Coal Makes A Comeback Despite Natural Gas Abundance

This wasn’t supposed to happen. Cheap natural gas was supposed to be the answer to our dependence on dirty old coal. But now, it seems, coal is making a comeback. The bitter winter, the coldest in 30 years, has pushed natural gas prices to some of their highest levels in four years, and that has made coal attractive to utilities again.

Electric companies are generating more than 4.5 million megawatt hours a day using coal, the most since 2011, Bloomberg reported, citing government data. As a result, coal’s share of power production rose to more than 40 percent from 39 percent last year.

Cheap and abundant natural gas supplies from the hydraulic fracturing boom had made natural gas a cheaper and cleaner alternative to coal for the past several years. Economics, though, had to catch up at some point. With demand for gas rising this winter, pushing prices as high as $5.56 per million British thermal units at the end of January, coal is looking more attractive.

The downside: the increased coal usage means U.S. carbon emissions are expected to rise this year after falling in 2011 and 2012.  

(Photo credit: oatsy40)

We’ve seen this sort of see-sawing on prices before. Back in the 1990s, a push to convert buses and fleet vehicles to compressed natural gas stalled when crude oil prices plunged and diesel became cheaper than natural gas.

Many utilities still have a large investment in coal. Even though the prospect of stricter emissions standards have loomed for years – and the Environmental Protection Agency issued new standards last year – most haven’t made the necessary investments to comply with the laws they know are coming.

Older coal plants, in particular, may have been idled or mothballed as natural gas prices fell, but it’s cheaper for utilities to bring those plants back on line than invest in new or cleaner technology.

Besides, it’s becoming clear that a few years of cheap prices wasn’t enough to drive a wholesale investment away from coal and into natural gas. Power plants, after all, represent billions in sunk costs, and switching all those plants would require more capital than most utilities have available.

Power companies have other long-term concerns to worry about too. Industry studies show U.S. electricity demand falling during the next decade, thanks to improved energy efficiency and the rise of alternatives such as distributed solar power.

Other factors also come into play. For example, the pipeline shortage that has left many oil and gas producers in hot shale plays struggling to get their production to market also makes it difficult to ship gas to power plants. Even if, say, 20 percent of the existing coal plants magically transformed into gas plants, there are no pipelines to connect them with their fuel source. Given the backlog of pipeline projects in the U.S. right now, this problem could persist for more than a decade.

All of which helps add to the inertia that pervades the power market. It takes companies years to expand their generating fleet, and with price advantages vacillating between gas and coal, many aren’t willing to place a bet on a single fuel.

Gas may be cheap and abundant, and it may represent a compromise on climate change issues, but coal’s reign in the power market is far from over.

23 Comments on "Coal Makes A Comeback Despite Natural Gas Abundance"

rollin on Sat, 15th Feb 2014 1:41 pm 



What hogwash, demand for electricity is up due to the cold weather so both coal and gas will be in higher demand.
Trying to make a general point using a short-term occurrence is really lame.

MSM extraodinaire.

Davy, Hermann, MO on Sat, 15th Feb 2014 2:02 pm 



I am curious why all the coal companies in bankruptcy. Oh, yea, like rollin says weather! Same thing happens lately with the BLS labor report and its interpretations. Great excuse. We all love talkin weather. Great small talk in any language.

Coal companies are experiencing unprecedented cost increases, environmental red tape, and political uncertainties. Are you going to invest in a coal plant with these headwinds? Try running a strip mine operation with the skyrocketing production costs and unstable prices. The industry will moan about politics or green backlash but let’s face it the easy coal is over, production cost are in orbit, and regulation increasing. Throw in a correcting financial market making capex higher from rinsing rates. Coal will collapse under its own weight green guys. I don’t see the AGW projections coming to fruition. In any case we are already toast from AGW unless we par down to postindustrial 500 million souls. Even then the long term effects are already set in motion.

rockman on Sat, 15th Feb 2014 2:48 pm 



Boys : Just MHO but I think the rumors of coal’s death are a tad premature. Certainly it can be misleading to make forecasts based on some recent and perhaps short live trends. Here’s a very telling chart.

http://en.wikipedia.org/wiki/File:Annual_US_Production_by_Coal_Rank.png

First US coal consumption has ebbed and flowed for many decades. We’ve had similar peaks in the past with similar pull backs. And the saw new peaks develop a decade or so later. Over all bituminous has been on a slightly increasing plateau for 100 years. What’s truly striking in the chart is the tremendous rate of increase in sub-bituminous in the last 40 years from nothing to over 500 million tons/year in 2009. Static since then but that trend line can’t be ignored. And the reason for coal’s pull back has been well documented and it wasn’t regs or production cost but a price slump. Which would seem to imply a health future for coal as NG and other ounces increase in price.

The potential for increased demand is out there IMHO. One small bump in the road to a greener future has been seen in Germany where scaling back their nukes led to a rise in coal consumption not seen in 20 years. And then consider the surge in US coal exports. Especially to China with a 500% increase in recent years. And much of it coming from western gov’t lands. The feds have been meeting local resistance to expanding west coast coal export terminals. No problem: the POTUS has promised to expedite capacity expansion of Texas export terminals…no meaningful local resistance. Not the first indication of the actual of the POTUS position: just two years into his first term he had his EPA issue the final permit for the new White Stallion coal fired plant in Texas. And than plan included hauling coal by rail from Illinois for the next 30 years. But due to the surge in Texas electricity from NG and our big wind power base the project has been put on hold. But Texas in projecting a huge increase in e- demand in coming decades so I suspect it will be built eventually.

Yes…I fully agree: don’t let short term aberrations distract from long term trends. And the long term trend of coal, combined with the PO future most here recognize, would seem to indicate a solid future for coal.

Davy, Hermann, MO on Sat, 15th Feb 2014 3:20 pm 



Rock, agreeing with a solid future in a stable financial system. Begging to differ on production costs and China. If we think oil is expensive to produce look at coal closely and we see the typical best coal mined out. The least sensitive locations are diminishing. Productions cost are set to rise significantly from higher interest rates. Rates will go up that is the only place they can go being near zero now. Despite the deflationary trends in certain aspects of the economy, inflation is roaring in others. It is just a matter of time before wage inflation takes off. Fat cats can’t deny the workers something indefinitely. The general public may be financially illiterate but they have common sense. With export and prices China is a wild card due to the uncertain reaction to the very dangerous pollution. We will also see the Europeans and Japan needing more coal as the reject Nukpower. Looks like a mix bag on prices.

“BUT”, Rock is right coal ain’t goin anywhere in a society of BAU. You just can’t get rid of coal and expect to always be able to turn the lights on. Don’t make me laugh with renewables. Renewables will likely never exceed 20% market penetration. Gas, like oil, has too many high value uses to be switch too much over to thermo power generation. IMHO It will be the most important as the backup to renewables in the thermo power market. Nothing provides solid baseline power like coal. Even Nuk power is great but it has its periodic outages. Coal is rock solid. So yea AGW folks, what pill do you want? Death now or death later. I have my kids hangin around this morning so you know my answer. I am all for adjustment, adaptation to less, and mitigation. Yet, this is precisely the actions that shrinks the economy that leads to the collapse I speak of. Unintended consequences of linear actions in a nonlinear complex system.

J-Gav on Sat, 15th Feb 2014 3:47 pm 



Making it sound like coal is ‘back from the brink,’ as this article does, is totally over the top. It was never just going to magically disappear from the energy mix, no more than fossil fuels or nuclear are.
Davy – Nope, that’s for sure – systems thinking is not the strong suit of TPTB.

ulenspiegel on Sat, 15th Feb 2014 3:55 pm 



Rockman,

you have in Germany and the USA the same developement: when NG becomes to expensive the utilities switch back to hardcoal, the power plants are still available.

NPPs are not the argument in Germany. Otherwise you would see an correlation with switched off NPPs and coal consumption there is no.

If you check data on primary energy consumption you find:

http://www.energycomment.de/primaerenergieverbrauch-2013-deutschland-postfossil-im-jahr-2154/

Steinkohle = hard coal
Braunkohle = lignite
Erdgas = natural gas
Kernenergie = nuclear energy
Erneuerbare Energie = RE

The coal consuption is slightly higher compared to 2011, but still much lower than 20 years ago.

There is nothing special in the last two years, on the primary energy side, the NG consumption increased due to high demand for space heating.

Correct data on final energy are found
here: http://www.ag-energiebilanzen.de/

Take the table Stomerzeugung 1990- 2013, the data contradict your assumptions. 🙂

Northwest Resident on Sat, 15th Feb 2014 4:03 pm 



Isn’t it interesting how pursuit of profit leads us all directly down that exact path that leads to the worst possible long term outcomes for humanity? We are locked into a profit-motive financial system that guarantees we will continue to make all the wrong decisions in regards to climate change and sustainability. It is almost as if by humanity’s very nature, we are programmed to self-destruct and take everything else down with us, all because we can’t or won’t do anything unless there is the prospect of an extra buck involved in the process. How sad for us.

rockman, you made an interesting comment: “…the POTUS position” regarding exports of coal to China. Not to nitpick, but you know, I wonder if that is really Obama’s “position”, or if it is the “position” that has been forced on him whether he likes it or not by an all-powerful energy industry AND by a reality that is staring at us all right down the sites of a double-barrel shotgun. At this point, POTUS has to choose between “worst case” and “totally screwed” scenarios — those are the only options. And that would be true no matter which temporary employee was sitting in the POTUS office, I’m afraid.

Our addiction to oil and dirty fossil fuels goes hand-in-hand with our addiction to the profit motive. We are locked in a death spiral and we’ll keep swirling down that deathly vortex toward our ultimate doom until we break those addictions and accept the consequences.

Kenz300 on Sat, 15th Feb 2014 5:00 pm 



Forbes —- shilling for the top 1%……………

The price of oil, coal and nuclear keeps rising and causing environmental damage.

The price of wind and solar keeps dropping and it is safe and clean. Once installed there are no worries about increases in monthly fuel prices.

Northwest Resident on Sat, 15th Feb 2014 5:07 pm 



“Once installed there are no worries about increases in monthly fuel prices.”

Until ten, twenty or thirty years into the future when that equipment wears out, if it doesn’t break before then, which it probably will. And once broken, the quantities of fossil fuel required to mine and manufacture the materials to build more “renewable energy” equipment will not be available.

I look at wind and solar power devices the same way I do camping equipment — good for many outings, but it will eventually wear out and need to be replaced. Problem is, there will most likely be no way to replace it in the future. But for now, it is awesome to have.

andya on Sat, 15th Feb 2014 6:59 pm 



Nat Gas from fracking is neither cheap, nor abundant. Coal is. Welcome to the real world.

MSN fanboy on Sat, 15th Feb 2014 7:37 pm 



We need more coal to help drive renewable growth.
It also helps drive other good things like:
global warming: helps the economy (Ricardo’s comparative advantage)
Air pollution: helps the economy (i.e. we buy gas masks)
Cancer: As more people get it, greater funding is put into a cure ( as demand increases) then we sell the cure, creating a profit.
Species extinction: Again, if we destroy enough biodiversity those GREENS wont have a leg to stand on, therefore the land will be taken to human needs. (Increasing productivity)
Also fish: kill the oceans and we can have GMO fish in fish farms, creating a greater profit.
(Also reduce shark attacks)
Once again, I have proven the market and industrial finance is the future.

Northwest Resident on Sat, 15th Feb 2014 7:40 pm 



MSN — It looks like you loaded up with sarcasm bombs this morning, and now you’re making repeated bombing runs on peakoil. Fun stuff! Have you been converted, or were you just faking it from the get-go?

rockman on Sat, 15th Feb 2014 8:08 pm 



Davy – “Begging to differ on production costs”. Well, the US produced more coal in 2008 then every before in history. I doubt production cost increased the much to cause it to pull back. OTHO coal prices as a result of so much hitting the global market pulled back significantly. So the future? I don’t know. But look at the recent history of oil production and development cost. Prices didn’t increase because the extraction cost went up. The extraction costs went up because the greatly increased price of oil allowed developing more expensive deposits. I expect the same dynamic with coal: if/when coal prices increase significantly o will production as those currently to expensive become viable.

rockman on Sat, 15th Feb 2014 8:14 pm 



U – Perhaps I didn’t phrase it properly. This is the sort of reference I was alluring to. From:http://www.ft.com/intl/cms/s/0/e6470600-77bf-11e3-807e-00144feabdc0.html#axzz2tQJhjPxQ

“Brown coal electricity production in Germany rose last year to its highest level since 1990, despite the country’s campaign to shift to green sources of energy.” Perhaps that is the proper characterizations I thought it was. Just trusting my weak memory.

rockman on Sat, 15th Feb 2014 8:38 pm 



NR – “…wonder if that is really Obama’s “position”, or if it is the “position” that has been forced on him whether he likes it or not by an all-powerful energy industry…” WE almost agree. First, it always the position of the POTUS when he makes a decision. Sorry but I don’t ever buy the weasel excuse of any politician doing anything he says he doesn’t really believe in. Second, he made his choices for the same reason any POTUS does: bowing to THE all-powerful: the voters. There is no one on this planet that will ever force any POTUS to take a course of action that will damage his election ability. And even in the case of a lame duck he still has to consider his party as well as his “legacy”. Our current POTUS has made it clear he doesn’t even have to take orders from Congress since he can wield executive orders. And IMHO the US Congress is far more powerful than any industry insiders.

So again I point out his EPA gave approval to build a coal-fired plant burning ILLINOIS production. And it was his Interior Debt. that vowed the expedite the expansion of coal export terminals in Texas. His State Debt says Keystone XL isn’t a bad idea. Do you really think any of this would happen if the POTUS didn’t want it to happen? I have zero doubt that our POTUS is making any energy related decisions by not considering his personal political calculus. IOW he’s no different than any other POTUS I’ve seen in my lifetime with the possible exception of the peanut farmer. As you see what that got him. LOL.

Davy, Hermann, MO on Sat, 15th Feb 2014 9:50 pm 



rockman – Prices didn’t increase because the extraction cost went up. The extraction costs went up because the greatly increased price of oil allowed developing more expensive deposits. I expect the same dynamic with coal: if/when coal prices increase significantly o will production as those currently to expensive become viable.
Okay Rock, sounds valid

Northwest Resident on Sat, 15th Feb 2014 11:29 pm 



rockman — OK, you got me there. POTUS is bowing to the “inevitable” — that being, whatever he has to do based on all those factors you mention. And you’re right — when you take the job of president, no matter what decision you ultimately make and for whatever reasons, you own that decision, it is your “position”. All good points.

rockman on Sun, 16th Feb 2014 12:23 am 



NR – And I suppose to be fair I shouldn’t have made it sound so accusatory. We are a representative republic. Our politicians, including the POTUS and the Congress critters, are suppose to represent the will of the people. Even when the will of the people is occasionally completely f*cked up. LOL.

Which is why it amazes when folks try to lay the blame for whatever on Big Oil, tree huggers, politicians, regulators, lobbyist, gays, blacks, whites, etc. IMHO we have a system that represents what most Americans want. We had segregation long ago for that reason. And then we had integration for the same reason. Decades ago we dumped all kinds of toxic crap on the ground legally. Now we’re doing much better.

I’m a devout member of the Church of Pogo and adhere to our one and only gospel: We have met the enemy and he is us.

Davy, Hermann, MO on Sun, 16th Feb 2014 12:39 am 



@rock – We have met the enemy and he is us.

Marc Faber’s gospel
Maybe we can’t see where the next bubble is because we are the bubble

Northwest Resident on Sun, 16th Feb 2014 12:55 am 



rockman — No, please, by all means, please do slap me up the side of the head when I need it. It stings for a little while, but it is better than walking around saying stupid things without even knowing it.

One minor point about “the will of the people.” I’ve already made this point before, but it is worth repeating. The will of the people is all to often shaped by lies, misinformation and emotional “hot button” issues. They are bombarded with propaganda to manipulate and deceive them into voting for someone/something which they might not otherwise do if all the facts had been plainly laid out before them and they had a chance to make a totally logically decision. The will of the people is a quaint notion. But I guess in general, and all things taken into consideration, it is “the majority” that still decides certain issues in America, and who gets elected.

rockman on Sun, 16th Feb 2014 1:12 am 



NR – Not a minor point IMHO. But here’s the problem: the vote of the most weak minded and easily manipulated person counts just the same as mine and yours. So yes there are many on all sides of the fences ready to guide those fools to the wrong conclusions. But I still hold them responsible. Stupidity in no excuse for ignorance. LOL.

Makati1 on Sun, 16th Feb 2014 2:27 am 



They will use whatever is cheapest at the time. Nothing new here.

Conversion kits Lagos on Mon, 17th Feb 2014 12:17 pm 



hello,
Nice to see you all. Nice one for our environment and also for fuel consumption……….!!!!!!!!!