The future of coal: Applying scenario planning to a critical issue
Power plant. For nearly 40 years, the Deer Creek mine provided coal to PacifiCorp’s Huntington Power Plant, located in Emery County, Utah. When PacifiCorp announced the closure of the mine in December 2014, the nearby towns were left to scramble with the impact of not only the loss of 182 mining jobs, but also the increased impact of coal trucks on their local transportation infrastructure. Photo by Shad West.
by Mike Hansen and Kyle Slaughter, Salt Lake City, Utah
The coal industry has entered a period of intense scrutiny, speculation, and uncertainty. This is particularly disruptive to communities in the West, where coal extraction and power generation are significant drivers of the regional economy.
The West’s changing energy landscape
Many states are experiencing a shift away from coal-fired power. Nevada, for example, reduced its coal-fired power production from 70 percent of its total power generation in 1992 to only 12 percent in 2012. Since 2010, over 150 of the nation’s coal-fired power plants have closed or been scheduled for retirement, and Rocky Mountain Power’s capital investment plans only include natural gas facilities. Most significantly for Utah, the Los Angeles Division of Water and Power recently announced that it will not be renewing its power purchase agreement for coal-fired power from the Intermountain Power Project in Millard County, Utah. Instead, the Los Angeles Division of Water and Power is working with the Intermountain Power Project to build a new natural gas plant that will produce their electricity by 2025.
Leaders in rural Utah have been and are concerned with indicators like these and asked the Utah Rural Planning Group (RPG) to conduct a study of the future of the coal industry in Utah. RPG’s challenge was how to communicate a large volume of information about the industry to exceptionally busy people with the hope that it would inspire conversations in which everyone would confront their assumptions about the coal industry’s future.
Why Scenario Planning?
A relatively recent, painstakingly detailed report on Utah’s coal industry projected consistent growth in the industry for the foreseeable future. Similar studies in the past demonstrated the same attention to detail, only to see coal’s future play out differently than the numbers suggested it would. Rather than make another attempt to predict a specific future for Utah’s coal industry, the RPG sought out a more flexible planning method that would help rural leaders see the multiple futures that could develop from coal’s current position. Consequently, the RPG believed it would best serve Utah’s rural communities by using scenario planning. This meant first identifying the set of key uncertainties that affect Utah’s coal industry most, establishing these uncertainties trends, and allowing rural leaders to come to their own conclusions about what is most likely. As a result, the Utah Coal Report produces an open, dynamic, forward thinking mindset where readers are encouraged to come to their own conclusions about the future rather than digest another static government report.
Planning matrix. A matrix originally developed by Royal Dutch Shell. The RPG planners adopted a scenario planning approach to this study because of the lack of certainty and control created by coal’s macroeconomic issues. The Mind of a Fox, Scenario Planning in Action by Chantell Ilbury & Clem Sunter (Human & Rousseau Tafelberg).
Applied scenario planning
Previous quantitative studies analyzing the future of Utah coal projected a sustained increase in Utah’s coal production. The reality that has unfolded, however, has been quite different.1
The gap between these projections and the reality that the industry has experienced is not a result of poor modeling, a misreading of market conditions, or faulty data. Instead, the disparity speaks to the complexity and uncertainty of something as large as the coal industry, as well as the inability of any model to adequately account for the full range of possible outcomes.
Rather than make another attempt to predict the future of Utah’s coal industry, the RPG wanted to design a process and product that would help local leaders position themselves for the future by challenging their assumptions. In order to do this, the RPG adopted a scenario planning framework. This practice helps decision-makers explore a range of possible futures, consider how those futures might emerge, and develop strategies that are both focused and flexible. Scenario planning isn’t just a clear statement of facts. Instead, its goal is to make educated guesses of what the jigsaw puzzle box looks like – not to try to tell local leaders where to place their pieces.
The first step in scenario planning is to create a thorough assessment of the set of circumstances (or “certainties”) currently affecting the industry. For the coal study, the RPG gathered an enormous amount of data on local and regional socioeconomics, industry trends, consumer and producer indicators, alternatives, etc. The team then distilled these reports into a series of infographics and magazine articles with the hope that readers would be able to easily see how influential the industry is to the counties, and where the industry is headed. The scenarios and infographics are detailed at RPG’s website www.ruralplanning.org/coalstudy.
The next step required deciding on the key uncertainties for the industry. The debate and decision process were not easy tasks because the study topic is so broad. To overcome this difficulty, the team built a script and conducted interviews with local leaders. Although these interviews were filmed, local civic and industry leaders were encouraged to speak candidly. Consistent themes emerged from these interviews, and the uncertainties emerged. RPG’s report argues that the primary uncertainties for coal in Utah are regulation, public opinion, technology, markets, and catastrophes.
Finally, scenario planning requires the actual writing of the scenarios, each outlining a possible outcome for the industry. All of these scenarios needed to be plausible. In order to build them, the uncertainties were combined in a way that allowed a story to emerge. Internally, the RPG called these “futurescapes” – pictures of different “futures” that could emerge if the uncertainties aligned in ways that make Utah’s coal industry thrive, survive, or dive.
Study approach. In order to digest all of the issues related to the broad “future of coal in Utah”, the RPG planners gathered the facts, distilled the most influential uncertainties, then drafted plausible futurescapes. Graphic by Nick Baker, Utah Rural Planning Group.
The future of coal in Utah
Coal Thrives Scenario:
This scenario explores a future in which coal is an indispensable power source for the United States, with Utah as a regional producer of both coal and coal-fired power. It first explores how key uncertainties must play-out for coal to thrive in Utah as the de facto energy source for the state and country; then it explores the socioeconomic impact this scenario would have on the Utah “Coal Belt.” Its assumptions include:
- Public Opinion: Shifts toward a greater perceived threat than CO2 emissions and climate change (i.e. water scarcity)
- Governmental Regulations: Decrease or remain at current levels
- Technology: Evolves according to historical patterns for coal’s alternatives, while emissions’ technology improves
- Market Forces: The market considers coal to be the lowest-risk, highest-return energy source
- Catastrophic Events: a major event affects natural gas infrastructure, but not coal
Coal Survives Scenario:
This scenario explores a future in which coal continues to be used at or near current rates. It explores how key uncertainties would likely play out in a scenario where coal maintained its current level of utilization, and long term coal use trends continue. Its assumptions include:
- Public Opinion: Maintains current trends
- Government Regulations: Fluctuates at (current) levels that discourage new developments and investments in coal
- Technology: Renewable technology improves at the same rate as coal emissions technology
- Market Forces: Maintain current trends
- Catastrophic Events: An event affects natural gas infrastructure, but not coal
Coal Dives Scenario:
This scenario explores the type of events that would need to occur in order for a “coalpocalypse” to happen in the Utah “Coal Belt.”This assumption is essentially what would need to happen for coal to remain in the ground, and the uncertainties include:
- Public Opinion: Substantially shift away from support of coal
- Government Regulations: Consistent and overwhelming increase of regulation on mining, air pollutants, or both
- Technology: Renewable technology is incentivized heavily or experiences a tremendous breakthrough
- Market Forces: Coal markets collapse as alternative energy sources increase in feasibility
- Catastrophic Events: Events don’t directly affect coal infrastructure, but the public blames them on coal
Coal Revives Scenario:
“Coal revives” was another scenario that was developed for this study, but it wasn’t explored as much as the other three as our research suggests that coal would have to dive for a long period of time before reviving. Similarly, the key uncertainties for a “revive” scenario would generally follow the same pattern as they would for the “coal thrives” scenario.
coal water-slide. A view from Skyline Mine located in Carbon County, Utah. Photo by Shad West.
Application
After distilling all its research and input, RPG crafted its scenario and circled-back to local leaders in order to have conversations about each one. Local leaders were encouraged to explore those stories, or develop their own.
It is unlikely that any of the scenarios represented in their study will play out exactly as presented. Instead, the value of these scenarios will continue to materialize as elected officials and business leaders explore their personal appraisal of Utah’s coal industry, examine the rationale leading to alternative futures, and decide to act.
Developing a strategic response to each of these scenarios will provide Utah’s coal-dependent communities the best opportunity for success in the face of any possible future.
Mike Hansen is one of the founding members of the Utah Rural Planning Group. He brings 15 years of planning and leadership experience at the state, local, and quasi-governmental levels. His core competencies and interests include project management, communications, and strategic planning. Kyle Slaughter joined the Rural Planning Group in 2014. His background is in public administration and private sector consulting in Utah and Idaho. His skill set includes technical writing, research, and presenting.
ENDNOTES
- The Structure and Economic Impact of Utah’s Coal Industry, Bureau of Economic and Business Research, University of Utah.
About the Utah Rural Planning Group
Created in spring of 2014, the Rural Planning Group (RPG) is a creation of the Permanent Community Impact Fund Board (CIB).
Having invested over $1.6 billion and funded more than 2,400 projects since its inception in 1979, the CIB provides loans and grants that enable rural communities to carry out fundamentally important capital improvement, public service, and planning projects. The CIB obtains funding from mineral lease royalties on extractive industries operating on federal lands that are collected by the federal government and then returned to the state. The CIB disburses this funding to communities who may be affected by mineral resource development on federal lands.
The RPG intends to improve the use of these funds by promoting planning best practices in rural communities. RPG accomplishes this end by providing planning leadership for Utah’s rural communities, facilitating communication and coordination between key stakeholders, offering planning and technical assistance, and developing and delivering training, tools, and resources.
By implementing these services, RPG provides rural communities with tools to build the futures they desire individually and prepare for the future as a region.
Visit ruralplanning.org
Published in the February/March 2015 Issue