I’ve posted before about Coal’s death spiral from the viewpoint of utilities, and the warnings from the US Geological Survey about the illusion of “200 years of coal”.
In the last week I’ve been getting a stream of notes from anti-coal activist Leslie Glustrom about what may be signs of the inevitable collapse of the market for coal in the US. She writes
Producing coal in the US is now like scraping the bottom of the peanut butter jar–it is getting harder (and therefore more expensive) to produce the coal–which is one of the reasons coal costs are generally rising on average about 7% per year around the country….
Now she’s fleshed it out in a piece for the Boulder Daily Camera:
What was true about coal that was mined in the last century is no longer true; coal deposits that are being mined now are buried deeper and are more expensive to mine. Coal company profit margins are narrowing or even turning negative and the major U.S. coal companies are reporting billions of dollars of losses.
The major U.S. coal companies have lost over 80 percent of their stock value since 2008 and are borrowing money at interest rates of 8-10 percent in order to pay off their staggering debts. Patriot Coal filed for bankruptcy in mid-2012 and other large U.S. coal companies have been put on bankruptcy watch.
In Colorado, average coal costs have gone from 97 cents per million BTU in 2004 to $1.85 per million BTU in 2012. That means coal costs have increased about 3 times faster than inflation and have almost doubled in less than a decade. Similar trends are seen all around the country.
Coal’s woes aren’t just due to “cheap” natural gas or to increasing regulation; the fundamental issue facing the coal industry is that coal is non-renewable and we are scraping the bottom of the barrel of coal that can be mined at a profit. If coal can’t be mined at a profit, not much of it will be mined.
Tellingly, on Aug. 21, the federal government offered about 148 million tons of coal in Wyoming’s Powder River Basin for “lease” and no coal company bid to buy this coal — even though these coal “leases” are widely seen as essentially giving the public’s coal away.
Cloud Peak, the coal company expected to bid on the coal issued a statement saying that given the cost to mine the coal, it could not put together an “economic bid for this tract at this time.”
My elderly mother is using similar reasoning when she jokes that she is so old she doesn’t buy green bananas either. No use in stocking up if you’ll soon be dead.
Actually fracing is not all that viable medium term let alone long term either. Coal on the way out, conventional oil on the way out, tight oil looking like a bubble, tight gas not as good either.
We face a big oh sh## moment very soon on the energy front. We could have been well prepared, we can see it coming. Despite that, it is still going to catch us by surprise.
… but renewables will be here as long as the sun lasts – about another 5 Billion years!
Neil
Exactly. Too much oil/gas/coal interest memes in this country to see the obvious things clearly, sad to say.
Weird things are going on with coal, but I don’t think it’s a clear case of ‘peak coal’ yet. It does seem to be a case of peak demand rather than peak supply.
Here’s another story:
http://grist.org/business-technology/the-coal-export-bubble/
Here’s Mike Roberts:
http://grist.org/climate-energy/goldman-sachs-says-coal-export-terminals-are-a-bad-investment/
Coal demand in North America has been dropping due to fracking and renewables, but demand in China has been rising – until recently. North American coal producers have built up their exporting capabilities and are now faced with an oversupply situation. China doesn’t want as much as they can give. As a result, prices of coal going to the export markets have dropped, and with it the fortunes of several coal companies. (Prices for coal in the U.S. are still rising in 2013, and natural gas is rising even faster than coal right now.)
The dynamics going on with increasingly harder to mine coal are certainly true – but there’s still a lot left. With a peak supply (as opposed to peak demand) situation, we’d see a much higher jump in prices, which would make the coal companies profitable again, which would create a renewal in mining operations.
Anyway, I don’t think we’re looking at a sudden halt in coal usage. We still supply a large percentage of the grid with coal which can’t and won’t be replaced either suddenly or easily, and the coal is there.
As the saying goes the stone age didn’t end because we ran out of stones. In the UK despite the fact that there’s estimated to be several hundred years worth of reserves under the country, many coal mines are on the verge of closure due to exhaustion of existing coal seams. The capital costs of going after the rest is seen as prohibitive, and thus its likely the bulk of it will stay underground.
http://daryanenergyblog.wordpress.com/2013/08/02/old-king-coal-is-a-very-sorry-soul/
This is one of the points people need to understand, large reserves don’t automatically mean a large rate of production. If that were universally true no desert country with a coastline would ever go thirsty.
Sure, what you’re describing is the ‘peak supply’ scenario, where production cannot keep up with demand and eventually drops even further. All non-renewable resources will face this situation at some point. As the downhill slide continues, it probably will reach a point where it doesn’t matter how much money or energy is thrown into extracting the resource – it just isn’t worth it at any price.
But, I don’t think the signs are pointing to that particular situation with coal right now. It seems more to be a peak demand situation, where lower demand causes a loss in profits to these companies. The supply is still there, but the coal companies don’t have the demand to produce it.
On the peak supply side, I’m reasonably certain we’ll see that with oil first, and I suspect rather soon. I tend to think natural gas will be next – the fracking boom is just that, a boom. We don’t have ‘100 years’ of the stuff by any stretch.
On Patriot Coal:
http://dealbook.nytimes.com/2012/07/09/patriot-coal-files-for-bankruptcy-protection/?_r=0
I posted this on the last coal update but well after it had been published (don’t think many folks saw it).
http://youtu.be/t0y3KPmM22g
‘…Don’t let your utility tell you it’s all fine, because chances are it isn’t. And this is a cliff that will make all the other cliffs our country has driven over look like child’s play…’
Very useful presentation, thanks for posting this.
I do not think a jump in coal prices brings oil back. Oil has already risen far too much for that. Coal is undergoing the same kind of depletion economics that oil already has. In fact, the winners will be wind and solar which are not dependent on fuel costs and continue to decrease in price. Neither oil nor coal will win this one. Supply and demand behave differently in an era of resource depletion. In a resource depletion scenario, high coal and oil prices do not spur exploration for cheaper coal and oil sources, because they are pretty much played out. Instead, demand drops. All exactly as is happening right now. Since wind and solar take time to develop and replace fossil fuels, they are more expensive than the coal and oil we had 10 years ago. Result, recession.
The subject must address growth, to be realisitic. As you point out, ever increasing demand is part of the problem. The following succinctly describes the situation and causes of demand growth.
http://monthlyreview.org/2013/01/01/global-resource-depletion
The Accumulation of Capital is the Accumulation of Environmental Degradation
The root of the problem lies in our mode of production. Capitalism is an economic system that is impelled to pursue never-ending growth, which requires the use of ever-greater quantities of resources. When growth slows or ceases, this system is in crisis, expanding the number of people who are unemployed and suffering. Through a massive sales effort that includes a multi-faceted psychological assault on the public using media and other techniques, a consumer culture is produced in which people are convinced that they want or “need” more products and new versions of older ones—stimulating the economy, and thus increasing resource depletion and pollution. It creates a perpetual desire to have new possessions and to envy those with more stuff. This manufactured desire includes the poor, who aspire to the so-called “middle-class” standard of living depicted on television and in the movies.17
Because it has no other motivating or propelling force than the accumulation of capital without end, capitalist production has negative social and ecological side effects, usually referred to by economists as “externalities.” In reality these are in no way external to production. Rather they are “social costs” imposed on the population in general and the environment by private capital.18 In its normal functioning, the system creates fabulous wealth for a certain few—now referred to as “the 1%” (though the 0.1% would be more accurate)—and very great wealth for the richest 10 percent, whose consumption of stuff is responsible for much of the ecological damage and resource use in the world. At the same the same time capitalism generates a significant portion of the population whose basic needs are not being met.
The situation is not either or. The system of compound interest is silently causing many results. It is not necessary to have bad guy, good guy, although admittedly, we can see some of that as well. We need to consider that the average US consumer and the US economy is the cause. It is no coincidence.
Do not fear, Americans! Here in Australia we are poised to elect possibly the most backward thinking right wing government in our history. Just as our last conservative Prime Minister, John Howard licked the boots of your leaders, Tony Abbott, if he does indeed win the election will no doubt be happy to sell you all our coal probably at a greatly reduced price. Given his first orders of business are to scrap the renewable energy fund, rip the heart out of our EPA, open up the Great Barrier Reef to increased shipping, remove mining development red tape, give tax breaks to miners and scrap the carbon tax and scuttle the proposed ETS, it will be a safe bet.
http://uknowispeaksense.wordpress.com/2013/02/27/the-mad-monks-mob-of/
And in the meantime the great barrier reef is undergoing its worst collapse ever, a majority of it because of climate change (I guess part of the problem is a crown of the thorns starfish too?).
“The coal is there” — you can say that again. http://www.nytimes.com/2013/08/21/business/economy/coming-full-circle-in-energy.html?pagewanted=all
May I make a suggestion for the readers here?
Look into purchasing an electrical plan that is allocates a high percentage of power from renewable sources. I live in Texas, and recently signed up for a 100% renewable electricity plan. I’m not sure every state has a 100% plan, but I do think all states have some choices for renewable energy plans.
Here’s some info:
http://www.txu.com/about/why-txu-energy/renewable-energy.aspx
More info:
http://www.epa.gov/greenpower/gpmarket/rec.htm
Now, the power isn’t coming straight from a wind tower to my house. All electricity gets pooled from the various sources and then distributed to individual homes. So, I am using coal and natural gas for electricity. But I am telling the power utilities that I want renewable power, and only renewable power, and that I’m willing to pay for it (the plans are usually a penny or two more per kWh).
In essence, it’s opting for a self-imposed carbon tax on the consumer side.
RECs (renewable energy credits) are allocated for these plans, are not double counted, and are audited. Most of the money that goes into the purchasing of an REC on the consumer side goes directly to renewable energy companies, allowing them to expand, get more REC allocations, and continue the process.
It’s a small thing, but it will help. Plus, the extra money used for buying such a plan can easily be offset by also reducing personal energy use.
In my state they offer the same thing, and I’ve been opting in for the last 10 years. I’ve watched the renewable mix over the years, and it hasn’t moved AT ALL. So where’s my money going? Why isn’t the renewable energy percentage going up?
Regarding coal in China, it seems I missed the news about more stringent pollution controls that are mandatory by mid-2014.
At a glance, it looks like they’ll match or better the rules for the US and are significantly better than those of the EU.
http://www.chinafaqs.org/library/chinafaqs-china-adopts-world-class-pollutant-emissions-standards-coal-power-plants
http://www.chinafaqs.org/files/chinainfo/China%20FAQs%20Emission%20Standards%20v1.4_0.pdf
And they shuttered 76GW of old coal plants from 2006-2010??
Not too shabby by any measure.
On the downside, a reduction in sulfate aerosol emissions probably means more heat retention.