Peak Coal

We are far from hitting peak coal there are plenty of reserves.

HOWEVER

The spot prices for coal have gone up by well over 150% depending on where you draw your baseline.

"OMG! We use almost all coal here! My bill is going to go up by 150%!"

No.

Energy companies negotiated contacts for multiple years.
They normally get better than spot prices especially when the price has not been high for multiple years.
Only a part of their costs come from purchasing the fuel.
That 150% is only for Appalachia (yes our local coal).

HOWEVER

I am going to make several generous assumptions.

1) Buying coal is 20% of all the costs for getting power to you.
2) The contracts are five years in length. 20% of them will expire.
3) The energy company can get a price that only represents 20% of the 150% in this short coal price peak.

150% * 20% * 20% * 20% = 1.2%

"Great no problem!"

No.

These are generous assumptions and we will not know until the energy company asks for an increase (which takes a long time to get).

And...

There is normal inflation of everything from employees, to vehicle fuel, to steel. The price of coal is guessed to fall way off of this peak (as China and everyone else uses more). So, really this is the absolute lowest increase.

That's the first year.

Let's say they can keep getting that same price.

Year 1: 1.2%
Year 2: 2.4% (Q: Why? A: One of those 20% above has changed to 40% since another year of contracts expired.
Year 3: 3.6%
Year 4: 4.8%
Year 5: 6%

Let's run another scenario...

1) Buying coal is 25% of all the costs for getting power to you.
2) The contracts are three years in length. 33% of them will expire.
3) The energy company can get a price that only represents 50% of the 150% in this short coal price peak. (That is like getting something at "40% off", how often does that even happen?)

150% * 25% * 33% * 50% = 6+%

Year 1: 0% (The year is spent in filing, lawsuits and media coverage)
Year 2: 6+%
Year 3: 12+%
Year 4+: 18+% (only three years worth of contracts)

Again even this is assuming that
1) Coal stabilizes at 70% of it's current price (this may get better)
2) CO2 legislation does not add costs
3) No other costs (employees, vehicles, inflation)

My recommendation is to update shelved renewable projects plans with an extra 0%/6%/12%/18% assumption of energy costs and look at the pay back period.

By the time you go though the process of planning, approval, bidding and actually paying someone for your renewable project you will have harder evidence of what the actual "coal" costs will be.

HOWEVER

There is coal from other regions that is cheaper. Now getting tons of coal remotely. Possibly it would be better to burn it there and just send the electric? Maybe getting wind and solar from afar will come into fashion.