Tuesday, October 29, 2019

Renewables finally getting credit they deserve for driving out coal

Murray Energy filed for bankruptcy yesterday, and Robert Murray is out of a job. Couldn't happen to a nicer fellow or company. I do regret what will happen to retiree pensions and to employees, although Democrats want to help them while Republicans refuse. The lesson to any current coal worker under the age of 55 should be clear though - get out, get out, get out.

With luck, this will throw a monkey wrench into Murray's efforts to throw a monkey wrench into policies addressing climate change, as money spent on lobbying would be viewed skeptically by a bankruptcy judge. OTOH, Murray has a deal with major creditors (but not unions) so emerging from court supervision could happen quickly. We'll see how much the court protects employees and other creditors.

Some excerpts from the bankruptcy filing, and my commentary and emphasis added:

The thermal coal markets that Murray traditionally serves have been meaningfully
challenged over the past three to four years, and deteriorated significantly in the last several
months. This sector-wide decline has been driven largely by (a) the closure of approximately
93,000 megawatts of coal-fired electric generating capacity in the United States, (b) a record
production of inexpensive natural gas, and (c) the growth of wind and solar energy, with gas and
renewables, displacing coal used by U.S. power plants.

For years, lukewarmers have given all credit to reduced emissions to natural gas, now even coal producers are admitting the truth. Murray had to cast a little shade though by not expressly admitting renewables are cheaper, implying that government policies are the problem.

At the same time, demand for U.S. coal from international utilities has been subject to its own perfect storm of negative forces, and the European benchmark price for thermal coal has halved in the last year

Trump gets his share of the shade for trade wars (pay attention, workers). European renewable efforts should get their share of the credit for reducing coal demand.

At the same time, Murray has had to rebate cash to certain customers under price sharing arrangements as a result of low pricing in the PJM Interconnection

I didn't know about this. Murray scored deals with utilities by (theoretically) taking on the risk that its product could get undercut by gas or renewables. So here's a question - did the utilities pay in advance and now won't get their rebates because of bankruptcy? If so, then the public is stuck with subsidizing coal when cheaper and lower emission supplies are available. This practice should be regulated, and maybe regulators should make the utility companies eat the costs, instead of ratepayers. Even if utilities didn't pay in advance, the best they can do now is walk away and see what short term pricing they can get, which is a gamble.

Competitors have used bankruptcy to reduce debt and lower their cost structures by eliminating cash interest obligations and pension and benefit obligations, leaving them better positioned to compete for volume and pricing in the current market, 

Pretty clear what Murray intends to do in bankruptcy. Pay attention, coal workers.

As of December 31, 2018, Murray owns and operates 26 harbor boats and towboats, 478 barges, 15 locomotives, 748 railcars, and 25 coal hauling tractor trailers (exclusive of non-debtor Foresight operations).

I wonder if this adds to the reason why railroad companies fight efforts to address climate change. Not only do they haul a lot of coal, coal companies are also their direct customers.

In June 2015, Murray Global Commodities, Inc. entered into a joint partnership agreement for a 34 percent interest in non-debtor Javelin Global Commodities Holdings LLP (together with its direct and indirect subsidiaries, “Javelin”).

Elsewhere it says that Javelin is one of their major international customers, which they apparently partly own. I wonder if it's a stalking horse for Murray to interfere in foreign politics to promote coal usage.

As of the Petition Date, Robert E. Murray holds all of the issued and outstanding voting Class A common shares

All other shares are non-voting, so Robert has (had?) full control of Murray. He's a serious bad guy, so whether he emerges with full control or any control is an important issue.

On June 29, 2018, Murray entered into the Superpriority Credit and Guaranty Agreement (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time, the “Superpriority Term Loan Agreement”)

This involves some of the senior creditors who are going to do the best at the other end of bankruptcy. The question in my mind is the date. At such a recent date, the risk of bankruptcy should have been clear and the possibility of a sweetheart deal at the expense of employees, retirees, and other creditors should be investigated. Does Robert Murray or family have any ownership of the senior creditors? Some other recent debt listed in the doc raises similar issues.

Following the large wave of chapter 11 filings in 2015 and 2016, more than half a
dozen large U.S. coal companies collapsed into bankruptcy over the last several years and
withdrew from the 1974 Pension Plan. When an employer withdraws, its vested beneficiaries
remain in the 1974 Pension Plan and are referred to as “orphan” beneficiaries. The remaining
contributing employers become responsible for the benefits of these orphaned participants who
were never their employees. As a result, approximately 95 percent of beneficiaries who currently
receive benefits from the 1974 Pension Plan last worked for employers that no longer contribute
to the Plan. As of January 2019, 11 employers contribute to the 1974 Pension Plan, compared to
over 2,800 in 1984. This has placed significant stress on the 1974 Pension Plan and the small
number of contributing employers—Murray most of all.

Pretty good summary of how effed up coal worker pensions are.

remaining coal-fired power plants are running at capacity factors of just 42 percent versus 48 percent in 2013.

It's not just plant closures, the still-open plants are running at lower rates.

Murray maintains its belief that longer term demand for coal is underpinned in the
United States by a practical requirement that approximately 25 percent of the power supplied to
the electrical grid come from coal power
generation to ensure reliable electricity during cold snaps
and heat waves, when other parts of the grid will be less reliable or overly expensive. This belief
has guided Murray’s decisions to make value-accretive acquisitions during general market distress,

That 25% figure is debatable to say the least, and not to mention that it could come from nuclear, large hydro, natural gas and eventually from power storage. Also, their acquisition strategy has been to double down on coal. How's that worked out?


That's it for the main bankruptcy filing. Definitely worth it for someone to look at the restructuring agreement.


Canman said...

California (and Germany) could have avoided all the fuss over coal:


nowadaysclancycantevensing said...

LOL - Canman and Forbes (The Capitalist Tool) with the same old reactionary bs that nuclear is "clean power'. Next up they'll claim that it's inexpensive too again.

And, good try yet not one single worker who votes Republican in the US will pay even the slightest bit of attention to how they are being screwed by the Cons. They all think Trump gave them a huge tax break (snicker). In 2020 in the US they'll all vote Con again.

Tom said...

"For years, lukewarmers have given all credit to reduced emissions to natural gas..."

This is a completely false and completely predictable statement by you.

Why bother telling the truth when lies are so much fun?

David B. Benson said...

Regions without access to large hydropower generation have had to make do with thermal generators. As older coal burners reach end of life the generation is being replaced by a combination of so-called renewables backed by natural gas burners. A pure example of this is observed in the USA in the ERCOT Texas grid. Also the South Australia grid.

Doesn't work in the Upper Midwest and Great Lakes regions. There coal burners are retained for grid reliability.

David B. Benson said...

But nuclear IS clean power. Just more expensive than it ought to be.

nowadaysclancycantevensing said...

David B Benson,

Completely discounting what happens when a nuclear power plant has a 'clean power' catastrophe, how many hours per month are nuclear power plants required by law to run fossil fueled backup diesel generators just to make sure they are all in running condition for all the necessary reasons at a nuclear facility?

How does using diesel fuel on a required regular basis make nuclear 'clean energy'?

David B. Benson said...

Lifetime carbon dioxide emissions for nuclear power plants is about the same as for wind turbines and much better than for solar panels. See the page on the World Nuclear Association website.

John ONeill said...

' how many hours per month are nuclear power plants required by law to run fossil fueled backup diesel generators'
They just have to be started once a month - plus further checks at refuelling maintenance. The diesels are usually 1 to 25 MW, for a ~1000 MW reactor. Probably run for a few minutes, but call it an hour. A wind farm usually runs at 30 -40% capacity factor, and any power deficits are usually made up by fossil fuels. So for a 1000 MW of wind farm you're looking at 30 x 24 x 1000 x .6 = 432,000 MW hours of backup. For a nuke, last year's capacity factor for the entire US fleet was 92%. So backup at that rate, for one reactor, would be 1000 x 30 x 24 x .08 = 57,600, plus 25 x 2 MWhrs for two backup diesels is 57,650 MWhrs. So wind needs seven and a half times as much fossil backup as nuclear, and the emergency diesels are a rounding error.( The figure for nuclear backup is undoubtedly high, since refuelling is scheduled for spring or autumn, when demand is low. That's also when it's windiest, so more wind power is surplus to requirements, is curtailed, and avoids no fossil fuel use.)
Happy to help - John ONeill

nowadaysclancycantevensing said...

John O'Neill,
Your reply has little to do with the rhetorical question you quote. That rhetorical question was in response to David Benson's claim that nuclear power is 'clean energy', which of course he couldn't answer either.

As for your fuzzy math, and this is not considering your alluded to variables suchas generator refueling maintenance etc., but nuclear power plants are required by the NRC to run each of their diesel generators 24 hours per month, not your "call it an hour" guess.
And these diesel generators at nuclear power plants are behemoths that have a capacity to be able to use 100,000 gallons per hour of diesel fuel.

So i'll ask rhetorically again, if a nuclear power plant has to by regulation burn almost 5 million gallons of diesel fuel per stack for every single month of its operation, that's 10 million gallons for 2 stacks, 20 million gallons for 4 stacks if they only use two generators for each,
how exactly does that make nuclear power a 'clean energy aka carbon free' source?

It's an easy non question to answer, sorry if it bursts anyone's MWhours bubble.

Canman said...

nowadaysclancycantevensing, I can't find any source for your numbers, but, assuming they are true, that small portion of pollution is certainly smaller than that caused by the fossil fuels used to back up the 15% to %40 capacity factors of wind and solar.

Any significant raising of the proportion of wind and solar is going to become increasingly more difficult and expensive, because of infrastructure, storage, local opposition ... etc. Increasing the proportion of nuclear should become cheaper, because of economies of scale.

Barton Paul Levenson said...

C: that small portion of pollution is certainly smaller than that caused by the fossil fuels used to back up the 15% to %40 capacity factors of wind and solar.

BPL: You think those capacity factors mean fossil fuels have to provide the missing 85% and 60%, don't you? You have no idea what "capacity factor" actually means.

Beakers said...

The sniping between nuclear and renewable fans is rather old and very boring. Both are low carbon, both displace fossil fuel consumption, both are welcome and the risks of adding too much of either or both are low - the consequences being both trivial and transient cf not adding enough.
Neither is a panacea and need to be part of an integrated, evolving portfolio of generation, but all this guff over backup is very silly. The backup at present is the existing fossil fuel plant that generates less thanks to the addition of the nuclear and/or renewables. Most big grids have existing storage/demand management systems to deal with old inflexible coal and nuclear. In the UK the grid has had lots of wind power added, antis claimed that this would require adding lots of fossil fuel backup. Instead none was added and lots of coal capacity has closed.
Both nuclear and intermittent renewables benefit from storage but we dont need to add more until we are displacing all the existing fossil fuel generation.
In the UK the 2007 energy white paper put us on course for lots of new nuclear with some wind and AD on the fringe. A decade on Toshiba and Hitachi projects for 7 reactors are dead. EDF were going to have their first pair cooking our 2017 Xmas dinner but its still a construction site and the costs have gone up significantly. Meanwhile wind and solar (despite active obstruction from the current 'government') are growing far in advance of what was deemed economic in 2007. Nuclear has been leapfrogged economically by renewables and the capacity of the industry to deliver is a big worry but lets not pretend that we should just give up on new plants, or worse still shut working and paid for nuclear plant like Germany. We need everything we can get and keeping going with the existing nuclear build need not compromise the roll out of solar and wind power that have turned out to be cheaper and faster to deploy.