Coal is a bad investment  

Grist has an interesting article on Warren Buffett and the dropping of plans to build more coal fired power plants by his energy companies.

One of the biggest climate stories of 2007 never made it to the business pages. It's about how Warren Buffett, with no fanfare, quietly walked away from coal, cancelling six proposed plants.

Buffett used to love coal. His involvement with it began when Berkshire Hathaway bought MidAmerican Energy Holdings in 1999. MidAmerican was a big operator of coal plants, and with natural gas prices edging toward a huge leap upwards -- bringing coal back into favor -- it appeared to be a typically savvy Buffett move.

In 2006, Buffett picked up another utility, PacifiCorp, which includes Rocky Mountain Power and operates in Calif., Idaho, Ore., Utah, Wash., and Wyo. Again, it seemed like a smart play, bringing MidAmerican's expertise with building and running coal plants to a region of the country with lots of coal. Sure enough, in the fall of 2006, PacifiCorp presented regulators with plans [PDF] for six (or, in some scenarios, seven) coal plants in Utah and Wyo. over the next 12-year time period, representing approximately 3,000 megawatts of new capacity.

Today, PacifiCorp is talking about a lot of ways of supplying future electricity demand growth: geothermal, wind, solar thermal trough, compressed air storage, geothermal, demand management programs, and natural gas. But all six new coal plants have vanished from the company's "preferred scenario."

What accounts for Buffett's change of heart on coal? Did the guru have more foresight than colleagues like Duke's Jim Rogers, Dynegy's Bruce Williamson, and Dominion's Thomas Farrell, all of whom persisted in building coal plants? Those three CEOs recently shared the dubious distinction of receiving Fossil Fool awards. Perhaps not coincidentally, all three have seen the stock market value of their companies fall in the past year. (Dynegy, the poorest performer of the lot, is down nearly 17 percent.) In contrast, the stock of Berkshire Hathaway has risen significantly in the same period. Of course, that's not exactly a measure of whether the company is making the right choices in its energy business, which makes up only 15 percent of the entire company. But at least nobody has nominated Buffett for a Foolie.

In examining the reasons for Buffett's U-turn on coal, it's safe to say that neither Buffett's business partner, Charlie Munger, nor his longtime bridge buddy, fellow richest Earthling, and partner-in-philanthropy Bill Gates, is likely to have done any lobbying of Buffett -- at least, not on behalf of Mother Earth. These two associates both made statements last spring that appeared to categorize global warming as a real, but distant, concern. At a forum in Beijing on April 19, 2007, Gates said, "Well, fortunately climate change, although it's a huge challenge, it's a challenge that happens over a long period of time. And so [according to] most of the forecasts about by the year 2100 the ocean will have risen perhaps a foot and a half, [so] you know, we have time to work on that."

(At the Beijing forum, Nobel Prize winner Mohammed Yunas, attempting to inject a note of sanity, responded: "Bill, whatever it is to be done is to be quick for us in Bangladesh. Bangladesh is a country [mostly at] sea level, very little high ground in Bangladesh. If the sea level rises with global warming, climate change, millions of people in Bangladesh will be affected, because part of Bangladesh will go underwater. And the remaining part, which will not go under water, their agriculture, their whole likelihoods will be threatened. So, with 145 million people in this tiny little piece of land, with the global warming shaking it up, it will be a terrible disaster of no going back.")