Bloomberg: “Cheap” Coal is Dead

June 21, 2012

Climate Deniers can only say coal is cheap because they do not value our children’s futures, to say nothing of their brains, lungs, and sex organs.

But even if you leave human health and well being out of the equation, “cheap” coal is gone, and the coal industry is a dead man walking.


In March, the power generating arm of India’s largest conglomerate, the Tata Group, announced that it was shifting its investment strategy from coal-fired thermal plants to wind and solar renewable projects. Coal projects, Tata said, were becoming “impossible” to develop, and investment in them had stopped.

With this declaration, one of Asia’s biggest energy players confirmed an emerging reality. The U.S., Europe, Russia, Australia and Japan all had created modern consumer economies dependent on abundant, cheap fossil-fuel energy. In the 21st century that is no longer viable; the high-carbon growth path is closing.

The reason is cost. Oil has long been expensive, because low-cost oil producers such as Saudi Arabia have learned to demand high prices by limiting supplies and refusing to sign long-term price agreements. Coal had always been different — traded locally, on both long-term concessions and short-term spot contracts. Two years ago, China and India could supplement their domestic coal supplies with imports from Indonesia, Australia and South Africa. Some of the cheapest coal mines serving China in 2010 were in Indonesia, where India’s Adani Power Ltd. and Tata were purchasing coal mines and building their own shipping and port facilities to ensure they could supply a wave of huge new power projects.

Geologically Abundant

While coal is geologically more abundant than oil, cheap coal, close to population centers, is not. The biggest coal- producing region in the U.S. — the Powder River Basin — can get coal out of the ground for about $12 a ton. It costs roughly $60 a ton to ship it to power plants in the Ohio Valley. China’s vast reserves near Inner Mongolia can be mined for $25 a ton. But by the time it travels by rail across North China, then by sea to southern coastal cities, the cost rises to more than $125 a ton.


13 Responses to “Bloomberg: “Cheap” Coal is Dead”

  1. […] to the cost of the coal, so much so that in some places, like India, investments strategies are shifting from coal to wind and solar energy projects.  Transportation costs, fueled by oil, will only rise as we near Peak Oil as well.  The US will […]

  2. Martin Lack Says:

    Bloomberg gave their article the title, “Cheap Coal Is Dead. Long Live Renewables”.

    I suspect it shall be more like, “Cheap Coal Is Dead. Long Live Expensive”.

    I am hoping for the best, but planning for the worst (you understand?).

    • MorinMoss Says:

      There are enough mendacious politicians who’ll suck the coal dust off a smokestack for a few thou that I expect to see many attempts to prop Peabody and friends for years to come no matter how pricey coal gets.

      Meanwhile natgas use will continue to rise; let’s hope for some more clean energy advances soon.

  3. Nick Carter Says:

    I hear ya, Martin. I know that the American coal industry is really ramping up proposals to export to China via Seattle shipping ports.

    Kind of explains why JoNova is suddenly ramping up denialist hysteria. Australia has a major dog in that deal too.

    • Martin Lack Says:

      Thanks Nick. In order to make myself more employable, I am trying to get away from thinking that coal mining is simply evil. What do you think of my pragmatic progress:
      …coal mining and/or turning it into steel is not a problem (not yet anyway); but using coal to generate electricity when we do not have to is simply insane. However, this is the real world, remember, not an ideal one. Therefore, coal-fired power stations are going to continue to operate in certain countries for decades to come. However… this is yet another reason why the rest of us should close them down as soon as possible.

      BTW, are you familiar with Weatherdem’s Blog?

    • Mike Says:

      Here in Australia in the state of Queensland, the locals decided to vote in a conservative government in a landslide. Queensland is the major Australian supplier of coal to the Chinese market and is exploiting vast reserves of coalseam gas also. They have abolished government environmental bodies, handed over planning controls to individual councils and started stripping millions of dollars out of green incentive schemes. They also plan to cut 40000 public service jobs over the next 2 years with many of them coming from the EPA, natural resources department and National Parks. They have begun the process of approving the construction of numerous new ports on the Queensland Coast to increase the infrastructure capacity for coal and natural gas exports. The new Premier of Queensland, Campbell Newman, when heavily criticised by UNESCO and other environmental groups about the potential impact on the world heritage listed Great Barrier Reef, glibly replied, “We’re in the coal business.”
      With the Australian economy, so heavily reliant on coal exports to China, I can see the writing on the wall, and its not too far away. I think I might invest in the workforce retraining business. I’ll have plenty of clients when China pulls the pin and I might be one of the few who actually have a job.

    • otter17 Says:

      The peak of coal extraction rates may be sooner than expected. I was under the impression that the high grade anthracite has already peaked.

      • MorinMoss Says:

        Oh wonderful. That means they’ll have to burn more of the dirty crap with all the attendant push-pull effects on CO2 / warming / aerosols / mercury / black carbon

  4. Ok ok, that is only good.

    but why is the share of coal on the global energy market still increasing?

  5. […] Bloomberg: “Cheap” Coal is Dead […]

  6. […] (A Coal Plant Dumping its Toxic Brew into the Atmosphere. Image source: Climate Crocks) […]

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