GE about-faces, will stop building coal power plants

Source: By Benjamin Storrow, E&E News reporter • Posted: Tuesday, September 22, 2020

General Electric Co. has long powered the coal industry. But no more.

The Boston-based industrial conglomerate said yesterday it will no longer build steam turbines for new coal power stations.

The announcement marks a significant shift for a company that was betting on a coal renaissance as recently as 2015. It also has significant global implications. While coal generation has fallen in the United States and Europe in recent years, total global coal capacity has inched higher due to the construction of new coal plants in China and India.

“I think it is a courageous decision and forward thinking. It is looking toward the future and seeing the future is not coal,” said Kathy Hipple, an analyst at the Institute for Energy Economics and Financial Analysis, a research firm that favors a transition to clean energy. “It is very challenging for companies to give up their legacy business. It is a business they understood, a business they knew. To move away from that is good long-term strategy.”

Coal has long been central to GE’s balance sheet. By its own count, GE has installed 30% of global steam turbine capacity. That figure includes gas and oil plants in addition to coal. The company made a big bet on the fuel in 2015 when it acquired the power and grid businesses of Alstom SA, the French coal turbine maker, for $9.5 billion.

But the acquisition proved costly for GE, as the black mineral was muscled out of power markets by natural gas and renewables. Three years later its power division was forced to write off $23 billion, largely as a result of the Alstom deal.

GE has pivoted to natural gas turbines in recent years but has been unable to stop its power division’s slide. A 13% drop in orders from its power division in 2019 was in large part driven by a decline in orders from its steam segment, according to financial filings.

What GE’s exit from coal will look like is not entirely clear. A company spokeswoman said yesterday’s announcement was the beginning of a process that will extricate GE from new coal power stations. A company statement said the announcement could result in “divestures, site closings, job impacts and appropriate considerations.”

GE is not completely cutting the cord with coal. It will continue to service existing turbines. But the move comes as coal accounts for a smaller and smaller share of GE’s business. The power division’s revenues fell from $29.4 billion in 2017 to $18.6 billion last year. About 70% of the power division’s revenues last year came from its gas segment.

“With the continued transformation of GE, we are focused on power generation businesses that have attractive economics and a growth trajectory,” GE Power Portfolio President and CEO Russell Stokes said in a statement.

Global coal capacity has grown in recent years on the backs of new plants in China and India. The world added 68 gigawatts of coal capacity last year, more than offsetting the 34 GW of capacity retired in the United States and Europe, according to the Global Energy Monitor, a nonprofit that favors closing coal plants.

A tally of new coal plants compiled last year by the Natural Resources Defense Council estimated that some 12 GW of new coal capacity worldwide had plans to install GE turbines. A GE spokeswoman called NRDC’s list inaccurate but declined to elaborate.

All of the company’s plans for new coal plants are overseas. No American utility has plans for a new coal plant today.

Han Chen, who manages energy policy for NRDC’s international program, called GE’s announcement a welcome move. In recent years, the company has partnered with Chinese firms to build plants in a handful of emerging markets. Yesterday’s decision removes some of the risk associated with a global coal expansion, she said.

The bigger question is what happens next, Chen said. It is unclear whether GE’s competitors will move in to take over where it left off or what the company will promote as an alternative to coal.

“The big concern is instead of swapping from a coal to a renewable energy project first, they will try to instead their gas turbines because they are not as competitive on the solar and wind turbines,” she said. “They are over-investing in gas because it is the easy alternative because that is their niche.”