Coal use growing around the world

While coal has lost market share in the U.S. due to a mix of low gas prices and extreme, anti-coal regulation, Rob Nikolewski’s recent article  shows how coal use is growing rapidly around the world.

“Coal remained the fastest-growing fossil fuel in 2013 in both absolute and relative terms, accounting for approximately 30 percent of global primary energy consumption, second only to oil,” said an IEA report on coal markets, released in December.

Another IEA report, published in May, tracking the progress of clean energy showed low-priced coal was the fastest-growing fossil fuel in 2013 and that coal production worldwide outpaced the growth of oil and gas in 2012.

Nikolewski’s article goes on to describe some of the reasons for the downturn in U.S. coal markets. He also quotes Robert Bryce who notes,

The price of natural gas is effectively undercutting the market for the price of coal…

As a means of extending what Bryce described, it is clear that low natural gas prices are absolutely competing with coal and picking up market share as a result. However, the coal industry would compete quite well with natural gas if the bulk of new regulation – literally 10’s (if not hundreds) of billions of dollars in additional costs – were not being targeted directly at the coal industry in both mining and industrial/utility use.

Furthermore, in today’s markets, natural gas producers and generators are actively encouraged to build newer, more efficient gas-fueled generation and transportation capacity, while the construction of clean and efficient coal generation facilities has been heavily restricted and is now effectively outlawed in the U.S. through legislation and regulation like the New Source Review rule and the EPA’s New Source Performance Standards for new coal plants.

I agree with Bryce’s take on low gas prices impacting the U.S. generation market. However, any reasonable market review must admit that a much larger impact comes from government regulation making it impossible for coal to compete by closing existing coal-fueled facilities and stoping the construction of cleaner and more efficient generation facilities.

As a comparison, the coal industry’s situation is similar to demanding that Apple compete with Microsoft, but then using regulation to stop Apple from designing or using new mobile or cloud technologies. With that done, it would be naive to then stand back and admire Microsoft’s “competitive” stance in the market. On it’s own, Microsoft can certainly compete with Apple’s offerings in a free market, but hamstringing Apple like this and then wondering why they are struggling to “compete,” would be nonsensical. Clearly, their lack of competitive position could hardly be blamed solely on “market” forces.

As Nikolewski’s article shows, in other jurisdictions around the world – where excessive regulation has not targeted the coal industry for closure – new, more efficient coal generation plants are being rapidly built and operated. Those new plants are producing clean, efficient, and affordable energy for consumers and competing quite well with other generation sources.

Reasonable energy policies and regulation in the U.S. would mean the same thing here.

22. July 2015 by Jason Hayes
Categories: Energy, Marketplace Information, Power Generation, Utilities | Tags: , , , , | Comments Off on Coal use growing around the world