Unlike businessmen and investors trained in the Warren Buffett school that focuses on companies with a market monopoly; I actually enjoy competition. I think it is good for both the participants and their customers because it pushes improvements that are mutually beneficial. Many of my most successful investments have been in companies that are successful in industries where no company or product line has a dominant role.
I see competition from the perspective of having competed in far more races than games. In a race, there are so many competitors that the only way to really succeed is to focus on your own performance. In a game, sometimes you can win by measures that are more focused on inhibiting the other team from performing well.
That is one of the reasons that I am so enthusiastic about the energy business; I see it as a marathon race with a large field of strong companies with products that all compete for the privilege of serving human needs for heat and power.
I recognize that some of the competitors in the business do not always play fair. Instead of focusing on improving their own products and competing on merit, they work on changing the rules of the game to favor their own unique strengths or they work to handicap their opponents through the use of trash talk or deception tactics.
Aside: Stretching my race analogy a bit, there are some rather famous race events where uncompetitive participants or spectators influence the final results by using negative tactics. That can help a selected participant to move up in the field on a relative basis, especially if the uncompetitive influencers direct the negative tactics against a participant that is performing well strictly on merit. End Aside.
Gregory Boyce, the CEO of Peabody Coal, recently published a presentation that unabashedly touts the strengths of his company’s product and describes why that product has successfully performed in markets around the world for more than 150 years. The presentation, dated September 14, 2010, is titled Energizing the World: One BTU at a Time: Equal Energy Access: The Power of Coal.
The presentation includes 25 pages of statistics, photos, charts and graphs that show why coal is so important in producing affordable energy. It also includes several slides that do a good job of identifying the impact that affordable energy can have for individual and national prosperity. In many ways, that portion of the slide show reminds me of the facts and figures that Bob Hargraves uses in his Aim High presentation to explain why he is so excited about the potential for thorium energy.
The big difference between the presentations is that Bob is a retired professor on a mission to introduce a fuel source that currently has little to no presence in the market. In contrast, Boyce is the CEO of one of the largest companies in the United States who is selling a product that has a 50% share of the world’s enormous energy market. Boyce’s message will probably get a bit more media exposure because his company and its fellow coal producers can afford to buy more commercials.
The presentation’s concluding slide attempts to be straightforward about the challenges that coal faces and the industry’s vision for improving in its admitted weak areas. In the style of a strong competitor who throws down the gauntlet to his rivals, Boyce is aggressively predicting that coal will win in at least half of the market battles for new power generation. Here are the final take aways from the slide show.
- Eliminate Energy Poverty and Propel Global Economies by Ensuring that Half of New Generation is Coal-Fueled
- Replace 1,000 GW of Traditional Coal Plants with Advanced Coal (Supercritical and Ultrasupercritical) Plants
- Develop 100 Major Carbon Capture, Storage and Use Projects Around the World by 2020
- Deploy Significant Coal-to-Gas, -Chemicals, and -Liquids Projects Around the World by 2020
- Commercialize and Deploy Next Generation Clean Coal Technologies to Achieve Near-Zero Emissions
One of the most interesting slides in the deck is one that directly confronts the fact that there are some coal detractors who have a goal of zeroing out coal combustion. The slide header says Zero Out Coal? No Energy Alternative Can Even Come Close. It lists the number of alternative power systems or the increase in those power systems that would be required for the task of beating coal out of the market. According to Peabody’s calculations knocking coal out of the ring would require one of the following:
- 1800 times the world’s inventory of solar systems (with something to provide back up for night and cloudy days)
- 2.5 million wind turbines (with something to provide back-up when the wind does not blow)
- 1,150 nuclear power plants
- 70 trillion cubic feet of natural gas (3 times as much as Russia currently produces)
- 2,250 large hydro electric dams
The message is that coal is not going to give up its market dominance anytime soon. The companies involved in the business are not going to drop out of the marathon just because they seem to be approaching “the wall”.
As an aggressive competitor, however, the nuclear industry would have a reasonable chance of catching up and reducing the lead that coal built during its 100 year head start. Our fuel source is cheaper and more abundant. We have already demonstrated the plants that are very close to zero emission – even including all lifetime contributions from the construction process. To draw even and then pass coal, we only have to build about as many new nuclear plants as the coal industry plans to build in its program to replace traditional coal plants with Supercritical and Ultrasupercritical.
Notice – the Peabody states a goal of 1,000 GW – that is 1,000 new plants each producing a Gigawatt of power – as just part of its plan for future development. That is a similar number to the 1,150 large nuclear plants that Peabody has computed would push coal out of the market altogether.
What effect would it have on coal consumption if the rest of the world combined would just match China’s current goal of 400 GWe of nuclear capacity by 2050? Perhaps if the nuclear industry’s leaders were as confident and aggressive about the benefits of their products as Boyce is about his company’s product, the nuclear industry would work harder to make up ground in its long running race with coal.
The world would prosper from a true competition that ensures that all participants provide a complete product and take care of the wastes that their processes create. It would push all fuel sources to improve and reduce their environmental impacts. It would help drive some of the unproductive costs and project delays out of the nuclear industry and keep the focus on safe, reliable operation. Competition is good, greed and market domination are not.