Berkshire utility faces conflicting coal economics in the West

PacifiCorp, the big electric utility owned by Berkshire Hathaway Energy, wants to retire some of its coal-fired power plants sooner than planned, to take advantage of declining costs for renewable energy sources like wind and solar.

The state of Wyoming, where those plants are located, is making it difficult, as officials there worry about what's happening to its coal-fueled economy.

The Financial Times (subscription required) reports state regulators are taking a very close look at PacifiCorp's long-range plan for how it wants to generate power in the next decade.  Wyoming's legislature has also passed a law requiring that utilities look for buyers before they shut down coal plants.

Pushing in the other direction, the states of Washington and Oregon are banning the sale of coal-generated electricity over the next 11 years.

For the utility, the prime driver is money. The FT quotes PacifiCorp's Rick Link as saying the move away from coal is primarily driven by costs that have "really come down quite a bit for renewables," including less expensive ways to store wind and solar power until it's needed by consumers.

"Our customers would, over time, save money by pursuing these largely renewable and storage alternatives rather than continuing to operate certain coal facilities on our system."

Coal, however, is a big part of Wyoming's economy. The state provides 40% of the country's supply.

Kemmerer is home to a coal mine that feeds a plant that's already been partially converted to burn natural gas. A city official tells the FT, "These are not just your average jobs. These are well-paying jobs, and they're the kind of jobs that this culture here is accustomed to having around."

But as an economist tells the FT, "If you're in favor of letting the cheapest supply cost win, the transition [to coal] is going to happen." 

BUFFETT'S OUTLOOK FOR COAL

At the 2017 Berkshire annual meeting, Buffett was asked about his thoughts on the future of coal as a major source of shipping revenue for Berkshire's BNSF freight railway. Charlie Munger didn't entirely agree with Buffett's forecast.

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