Growing energy efficiency, rising pollution worries and stiffer competition from other fuels has decreased world demand for coal. High cost deep mines in the Western world are worst hit: in America 24 coal companies have gone bust in the last 3 years and 16% of the rest lose money.
China consumes 47% of the world’s coal and accounts for 87% of the world’s growth in demand for coal. But consumption dipped 1.6% in 2014. Its coal-fired power stations operate at 54% capacity. In Beijing, two big coal fired plants closed in March 2015 and another will shut down in 2016.
The price of natural gas has fallen by 80% since 2008. Two-thirds of coal-fired power plants proposed world-wide have been stalled or cancelled. In 2014 the world added more generation from wind power than coal.
Coal provides for 40% of the world’s electricity. But of 1,617GW of global capacity, 75% is of the dirtiest kind, which burn coal at low temperatures and emits 75% more carbon dioxide than the most advanced “ultra-supercritical” plants, which burn powdered coal at high temperatures. The chimneys of all but the most modern plants emit mercury, sulfur and nitrous oxide, kill 800,000 people a year.
80% of the world’s coal reserves must stay in the ground if the planet is to stand a chance of keeping global warming under 2°C by 2050.
Clean coal technology is expensive and capturing CO2 not economic. Some emerging markets, especially India, have a rising demand for coal. Once India starts to produce more of its own coal, Indonesian, S African and Australian mining firms will be in trouble.
Poland is Europe’s largest producer. It costs $80 to mine a ton of coal with a world price of $61. Poland now has a stockpile of 16m tons as they import much cheaper coal from Russia. Polish miners are pampered.
With decreased demand in China, new coal-mining investments risk becoming stranded assets.
THE WORLD’S BIGGEST COAL MINER GOES BUST
Apr 16th 2016 Economist
The American firm, Peabody Energy (the world’s largest private coal company) with debts of $6 billion, filed for Chapter 11 bankruptcy protection. The industry is indeed in a hole, beset by pricing and pollution problems, plus NGO pressure on creditors and investors to pull out their money.
But Peabody’s problems are also of its own making. It raised big debts to buy an Australian firm, Macarthur Coal, for $5.2 billion in 2011, aiming to bolster sales of metallurgical coal to China just before that country’s steel industry plunged into crisis. As prices of metallurgical and thermal coal (used in power stations) tumbled, it lost $2 billion last year, writing off almost $1 billion of its Australian assets. Since the start of 2015, five big American coal miners have declared bankruptcy, including Arch Coal and Alpha Natural Resources. A former Australian coal billionaire, Nathan Tinkler, was declared bankrupt this year after losing a fortune in coal.
Coal has not joined a recent commodities rally. The shale revolution in America meant that for much of last year, for the first time, natural gas replaced coal as the country’s main fuel for generating electricity. Britain plans to close all its coal-fired power stations by 2025, and on one day last week even it produced more power from solar than coal. In China coal use for its power supply fell in 2015 for the second year. On April 13th Greenpeace, an NGO, said China’s National Energy Administration had ordered 28 of 31 mainland provinces to suspend approval of new coal-fired power plants. India and China will keep using coal for decades, as they rely on it to generate about 70% of electricity. Had prices of gas and oil not fallen…you would not have seen such a reduction in use of thermal coal. Everything suggests a dark future for coal.