Three years ago 90% of its power was coal. Now Kentucky is working on a post-coal economy
Three years ago 90% of its power was coal. Now Kentucky is working on a post-coal economy ·CNBC
Zachary Basu
Updated
"As we speak, we are preparing new executive actions to save our coal industry and to save our wonderful coal miners from being put out of work," President Donald Trump declared at a March 20 rally in Louisville, Kentucky. "The miners are coming back."
If true, they are coming back at the same time that solar energy and a new kind of mining — for raw ingredients used in the tech industry — are coming to coal country. Some state officials and researchers in Kentucky are betting that its future economy can be driven as much by solar panels and smartphones as strip mining.
When Kiran Bhatraju, a native of Pikeville, Kentucky, and the CEO of renewable-energy company Arcadia Power, heard that a coal company would be converting an old strip mine into a solar farm, he expected huge backlash. But his community's reaction was the opposite.
"The mayor, local politicians and people in coal country are ready and excited about new jobs in the renewables industry," Bhatraju said. "The entire community has been rallying behind the project because it will retrain and put miners back to work."
Nick Comer, external affairs manager at the East Kentucky Power Cooperative, a member-owned utility service that provides electricity to more than 530,000 homes, said that while coal will always have a place in Kentucky's history and cultural standing, it's not a loyalty that supersedes economics.
"Ultimately, it comes down to how we can provide affordable, reliable power to our members," Comer said. "That's our mission."
At one point more than 90 percent of the electric power provided by EKPC was coal-fired. Last year that number was down to about 70 percent, and today the cooperative is in the process of installing a 33,000-panel solar field on its property.
"What we're doing is recognizing customer demand," Comer said. "And not just residential customers but also businesses. When companies are considering areas to locate a plant or facility, they're looking for energy options that are cost-effective and sustainable."
StateBook International, which provides a platform of local data to corporations making decisions on where to invest and expand, says that availability of sustainable power is a major factor for companies, and they pay close attention to which states produce enough capacity to reliably power their communities.
Berkeley Energy Group, the coal company that Bhatraju referenced, announced their plans to build the state's largest solar farm in April, claiming that it would generate jobs for displaced coal workers. That same month, the Kentucky Coal Museum — a physical, standing tribute to the state's coal heritage — had 80 solar panels installed on its roof as a cost-saving measure. The museum's owner expects to save between $8,000 and $10,000 a year.
Trump was right about one thing: The coal industry is hurting. The state of Kentucky lost 24.2 percent of its coal jobs in 2016, according to a report by the Kentucky Energy and Environment Cabinet, dropping the number of coal miners to its lowest total since 1898.
Things seemed to be looking up when, just a week after the March rally, Trump signed an order that rolled back a series of Obama-era climate policies; that was followed by the president's June 1 announcement that the United States would withdraw from the Paris Agreement.
But even so, the claim that "the miners are coming back" is one that has raised eyebrows, not just among liberal environmentalists, but among Kentuckians who have grappled for years with the implications of a coal-powered future.
There's no denying that government regulations and emissions standards have played a role in the withering of the coal industry, which just three years ago accounted for more than 90 percent of Kentucky's electricity.
But with production peaking about 30 years ago, coal was facing an uphill battle even before the Obama administration, said Dr. James Hower, a sedimentary geologist at the University of Kentucky. Hower named competition from China, the increasing affordability of natural gas due to fracking, and a decline in coal reserves as other contributors to the industry's decline.
"A ton of coal you mine is a ton you'll never mine again," he said, referencing industry practices that lacked the foresight to remain sustainable.
Hower also said many of Kentucky's coal plants, which were built in the 1950s and 60s, operated far beyond their scheduled lifespan of 20 years. When newer air regulations came along, it simply wasn't worth it for utilities to retrofit old, inefficient plants with the right technology. Eight out of Kentucky's 20 coal plants have been retired or converted to natural gas units since 2012.
Kentucky chases rare Chinese-mining monopoly
The coal community of Kentucky can be proud, and sometimes stubborn, but the state is adapting to the changing energy landscape at an unexpectedly high and innovative pace.
Hower and his university colleagues, for example, have partnered with the Department of Energy in the research of "rare earth elements," a group of 17 metals that are vital in the production of smartphones, wind turbines, solar panels and dozens of other modern-day technologies.
REEs, which include metals like scandium, yttrium and neodymium, are said to make up a $7 trillion global market, while supporting $500 billion to $600 billion in other industries. The United States imports 90 percent of its REEs from China, which holds a near monopoly over the market. This is despite the presence of 13 million metric tons of rare earth elements within the continental United States, according to the U.S. Geological Survey. Hower said it's too soon to provide an estimate for REE resource potential in Kentucky, specifically.
"REEs can make Kentucky a player," Hower said. "You're not going to displace the entire range of imports from China, but if you could make a dent in it, that can go a long way."
This isn't the first, or only, U.S. effort under way in the rare earth metals market, which can be volatile. Nevada-based Molycorp — which was the only rare earth metals producer in the United States at a time when China was threatening to withhold its supply from the rest of the world — received a lot of attention. However, it went through a Chapter 11 bankruptcy in 2015, before reemerging last year as a private company called Neo Performance Materials.
"Aside from the risks inherent in any mining venture, some of the problem with the former Molycorp product slate was that it was dominated by the more abundant, therefore less economically desirable, lighter rare earths. Coal actually contains a higher relative concentration of the heavy rare earths, many of which have a high strategic value," Hower said. But he added, "Whether those heavy rare earth elements can be extracted from coal and coal combustion products and whether the process can be economic is something that is still being demonstrated."
Kentucky's renewable renaissance may seem like a series of one-offs, but the reality is that a number of energy-efficient initiatives are coming from the top down. Last October the state was selected by the National Governors Association to participate in the Policy Academy on Power Sector Modernization, along with Oregon, Rhode Island and Washington. The purpose of the initiative is to bring together stakeholders to discuss and work on energy issues, particularly with respect to generation and efficiency, said Rick Bender, executive adviser for Kentucky's Department of Energy Development and Independence.
"Throughout this year, we've met with utilities folks, industrial and commercial consumers, renewable developers and environmental advocacy groups, working on issues like how does distributed generation work and where does it make sense," Bender said. "We're engaging with all our citizens."
On the city level, Louisville's government is setting sustainability standards for its residents. Following Trump's withdrawal from the Paris Agreement, the city signed onto "We Are Still In," a coalition of more than 200 cities pledging to uphold the climate accord.
Internally, Louisville's Office of Sustainability tries to steer away from rhetoric that could be politically polarizing. Instead, it focuses its efforts on energy efficiency, with a goal 25 percent usage reduction by 2025.
"It's important to look at everything on the energy-efficiency side, even before looking at solar," said Bender. "[Energy efficiency] is our cheapest resource out there."
