From the Editor: The rise (again) of King Coal [Gas in Transition]
Back in the day, a popular trope was that the only living thing that would survive a nuclear holocaust was the lowly, and much-despised, cockroach. This myth – since debunked – emerged in the weeks and months following the US destruction of Hiroshima and Nagasaki to end World War II, when it was discovered that the insects survived much longer than their human superiors.
Coal, it seems, is following a similar path. No matter how hard COPs 1 (Berlin, 1996) through 26 (Glasgow, 2021) stomped on coal, it kept on ticking – the Energizer Bunny of the energy world, the cockroach of the green transition.
China – home to more than half the world’s coal-fired generating stations, with more on the way – increased its coal-power generation by 9% in 2021. India saw a 12% gain last year. Both represented record increases.
Coal interests in those two countries, and elsewhere in Asia, forced COP26 leaders to water down the wording in that summit’s final communique. Coal states in the US got Donald Trump elected as the 45th president of the US in 2016, and very nearly re-elected him four years later.
In the US, the Energy Information Administration is forecasting a 5% increase in coal production and a 4% increase in coal exports this year, followed by another 3% boost in production next year.
Economic recovery from a waning Covid pandemic last year and soaring natural gas prices pushed coal’s use as a power generating fuel to an all-time high in 2021, the Paris-based International Energy Agency told us in December. It followed up that pre-Christmas news with a forecast that overall demand for King Coal could reach a record high this year.
None of this bodes well for the climate change bunch, nor for Keisuke Sadamori, the IEA’s director of energy markets and security, who bemoaned the fact that neither China nor India are walking their talk.
“The pledges to reach net zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting the major gap between ambitions and action,” he said in the IEA’s 2021 coal report. “Asia dominates the global coal market, with China and India accounting for two-thirds of overall demand. These two economies – dependent on coal and with a combined population of almost 3 billion people – hold the key to future coal demand.”
But the IEA’s prognostications certainly buoy the spirits – and the bottom lines – of those hardy souls still in the coal game.
Peabody Energy, the largest coal producer in the US and a global pure play with mines in the Rocky Mountain and Appalachian states in the US and in Australia’s coal centres of Queensland and New South Wales, reported fourth quarter net income last year of $513mn and free cash flow of $427mn – a marked improvement over the same period a year earlier, when it reported a $128mn loss.
Adjusted EBITDA margins in Peabody’s seaborne thermal division soared when demand picked up as Covid restrictions eased, to $32.26/metric ton in Q4 from $23.44/mt in Q3 and from a paltry $8.67/mt in Q4 2020. Annual margins were similarly robust: $20.45/mt in 2021 against $8.59/mt in 2020.
You could almost hear Peabody CEO Jim Grech chortling as he talked about his company, “which continues to benefit from strong market fundamentals driven by the vital necessity for coal to produce reliable energy and steel to fuel the global economy.”
But coal doesn’t only continue to hang around in China, India West Virginia or Australia. It also remains a major part of the energy mix in parts of Europe, most notably in the six Western Balkan states of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia, where 16 ancient coal-fired power plants spew out more pollution than the 250 that still remain inside the EU.
The Balkan Six have their own aspirations – notably inclusion in the EU – but they don’t appear too eager to accept the bloc’s green rules to solidify their membership applications.
“Many of them (are) still addicted to highly-polluting coal power stations that provide cheap electricity as well as revenues to governments and the local population,” says director Janez Kopac of the Energy Community, the agency tasked with spreading the EU’s green gospel across the region.
While perhaps not quite as addicted as the Balkan Six are to coal, the rest of the world – as climate change activists seem finally to have learned – remains heavily reliant on the fossil fuels they so desire to eliminate. Whether to meet energy demand in a cold and windless winter or to pull a billion people out of energy poverty, coal – and natural gas and oil – will be part of the global energy mix for decades to come.
Just as there is no silver bullet to net zero, also, it appears, is there no effective insecticide to rid the world of coal. An effective energy transition will require the use of all options, no matter how distasteful some of those options may be.