors boatloads of cash. We reveal all in our special 100% FREE report The 21st Century's Most Precious Natural Resource. Just click here for instant access!

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 27, 2013, at 10:55 PM, tigerade wrote:

    Coal is the dirtiest energy source with the highest impacts on human health and the environment. Only a few knuckledraggers behind keyboards still support coal. I want to see it phased out as quickly as possible. It's a dinosaur.

  • Report this Comment On October 28, 2013, at 12:20 PM, Usurped wrote:

    The citizens have no idea how much they're going to be stepped on...the costs are going to soar. But the natty gas folks will soar in riches based on their partnership w/ the ecoterrorists of Sierra Club and the EPA.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2695421, ~/Articles/ArticleHandler.aspx, 9/29/2016 9:40:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,339.24 110.94 0.00%
S&P 500 2,168.77 -2.60 -0.12%
NASD 5,318.55 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 4:00 PM
AEP $65.36 Down -0.14 +0.00%
American Electric… CAPS Rating: *****
ANRZQ $0.00 Down +0.00 +0.00%
Alpha Natural Reso… CAPS Rating: *
BTUUQ $1.52 Down -0.02 +0.00%
Peabody Energy Cor… CAPS Rating: *
DUK $81.10 Down -0.33 +0.00%
Duke Energy CAPS Rating: ***