Coal giant Peabody touts big solar project in Illinois Basin

Peabody Energy is the world's largest private-sector coal producer, but it announced last week it's launching a renewable energy company called R3 Renewables. In the announcement, the company "touted its financial backing and 'extensive' land holdings, and said it would start with development of six sites on or near old coal mines in Indiana and Illinois," the Illinois Basin coalfield, Bryce Gray reports for the St. Louis Post-Dispatch. The move may be startling, since the St. Louis-based company has long been a staunch defender of the coal industry, but analysts say it makes sense.

"Old coal mines offer the land and available space that’s critical for renewable energy projects. And they’re already wired for heavy electrical use, with built-in access to the wider power grid, which could make it far cheaper to rewire them for solar. And grid access is so important some renewable energy developers value it even over especially sunny or windy sites," Gray notes. "Additionally, repurposing existing mines might provide Peabody with a way to alter reclamation obligations — hefty costs tied to the restoration of land after mines close down. Keeping the land in use, albeit for a different purpose, might change when and how the bills come due."

Peabody and other coal companies have faced increasing financial pressure in the U.S. in recent years as demand for thermal coal shifts toward Asia, and have acted accordingly. In 2016 the company filed for Chapter 11 bankruptcy and in 2019 it merged its Powder River Basin operations with rival Arch Resources, then called Arch Coal. Arch made the name change in 2020 when it pivoted toward metallurgical coal. "Amid the switch, Arch’s leaders spoke very clearly about the vanishing future for thermal coal" use to generate electricity, Gray reports.

Peabody remains focused on thermal coal; its website address icon is "BTU" in a blue block. One analyst speculated that major Peabody creditor and investor Riverstone Credit Partners may be behind the company's move. Riverstone not only has experience developing renewable energy projects, but also has the financial wherewithal to shepherd large-scale projects, Gray reports.

And the scale is striking: "Over the next five years, R3 aims to develop more than 3.3 gigawatts of solar power and 1.6 gigawatts of battery storage capacity at the sites in Indiana and Illinois," Gray reports. "That’s about three times the existing solar generation in the two states combined . . . and nine times their storage capacity."