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Investing in Coal Shows Growing Financial Risks
By Tyler Collins

The As You Sow Foundation is predicting coal’s decline as a financially viable energy source.

Last week, As You Sow released an update to a previous report, “White Paper: Financial Risks of Investments in Coal,” which outlines the increasing financial risks of investing in coal-based utility and mining companies.

The updated report structures the financial risks for investment in coal to five primary categories: regulatory risks, natural gas, price and price volatility of coal, construction, and alternatives.

Analysts estimate that due to the rising cost of environmental controls, 75 GW (gigawatts) of coal-fired capacity may be retired by 2030. Since June 2011, electric utilities have announced the retirement of more than 6% of total 2011 coal capacity, with this number expected to climb as natural gas prices remain low. Natural gas power plants operate at a higher efficiency and with fewer emissions than older coal-fired plants.

As natural gas plants become more favorable and regulations become more stringent, the costs of construction for new coal-fired plants and upgrades to existing plants are increasing dramatically, making coal substantially less competitive.

The growing use of renewable energy sources is a strong factor in the shrinking reliance on coal. As You Sow states that, according to Lazard’s Levelized Cost of Energy Analysis (LCOE), wind is the most economical source of electricity for many markets, and, when factoring in the depletion of water resources, has a lower operating cost than both gas and coal.

Posted: October 29, 2012