MAC/20: Mines and Communities

Coal is losing the energy battle - Bloomberg journo predicts

Published by MAC on 2019-11-01
Source: Bloomberg

"The world has gone through a remarkable energy transition over the past
decade, but much of the shift still lies, iceberg-like, beneath the surface.

"Renewables are cheaper than coal almost everywhere, a prospect
that was considered so improbable at the time of the 2006 Stern Review
on climate change that it wasn’t treated as a serious possibility beyond
a vague hope that research and development might one day flip the script."

And the conclusion now drawn by a Bloomberg commodities and companies correspondent?

"Don’t be surprised if this industry falls even faster than people have dared to hope".

From Wyoming to Australia, Coal’s Heartlands Are Retreating


The world is going through a remarkable energy transition as cheaper
renewables push the fossil fuel into its death throes.

By David Fickling

Bloomberg

23 October 2019

From the Rocky Mountains to the Rhineland and Australia’s Great
Dividing Range, the great tide of the coal industry is receding.

The entire Powder River Basin, the region spanning the states of Montana
and Wyoming that provides about half of America’s thermal coal, is
“distressed,” Moody’s Investors Service wrote in a report last week. All
companies producing coal there are now focusing on mining coking coal
elsewhere in the U.S., the ratings company wrote. Output “will likely
fall significantly in 2020,” it said.

Energy Information Administration forecasts quoted by Moody’s suggest
that production from the Powder River-dominated Western Region will drop
to 339 million short tons in 2020 from 418 million short tons in 2018, a
19% reduction and a 42% decline from 592 million short tons in 2010.
Most of that decline happened while coal could still produce electricity
more cheaply than renewable alternatives, a situation that’s now
reversed. A comparable drop over the coming decade would shutter almost
every mine in the basin.

In Australia, the world’s second-largest coal exporter after Indonesia,
similar trends are afoot. The pipeline of new renewables projects, led
by solar farms, now stands at 133 gigawatts, according to research group
Rystad Energy. Coupled with a flood of energy-storage projects coming
online by 2025, that means that coal-fired generation could be extinct
by 2040, the group said Tuesday.

Changes under way in Europe are pointing in the same direction. Germany,
long considered one of the rich world’s last redoubts of coal-fired
power, is seeing generation plummet as the rising price of carbon
credits and falling cost of gas squeeze out profits for generators.
Germany’s current-year and next-year dark spreads, which represent the
theoretical profit for coal-fired power based on prevailing fuel,
electricity and carbon prices, have been in negative territory for much
of the year.

Hello Darkness My Old Friend

Generators RWE AG and Uniper SE are still able to eke out margins by
utilizing carbon credits bought in former years when prices were in the
region of 5 euros ($5.57) compared to their current 25.93 euros.
Eventually, that stockpile will run out. Unless gas gets more expensive
or carbon gets cheaper, the German government’s target for ending
coal-fired generation by 2038 is likely to come 15 years or so early.

Remarkably, this trend is even sweeping up brown coal, or lignite, a
cheap-and-dirty variety that’s been seen as more resilient than
Germany’s costlier black coal. Lignite generation in the six months
through June fell 28% from a year earlier at RWE, a drop of 9.9
terawatt-hours.

Even regions that were once viewed as the last hopes for coal demand are
looking dicier. The pipeline of thermal power projects beginning
construction in Southeast Asia has fallen to zero this year everywhere
except in Indonesia. Even there, the capacity starting up is just 1,500
megawatts, equivalent to just five or six power plants, according to a
report published Wednesday by Global Energy Monitor, a research group in
favor of fossil fuel phase-out.

End of the Road

The world has gone through a remarkable energy transition over the past
decade, but much of the shift still lies, iceberg-like, beneath the
surface. Renewables are cheaper than coal almost everywhere, a prospect
that was considered so improbable at the time of the 2006 Stern Review
on climate change that it wasn’t treated as a serious possibility beyond
a vague hope that research and development might one day flip the script.

The great hope for coal now is not that it will be able to survive in
the free market, but that government support will come in to bail out an
industry that can’t survive on its own, in the process locking in
pollution-related disease and climate emissions for future generations.

It’s not impossible that this bet will work in a few regions — as
exemplified by the speech given last week to China’s National Energy
Commission by Li Keqiang, in which the premier sang the praises of
domestic coal deposits and stepped back from previous promises to
accelerate deployment of renewables.

Any industry that harms its consumers, pollutes the planet and depends
for its survival on political support is living on borrowed time,
though. The declines to coal-fired power on multiple continents are the
death throes of a technology that’s rapidly heading towards
obsolescence. Humanity will still struggle to reduce our emissions fast
enough to avoid devastating climate change — but don’t be surprised if
this industry falls even faster than people have dared to hope.

 

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