Tag Archives: China

Coal on the Decline in the U.S. and China – 1/30/17

China and the U.S. are the first and second largest consumers of coal in the world, respectively. And though the governments of each nation are regarding the resource very differently for 2017, it doesn’t have much of a future in either.

China will invest $361 billion over the next three years in renewable power generation, while also canceling plans to build 103 coal-fired power plants, its National Energy Administration recently announced. If the Chinese government follows through on the plan, then it would mean stopping the addition of 120 GW of capacity, including projects already under construction.

The cancellations are in line with China’s goal of limiting its total coal-fired power generation capacity to 1,100 GW by 2020. Under the promise of reducing air pollution and greenhouse gas emission, coal use has been on the decline in China since 2013 and cleaner sources of power have account for a larger share of new additions each year.

Still, implementing the cuts could prove difficult. China is building more capacity than it needs for a number of reasons including the fact that power plant projects are popular way for local governments to raise tax revenue and employ citizens. It is unclear if local officials will play along with canceling contracts when the political cost of doing so is high. Unfortunately for those officials, the directive names each project set for cancellation, so they are likely to face heavy pressure to comply.

In the U.S., coal is under also under threat, though for different reasons. Despite, promises to revive the industry from the executive branch, coal’s share of American electricity generation peaked long ago and all signs point to further decline.

Natural gas alone has devastated coal’s share of energy consumption. Even before the massive shale gas deposits came into play with the rise of fracking, natural gas was a competitive threat. Nowadays, between the low cost of gas and its relatively clean burn, coal can’t even compete with another fossil fuel, let alone renewables with fast-falling costs and popular support.

Fewer than 60,000 Americans now make their living mining while clean energy employs at least 2.5 million Americans.

On top of that, nearly half of American output is produced by companies in bankruptcy.

And utilities in the United States have only four coal-fired plants set to go online through 2020, with a combined capacity of less than 1 GW, according to the U.S. Energy Information Administration. For comparison, more than 13 GW of coal-fired capacity was retired in 2015.

Be it in China or the U.S., with or without government support, coal is set for continued decline for the foreseeable future.

Climate Change Talk Fills the Room at Davos – 1/24/17

Despite the shift in political weather in Washington, the captains of business and finance gathered in Davos are talking a lot about climate change.

The World Economic Forum is devoting 15 sessions of its 2017 annual meeting to climate change, and nine more to clean energy.

“The good thing is that the Paris agreement raised the bar for everyone,” said Ben van Beurden, the head of Royal Dutch Shell Plc, Europe’s largest oil group. “Everybody feels the obligation to act.”

Achieving the ambitions set out in Paris may require $13.5 trillion of spending through to 2030, according International Energy Agency (IEA) data that show the scale of the opportunity for business. Only last year, clean energy investment stood at $287.5 billion, data compiled by Bloomberg New Energy Finance indicate.

“The scale and scope of the investment flows on renewables shows it’s mainstream,” said David Turk, head of climate change at the IEA in Paris and a former senior U.S. climate diplomat.

A survey of 750 participants at this year’s meeting shows that extreme weather is considered the biggest global risk, outstripping migrations, natural catastrophe and terrorism.

In November’s follow-up meeting to the Paris agreement, nearly 200 nations, including China, vowed to step up their efforts to fight global warming.

China, which historically fought against climate change efforts, is now pushing the importance of the issue.

Chinese President Xi Jinping urged the U.S. to remain in the “hard won” Paris agreement during a Davos speech that touted the world’s largest polluter as a leader in the fight against global warming.

“Walking away” from the pact would endanger future generations, he said.

Earlier this month, China pledged to invest 2.5 trillion yuan ($360 billion) in renewable energy through 2020 to reduce greenhouse gases that cause global warming and China’s government has recently suspended 101 coal-power projects across 11 provinces as it moves toward cutting CO2 emissions.

China already spent almost $88 billion in 2016, according to Bloomberg New Energy Finance, about a third more than the U.S. And China’s investment has already created 3.5 million renewable energy jobs that could grow to 13 million by 2020, according to the International Renewable Energy Agency.

China: Fossil Fuels and Renewables – 12/13/16

China uses more energy than any other country. The scale of Chinese consumption of electricity and oil dwarfs any other nation’s besides the U.S. giving trends in China far reaching implications for global energy markets.

Oil

In oil markets, the expected slowdown of Chinese economic growth has contributed to oil prices to half their 2014 levels. Even now, China’s demand for imported oil is seen as major factor in if and how prices recover.

So far, oil output from China has slid this year as the country’s producers shut fields too expensive to operate at current prices. According to Bloomberg News, even China’s largest oil companies have struggled under low prices: PetroChina Co., the country’s biggest oil and gas producer, barely broke even in the the first half of 2016 and Cnooc Ltd., its biggest offshore explorer, posted a first half loss as low crude prices forced it to write down assets. Overall, China’s crude production from January to October fell 6.7% from a year ago, according to data from the National Bureau of Statistics.

Electricity

China currently uses about 47% of the world supply of coal, but health and environmental concerns have lead the Chinese government to consider supporting alternative fuels.

Seeking to boost the share of natural gas in its energy mix to 10% by 2020, the Chinese government has pushed favorable policies for the fuel including an adjustment of pipeline fees next year to stimulate use. China National Petroleum Corp., the country’s biggest oil producer, also plans to separate its pipeline and natural gas sales units, as reported by the state-owned China Daily.

In clean energy, China has encouraged a boom in wind turbine production, though it is now struggling to upgrade power grids needed to carry it to users. As a result of construction outpacing infrastructure, roughly one-fifth of wind power currently goes undistributed and the country’s energy authority in November was forced to slashed wind and solar targets through 2020 in response.

In its newly issued five-year plan for power, China’s government targets total installed solar capacity of 110 GW by 2020, down from earlier guidance by officials of 150. On wind, the government now aims for 210 GW of installed capacity, down from 250.

Meanwhile, a slowing economy is reducing the amount of electricity that people will ultimately need. The growth in electricity demand has already dropped from double-digits in recent years to less than 3% in the first half of 2016.

China’s Coal Headache Continues – 12/5/16

China’s coal reforms are have its markets, miners, and power generators unsure what to do next.

Coal prices have spiked more than 60% in local-currency terms since the end of July after Beijing moved to limit production, according to analysis from Morgan Stanley.

While most economists agree that reducing excess capacity, particularly in state-owned enterprises (SOEs), is key to a more sustainable growth trajectory, China’s supply side reforms are receiving poor reviews.

Morgan Stanley’s Chief China Economist Robin Xing details two key ways in which supply-side reforms with Chinese characteristics have been ill-designed.

First, restricting the number of working days in the sector to 276 from 330 creates a misallocation of production that builds on the existing misallocation of credit favoring SOEs.

The second problem is the policy makes responding to demand spikes difficult, which made the recent rally in coal prices possible.

As a result of the demand spike, Beijing was forced to allow firms to meet the pick-up in demand and undercutting the intended reduction in capacity and emissions.

A similar problem appears in the Chinese power sector. A study from think tank Carbon Tracker Initiative indicates that over $490 billion will be spent building coal power plants made unnecessary by slowing power demand growth. The study echoed findings of an IEA study that also showed China may be investing too much in coal power despite government ambitions to scale back.

As of July, the country had 895 GW of operating coal capacity being utilized less than half the time, with another 205 GW under construction.

Additional coal capacity beyond existing plants is only required by 2020 if power generation growth exceeds 4% per year and coal plants are run at a utilization rate of 45% or less, Carbon Tracker said. Even existing capacity may come under financial pressure by 2020 from power market reforms and carbon pricing.

Possible Evolution of the Oil Industry – 12/2/16

Companies in the oil industry are weighing their options as pessimism about traditional business models grows.

In the short-term, the collapse of crude oil prices has led to massive cuts in exploration budgets needed to find new fields. Some believe prices could rise one more time because investment in finding new supplies is so weak, but many firms like Goldman Sachs and Wood Mackenzie expect prices to stay between $50 and $60 a barrel — a level where few fields are profitable — in the short-term.

The U.S. Energy Information Administration (EIA) projects that a recovery in non-OPEC production, primarily from U.S. shale drillers in mid- to late-2017, will offset OPEC actions and limit price increases throughout the year.

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At low prices producers invest in the lowest cost per barrel sources like the Middle East, America’s Permian basin, Brazil’s pre-salt fields, and not much else. But even a boom for those areas could be short-lived if demand continues to decline in the long-term due to stricter fuel efficiency standards or widespread adoption of electric cars.

Concerns about reaching peak oil demand in the near future are rising as well. The IEA has projected that European consumption will fall from 11.7 million b/d to 10.8 million b/d between 2015 and 2020. Most, if not all, major oil players are prepping for the shift in demand. Shell finance chief Simon Henry has said the company sees oil demand peaking in 5 to 15 years. In China, China National Petroleum Corp. issued a report over the summer predicting oil consumption will begin to fall by 2030, if not sooner.

Others, though doubting peak demand will come quickly, are still preparing for it.

European oil companies are already shifting investment to sectors like petrochemicals or clean power that have better growth prospects. French oil supermajor Total SA has said it wants 20% of its portfolio to consist of low-carbon businesses before 2040.

Saudi Arabia, the world’s largest exporter of oil, is diversifying away from oil by investing in petrochemical plants and publicly listing state oil company Aramco, to raise money for other industries.

Meanwhile, Exxon and others are pouring money into natural gas as Chinese energy giants are aggressively embracing natural gas as a fuel for power generation and transportation.

For the companies supporting the oil industry there will be plenty of work decommissioning aging and unprofitable rigs at first. Next would come projects like Statoil, the Norwegian state oil company, and its floating wind farm where they could leverage experience with offshore oil rigs. Statoil also operates two carbon capture and storage (CCS) projects, technology which many fossil fuel companies support as a solution to emissions.

Coal Use in Asia Set to Rise – 11/25/16

China has said it will take over as an environmental leader should the U.S. pull back from the role, but the country will have enough trouble meeting its own targets. China’s utilities would have to phase out coal use by 2040 to meet its emissions goals, according to Climate Analytics, a Berlin-based non-profit that is studying the Paris Climate talks.

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Unfortunately, China, and Asia as a whole, is more likely to see demand for coal is increase than decrease for years to come.

According to an analysis by Bloomberg New Energy Finance using International Energy Agency data, China’s coal consumption is set to rise substantially. Despite efforts by Chinese policymakers to reduce coal use, the largest Asian nation continues to build roughly two new coal plants a week.screenshot-2016-11-22-at-9-36-24-am

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The BNEF’s outlook has China’s rate of building coal-fired power stations slowing to one a week in the next five years, though it indicates that even with no new construction the nation could meet all its power demands. If you are wondering why the coal plants are still being constructed then see “China’s Power Plant Problem” for more information. The short version is reluctance to follow-through on cutbacks at the local level for fear of social unrest and loss of tax revenue.

The report also showed Japan is pushing ahead with new coal-fired plants in response to the Fukushima disaster in 2011. Concerns about nuclear plants following the incident appear to have soured the country on nuclear power.

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Climate Action and the President-Elect – 11/23/16

The president-elect has expressed doubts about the potential impact of climate change, but what steps will he actually take once he’s in office?

In 2009, he signed a public letter calling for a reduction in greenhouse-gas emissions. In 2012, he dismissed climate change as a Chinese hoax. As a candidate, he said he would “cancel” the Paris Climate pact and “focus on real environmental challenges.” But in a recent interview with the New York Times, he said he would “keep an open mind” about the climate change accord. Such disparate opinions make it difficult to guess what position he will eventually settle on.

Acting with an “America First” mentality probably won’t mean favoring or rejecting globally-minded climate agreements so much as leaving other nations to lead them instead while taking each on its benefits for the U.S.

Should the U.S. ignore the agreement’s goals or renounce the treaty that established the talks, it would certainly be a blow to climate change mitigation efforts. However, the loss of the U.S. wouldn’t necessarily change much in the grand scheme of things. The Paris Agreement is already criticized as being not nearly enough to prevent cataclysmic climate change and many experts believe it would have fallen short one way or another.

With over 170 countries already signed on to the agreement, it is unlikely to fall apart completely anyway. The other signatories seem committed to lowering carbon emissions with or without U.S. leadership. Envoys from Europe to China have called the shift to a low-carbon economy inevitable and warned that to ignore it could mean missing out on business opportunities in clean power and energy-efficient technologies. Ironically, China has also vowed to step up as an environmental leader if the U.S. abandons the role.

China, India, and other developing nations have strong incentives to embrace cleaner technologies. Unlike rich countries, where energy demand is stagnant and efficiency is rising, many poorer countries still have many citizens whose lives would be vastly improved with access to cheap energy. To minimize environmental and health costs associated with extreme weather and air pollution from fossil fuels, these nations are seeking out any alternatives they can.

Even just in the U.S., there are limits to what a presidential embrace of fossil fuels could actually do.

Opening up federal lands to fracking means nothing if it is unprofitable to do so under oil prices that are stubbornly close to half of what they were at their 2014 peak. Coal, too, has been displaced by cheap shale gas, which burns with roughly half the CO2 emissions of coal. Besides, energy investments like oil rigs or coal power plants last for decades so firms may hesitate to risk their money turning into stranded assets as soon as the next president takes office.

In the end, there is no telling what the president-elect will do once he takes office or how the world will react.

Coal Prices Fluctuate On Chinese Regulation – 11/15/16

The shale drilling boom and subsequent glut didn’t just send the price of oil and gas plummeting. Since 2014, the value of coal and coal mining companies plunged so low on low coal prices that even one of coal’s largest companies, Peabody Energy, was forced into bankruptcy.

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According to data from the EIA, coal consumption has fallen substantially, in both absolute and relative terms.

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Between 1997 and 2015, coal gave up a large percentage of its share of total electricity generation to natural gas as the competing fossil fuel proved to be a cheaper, cleaner alternative in many parts of the U.S.

But Chinese government’s attempts to reduce overcapacity in its coal industry has pushed coal prices far higher than anticipated giving coal an impressive rally in recent months. As moves to reduce output proved to be too successful, Chinese output dropped and caused coal prices to almost double since the start of 2016.

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With Chinese regulators referring to the surge as “irrational”, it is likely only a matter of time before their response to the irrationality causes another price shift. Companies like China Shenhua Energy Co. and BHP Billiton Ltd. have already issued statements indicating they see thermal coal prices pulling back as regulators take action.

On the fundamental level, the coal price upswing appears to be a temporary shock caused by state interference in the world’s largest coal consumer with no real change in supply and demand trends. So long as Chinese regulators make good on their promise to address the overshooting of their goal, coal should settle back into its downward spiral in the coming months.

How Clean Can An Electric Car Actually Get? – 10/13/16

How much cleaner can an electric car get compared to one running on conventional fuels? The answer is important, especially when controversies like a study finding that a Prius could be dirtier than a Hummer add to the confusion. To answer the question you have to look at the life cycle of the product from manufacturing to usage to disposal.

Starting with disposal, there is no significant difference in emissions between electric and non-electric cars at this stage, which sees minimal emissions relative to making and driving the car. The main environmental problem in disposal comes from the battery. Part of the issue with older electric hybrids like the Prius from the study was their reliance on lead acid batteries rather than the lithium-ion batteries used in newer electric car models like the Tesla Model 3 or 2017 Chevrolet Bolt. In addition to not dealing with the toxicity of lead, the rarity of components in the newer batteries has prompted extensive recycling programs to avoid shortages of cobalt, nickel, and lithium.

Next, usage. An electric car is only ever going to pollute indirectly i.e. charging the battery using electricity from a power plant that burns coal. In the past and in certain areas that still rely heavily on coal, the emissions from those plants were hardly better than those put out by burning gasoline. Nowadays, however, the US grid is being inundated with electricity from natural gas (at about 50% the pollution than traditional coal plants) and renewables.

That switch to cleaner power sources means a lot for electric vehicle (EV) emissions, as the graph from Bloomberg New Energy Finance (BNEF) shows.

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  • for context, emissions free nuclear power supplies most of France’s electricity as opposed to heavy coal use in China.

Those cars may run twice as clean when they’re charged in a place that gets a lot of power from green energy, but the same car driving in a coal-burning region may yield a gain of just 20%, according to the Union of Concerned Scientists, based in Cambridge, Massachusetts.

Of course, fuel-efficiency standards are also pushing car makers to make engines that use less fuel.

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What this means for their emissions relative to EVs is depends heavily on the state or country you’re in.

In France, the gap has to narrow in the coming decade because regular engines are getting cleaner and the energy mix can’t get much cleaner.

In Japan, emissions from driving electric vehicles may actually rise as nuclear power plants are replaced with natural gas and coal in the wake of the Fukushima Daiichi nuclear disaster.

For the US, the state you live in matters a lot for this discussion as shown in the BNEF map of the carbon intensity of power for each state.

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Note the difference between coal state Wyoming and hydroelectric powerhouse Oregon.

For an idea how that map might change, look at what energy sources each state was installing in 2015.

by state

Finally, manufacturing.

A study done by the Union of Concerned Scientists found that making an EV results in 15% greater emissions than in manufacturing a similar gasoline vehicle. However, the same study was optimistic even this could be reduced and paled in comparison to the savings gained in the usage stage.

Assuming a grid composed of 80% clean electricity — France currently derives about 75% of its electricity from nuclear energy and about 14% from hydropower — the analysis would have a EV see at least a 25% reduction in emissions from manufacturing and an 84% reduction in emissions from driving. That combination would result in an overall reduction of more than 60% compared to today’s EVs, which are already about 40-50% cleaner than those running on gasoline or diesel.

So, basically, an electric car can get pretty darn clean, especially when the power grid that fuels it is running on renewable energy.

China’s Coal: G-20, Weather, and Manipulation – 9/20/16

Though a perfect storm of events in China’s coal world has sent coal prices higher, the clouds will likely pass as quickly as they came.

China’s coal imports rose 52% in August from a year earlier, customs data showed. An apparent shortfall of coal output in the country has helped send thermal coal prices up 40% since 2016 began. Chinese leadership has been pushing reforms of an industrial sector bloated with overcapacity, but the shortfall was still surprising to many.

coal-rebounds

Yet, many of the factors causing the rise in imports are temporary and/or artificial, having no permanent on supply.

Before the G-20 meetings in September, Beijing ordered temporary factory shutdowns to alleviate air pollution. Then you have the bad weather that caused heavy flooding earlier in the summer also disrupting supply chains for coal mines, which have already had their operating days reduced. And over in India, Coal India Ltd., the world’s biggest miner of the fuel, reported its lowest output in three years on the heavy rains and protests. None of these factors will have a lasting effect on the fundamental supply of coal.

The rising price of coal does not mean coal demand is making a lasting rebound either.

The temperate weather of Fall is right around the corner to cut into electricity demand, and alternative sources of power are growing much faster than coal on falling costs and rising government support. Now that China has committed to the Paris Agreement, its encouragement of low-carbon sources of energy will probably only increase.

More significant for the long-term price of coal, Chinese officials appear to be targeting a price range for thermal coal.

Regulators and miners agreed this week to coordinate production. The agreement shows officials are aiming for Bohai-Rim coal to rest between of 450 yuan to 500 yuan a ton. This week, the price was around 554 yuan, according to CCTD. The price range, maintained by cuts or increases in output by miners, is apparently meant to drive down overcapacity by forcing inefficient miners out of the market.

All in all, coal is still in rough spot. Regardless of political manipulations, cheap natural gas and concerns about climate change are beating down demand for the fuel and, unlike bad weather, those won’t just fade away.

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