Wednesday, May 2, 2012

Massive Switching To Gas Causes BusinessWeek To Ask, "Is Coal Doomed?" It's Not

The large switching from coal to natural gas in the USA caused The Atlantic and Business Week to write big stories about the future of coal, leading with the question, "Is coal doomed?" Also see  Coal is not doomed, because it remains the lowest cost source of energy in most of the world.  Developing economic carbon capture and sequestration technology, however, is essential to coal's global, long-term future.

While Deutsche Bank predicts that coal will provide just 20% of US electricity supply by 2030, down from more than 50% in 2000, slumping coal demand has finally triggered a 45% price plummet in Powder River Basin coal so far in 2012 and a 24% drop in the price of Appalachian coal over the last year.  The price war between coal and gas is intense.  Coal's recent steep price declines will make it more competitive with natural gas in the USA during the next few years, if coal can be sustainably produced at today's much lower prices.

While intense price competition with natural gas is stressing coal in the USA, natural gas prices around the world are now 4 to 5 times what they are in the USA.  Coal is the low-cost energy provider in most parts of the world.

Unsurprisingly, given coal's global price competitiveness, coal demand is actually growing globally, mainly as a result of burgeoning demand from China and India.  But even in those markets, warning signs for coal's future can be seen on the horizon.

Importantly, both China and India are beginning development of natural gas resources, including potentially very large shale gas resources.  China is building an incredible 27 nuclear reactors, and India is increasing nuclear investment too.  In addition, both nations are among the world's biggest and fastest growing renewable energy markets.

Though rising global sales of coal mean that coal for the next 10 years is secure around the world, coal's future over the next 40 years is another matter. The fuel's long-term future hinges on the development of economical carbon capture and storage technology.

Research and development of such technology should be the top priority for the coal industry and a major priority for governments and advocates concerned about climate. Everyone has a big stake in making coal a zero carbon fuel.

No comments:

Post a Comment