Coal Age

MAR 2014

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p r i c e s f e l l t o h i s t o r i c l o w s . T h e h a r s h winter has led to coal increasing even more of that share. This solidified what many in the coal industry have stated, that natural gas has volatile pricing and removing coal from America's energy portfolio is a mistake. "Coal stands firmly as a central part of the energy picture," Crutchfield said. Even though the Obama administration's "message for coal is clear. They want the industry gone," he said. Crutchfield spoke briefly on the pro- posed carbon capture rule for new coal- fired plants, as well as the soon-to-be rule for existing plants. He reiterated what many have said before, that carbon cap- ture technology is still in its infancy and all want to be a part of a better, cleaner energy picture. According to Crutchfield, if all existing coal-fired plants were closed, it would reduce greenhouse emissions by 3%. He stressed the importance of campaigning at the state level and showing Americans the whole picture. "Decisions need to be made based on fact," he said. He gave examples of countries who decided to turn away from coal and rely on renewable energy, offering huge sub- sidies programs, including the U.K and Germany, and who have now returned to coal. Across Europe, 69 coal-fired plants are under development, with 10 in Germany alone, Crutchfield said. In 2012, coal was the dominant fuel for electricity generation in the U.K., which hasn't been the case since 2007, he added. This is very different from the U.S., according to Stall. In Europe, natural gas consumption has been declining since 2011 and coal consumption has been increasing. Crutchfield also touched on the demand for thermal coal in developing countries, which he felt the U.S. coal industry has a moral obligation to pro- vide, to help them receive basic utilities, ones people in the U.S. take for granted, he said. "It's raising their standard of liv- ing, just like it raised ours," he said. J. Brett Harvey, CEO of CONSOL Energy, also felt it was a moral issue and cited the 1.3 billion people around the world who still lack access to electricity. "The developing world is in the midst of an industrial revolution," he said. He described their thirst for energy and com- pared it to the U.S. Industrial Revolution. Emerging markets, led by China, will drive growth of just more than 3% in elec- tricity generation through 2040 in non- OECD member countries, according to Stall. "That southeast Asia block is going to be where the biggest new sect of power generation, coal power generation, is going to be," he said. In global electricity generation, coal will drop from 2010's 40% share to 36% in 2040, according to Stall. "Where that coal is fired is going to be very different from where it currently is today," Stall said. Adding that a big push forward will be seen from non-OECD countries, and those OECD countries will pull back. The seaborne market for coal has got to grow to meet this demand, Stall said. This falls in line with what both Harvey and Crutchfield expressed, he said. "Give those countries the opportunity to have the economic prosperity that the U.S. enjoyed as we built our economy using fossil fuels," Stall added. Natural Gas also Has its Challenges The not-so-good news for the U.S. coal industry is that shale growth is largely in the east, but is starting to move to the west, according to John Corrigan, partner of consulting firm, Booz and Co. A lot of backlogged gas is coming into the market and shale gas is everywhere, he said. Costs associated with drilling the wells, which ranges from about $6 million to $12 million, are decreasing, Corrigan said, which is not good for coal. "They are able to do it much more cost effective than they have in the past," he added. According to the U.S. Energy Information Administration (EIA), shale is a big wedge that's replacing the other fuels, Corrigan said. "It's growing at a rapid rate," he added. Power generation is where gas is com- peting directly with coal. A lot of the new plants being built are gas plants because of the fear of potential Environmental Protection Agency rules, he said. "Gas is now seen as the sort of no regrets kind of move for a lot of utilities," he said. Natural gas is competing at the baseload level, which hadn't been seen before, Corrigan said. However, the big problem for gas is the lack of infrastructure. The pipelines are not there, he said. Stall agreed and said one of the issues is not having the land available to put in the pipeline. He also felt there was a lot of risk out there in dealing with gas. There is also more preference for coal plants to run seasonally because it is more reliable and easier to keep inventory. "Coal should have a leg up in firm dispatchable power," Corrigan said. Other issues are different delivery and oper- ating cycles for gas and power generation. There is also an issue with planning coordination, he said. Coal should have a leg up in that regard for the next three to five years, he added. "The world according to gas will look very different in the next three to five c o a l t r a n s u s a r e c a p c o n t i n u e d March 2014 www.coalage.com 43 Figure 3: Seaborne thermal coal supply is likely to increase 300-500 MPTA through 2020. (Source: McKinsey & Co.) CA_pg42-45_V2_CA_pg46-47 3/12/14 8:49 AM Page 43

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