Politics Blog

Coal outlook remains down, but don’t count it out

Declining domestic demand has U.S. coal companies itching to ship their product to Asia.

A recent forecast of world coal imports — although recently cast into doubt by the forecaster itself — shows coal continuing to be on the rise through 2030, including in China, which by far is the world’s biggest coal burner.

“A rising tide lifts all boats,” an analyst from that energy-industry forecaster, Wood Mackenzie, told me in November. That’s why WoodMac continued back then to be bullish on coal exports and offered a counterpoint to financial analyst Tom Sanzillo of the Institute for Energy Economics and Financial Analysis.

Sanzillo was in Bellingham in November to explain the point of view of his institute, which advocates for getting away from coal and into cleaner energy sources.

He followed up on Feb. 2 with a report that said more of the same: Coal is in a heap of trouble, and any forecasts saying the price of coal will rebound are overly optimistic:

Peabody (Energy, the United States’ No. 1 coal producer) continues to talk nonetheless of growth in India’s coal imports and of its hopes for a recovery in Chinese coal-import demand even after an 11 percent decline there in 2014. The company does acknowledge that total domestic coal demand could fall by more than 5 to 6 percent in 2015 but it also optimistically forecasts a rise in natural gas prices into 2017 as a potential catalyst in reversing the eight-year trend in declining U.S. domestic coal demand. Peabody at least concedes short-term difficulties, forecasting U.S. coal-export volumes to drop by another 20 to 30 percent in 2015 after declining by 17 percent in 2014.

The anti-coal institute put out a guest column today, Thursday, Feb. 19, by Ross Macfarlane of Climate Solutions. Macfarlane said Pacific Northwest coal-port proposals smacked of desperation, although he focused on the proposed Millennium Bulk Terminal in Longview, Wash., not our Gateway Pacific Terminal at Cherry Point. Macfarlane described the financial woes of the two coal companies behind the Millennium project: Ambre Energy and Arch Coal. Their position is so precarious, Macfarlane surmises, that it’s hard to imagine them financing a project bound to cost close to $1 billion.

Macfarlane:

They could get lucky: Coal prices might magically surge again, defying forecasts from virtually every financial and industry analyst and defying what futures markets are telling us. They might find what investors call a “greater fool,” somebody with deep pockets who will buy them out and fund the project. It’s possible they will persuade the public to pick up a big share of the tab and underwrite the investments, a strategy that is already emerging in Wyoming, where the coal would be mined and where legislators are talking about putting money into out-of-state export facilities.

Where to turn for some uplifting news, if you’re in the coal business? An unlikely source: Andrew Revkin, of the New York Times’ environmental dot Earth blog.

On Wednesday, Feb. 18, Revkin gave context to the news, first reported by Greenpeace as far as I could tell, that China’s coal consumption surprisingly dropped in 2014.

True enough, Revkin says, but not in China’s energy sector. Revkin actually gives much of the space in his post to another blog entry by the Clean Air Task Force, headlined in part, “No China coal peak in sight.”

Task force Executive Director Armond Cohen:

The short-term blip (in Chinese coal consumption in 2014) does not undermine the general trend of continued upward trend in coal deployment in China’s power sector, which represents a growing share of China’s energy use].

Unfortunately for climate, these China 2014 coal additions (in the energy sector) – which in one year alone were double the size of the United Kingdom’s entire legacy coal fleet – will be around and cranking away for many decades, along with the rest of China’s coal fleet, most of which is less than 15 years old. Indeed, these plants can continue to pump CO2 out well into the second half of this century even with China’s pledged 2030 CO2 peak.

Bad news for the climate but good news for the coal industry. Is there any way that the two — coal and climate — can be positioned so as not to oppose each other?

The closest thing to a magic bullet, according to Cohen, is carbon capture and sequestration:

In addition to rapidly increasing China’s adoption of non-fossil power sources such as renewables and nuclear, to mitigate long-lived CO2 emissions, carbon capture and sequestration (CCS) must be applied to both new and existing China plants, both coal and gas. Full commercial scale projects in Canada and the US demonstrate that CCS is not a science project but is here today and works.

Revkin is more skeptical of CCS. He wrote on Wednesday that his piece on CCS from 2010 still represents his opinion on the technology:

[I]t remains an absolute pipe dream if considered at anywhere near the scale that would be required to impress the global atmosphere in a world where coal use is expected to surge for decades.

The issue isn’t technology or geology (finding safe storage sites for huge volumes) nearly so much as cost. And remember, this isn’t about the affordability of the technology in the United States or Europe. It’s about the cost of deployment at large scale in the coal-boom countries, China and India.

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