The coal fleet operated by Berkshire Hathaway emits more noxious oxides than competitors, Reuters reported this week, taking aim at one of the many lucrative businesses of Warren Buffett. What the report omits is the reason that Berkshire Hathaway is still so invested in coal power: its reliability and affordability.
The report points the finger at Berkshire’s coal power plant fleet in the Midwest, claiming it was dirtier than any other company’s coal power plant fleet—even though “No single Berkshire plant itself can be considered the dirtiest in the industry.” The basis for the claim is a modeling tool developed by the Environmental Protection Agency to estimate emission generation.
The tool, dubbed COBRA, or Co-Benefits Risk Assessment, “assigns an economic value to pollution variables, calculating the economic and public health costs of contaminated air.” That tool’s value assignations suggested that noxious gas pollution from Berkshire Hathaway coal plants may be causing up to seven premature deaths, 1,800 lost school days due to air pollution, and $104 million in health expenses every year.
It is worth noting here that these figures are the result of modeling rather than empirical data, meaning they are not really factual data. That said, Reuters also cited a number of documents showing Berkshire Hathaway has been resisting investments in pollution reduction at its coal plants for years, including through litigation. The report says that other coal operators have invested in so-called scrubbers to reduce their noxious oxides emissions, Berkshire has not done so. Yet it also quotes a statement by the company that says its coal power plant fleet is “in full compliance with state and federal environmental laws, regulations and requirements.”
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The investment company also said that installing scrubbers at its coal generation facilities would have raised the electricity bills of its customers, raising an important issue in the energy transition narrative. That narrative asserts that exorbitant electricity prices are a necessary pain along the way to decarbonization, and they are a temporary pain that will go away as the grid reaches net-zero. Yet this assertion is a departure from earlier claims that wind and solar in and of themselves are cheaper than coal and gas—because they are not.
Indeed, Warren Buffet himself famously said that Berkshire Hathaway was only investing in wind power because of the tax incentives this investment brought with it. “I will do anything that is basically covered by the law to reduce Berkshire's tax rate,” Buffet said back in 2014. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.”
The Reuters report notes that Berkshire has invested some $41 billion in alternative energy generation, most of it in wind and solar. Be that as it may, the company continues operating coal power plants, with a stated intention to exit coal power by 2049. This is an interesting deadline because it is a much later deadline than many other utility operators’ plans for a coal exit. And this could only mean one thing: that Berkshire has an unpopular opinion about the profitability of coal power generation even in a transition context. Unpopular, however, does not mean unrealistic. Indeed, recent developments suggest that it is the exiteers from coal that may have unrealistic expectations.
Germany is a case in point. While highly ambitious in the transition push, Germany has increased its power generation from coal because wind and solar have failed to make up for the loss of its nuclear generation capacity. Coal remains essential for China as well, despite it being the largest market for wind and solar energy. In the U.S., coal has remained resilient, too, with coal power plant retirements slowing down instead of accelerating with the buildout of wind and solar. Reliability and affordability matter in energy supply.
By Irina Slav for Oilprice.com