Tag Archives: coal

Energy Jobs: Automation and Numbers – 2/10/17

If members of Congress and the new President are really dedicated to wringing more jobs out the energy sector, then they should make sure they’re looking for them in the right place.

Since oil prices collapsed in 2014, Bloomberg estimates that 440,000 jobs in the U.S. have been lost as a result of the downturn. As a result, the world’s biggest oil services companies have had to spend billions on severance costs and, now, few seem ready to risk a repeat of that huge expense. Many in the oil industry are increasingly turning to automation to replace many of the lost jobs, a trend unlikely to change as technology costs continue to fall relative to wages. The UBS estimates that the US oil industry will only need about half as many workers per barrel of oil produced post-2017 versus pre-2015.

That doesn’t necessarily mean that states known for oil output are heading for high unemployment rates. For example, Texas may have suffered greatly during the 1980’s oil price downturn, but its economy has since become far less dependent on the commodity thanks to strong growth in other sectors. In fact, Texas has had net creation of new jobs recently despite the severe oil price downturn.

Only about 2.5% of Texas’ employment was related to natural resource extraction before the crisis because oil was and increasingly is not a particularly labor intensive industry. Even now Austin and Dallas are thriving with job growth rates of 4.3% and 4.2% respectively because neither city is dependent on oil prices to drive economic growth. Overall, the biggest oil producing state in the U.S. has held together just fine despite the lower-for-longer oil prices.

Meanwhile, large number of new energy jobs are coming from the wind and solar energy industries. U.S. wind-farm developers and suppliers had more than 100,000 workers at the end of the year, compared to 65,971 coal mining jobs at the start of last year, according to the U.S. Energy Department.

Perhaps surprisingly, the top 10 congressional districts for wind energy are all in Republican-dominated red states such as Iowa and Texas, according to American Wind Energy Association CEO Tom Kiernan.

“We’re hiring workers in the rust belt,” Kiernan said in an interview. “We’re helping families keep farms they’ve held for generations. The lifeblood of our industry is in rural America.”

And the extension of two key federal tax credits by the Republican-controlled Congress at the end of 2015 along with the fact that the new Energy Secretary, Rick Perry, saw Texas become the largest producer of wind power during his term as Governor gives some cause for optimism in the renewable energy companies.

EIA STEO: Natural Gas – 2/8/17

In its January 2017 Short-Term Energy Outlook (STEO), the EIA expects the Henry Hub natural gas spot price to average $3.55 per million British thermal units (MMBtu) in 2017 and $3.73/MMBtu in 2018, both higher than the 2016 average of $2.51/MMBtu.

The confidence interval range for natural gas prices is a market-derived range that reflecting trading on futures, not supply and demand estimates.

The EIA expects natural gas consumption to rise based on a return to more typical winter temperatures, while use of natural gas for electric power generation is expected to decline because of higher fuel prices.

Natural gas-fired power generation is forecast to rise in 2018, but remain below the 2016 level. Current plans for additions show 11.2 GW in 2017 and 25.4 GW in 2018, equating to an overall increase of 8% from the total capacity existing at the end of 2016.

The expansion of natural gas-fired capacity follows five years of net reductions of total coal-fired capacity. Available coal-fired capacity fell by an estimated 47.2 GW between the end of 2011 and the end of 2016, equivalent to a 15% reduction.

The electricity industry has been retiring some coal-fired generators and converting others to run on natural gas in response to environmental regulations, as well as low cost of natural gas resulting from expanded production from shale formations. Many of the natural gas-fired power plants currently under construction are located near major natural gas shale plays or pipeline networks.

Rising natural gas prices could lead developers to postpone or cancel some planned projects, or reduce the capacity used in existing plants. Despite the additions to capacity in 2017, the STEO forecasted share of total U.S. generation supplied by natural gas falls from 34% in 2016 to 32% in 2017. By 2018, however, the scheduled expansion of overall capacity fueled by natural gas is expected to result in a slight increase in natural gas’s share of total U.S. electricity generation despite other factors.

The Kemper Project: Clean-Coal Gone Awry – 2/1/17

Southern Co.’s “clean-coal” plant in Kemper County, Mississippi has been hailed as a first-of-its-kind project; it could also be the last.

After running more than two years behind schedule and $4 billion over its original $2.88 billion budget, the Kemper project was already hard to call a success. That difficulty becomes nearly insurmountable when you add a number of cheaper, cleaner alternatives to coal and a climate change skeptic in the White House.

The Kemper project began around 2008 when many believed that natural gas would soon become scarce. Shortly after, hydraulic fracturing applied to shales in the United States unlocked so much natural gas that the U.S. soon became a net exporter of the fuel.

And with skyrocketing supplies came plummeting prices.

In a matter of years, natural gas became a much better bet than coal.

Emissions related to combusting coal (206 to 229 lbs CO2/MMBtu) are also higher than those associated with combusting natural gas (117 lbs CO2/MMBtu), according to the EIAA cleaner burn makes natural gas more palatable for environmentalists and helps insulate it from future regulation of emissions. Such qualities are a must for new power plants which have lifetimes measured in decades and must remain profitable through multiple presidential and Congressional administrations.

Kemper was supposed to show how coal could be “clean”, but utilities have to make money too and Kemper only showed how far away carbon capture technology is from matching up to other available options.

On the regulatory side of things, the Trump administration’s committment to clean-coal technology and reviving America’s coal industry seems like a lucky break for the Kemper project. However, promises to roll back energy regulations hold their own problems.

Trump’s antipathy toward the Clean Power Plan would make the financial justification for clean coal an even tougher sell, said Christine Tezak, a managing director at Washington-based ClearView Energy Partners.

“The economics are incredibly disadvantageous,” Tezak said.

Once the government is no longer pushing for lower emissions, the Kemper project loses one of the few justifications for existing, or at least appears to, making it harder to build support.

On top of its economic and regulatory problems, the Kemper facility remains in a tricky legal situation as well. Oil producer, Treetop Midstream Services LLC, is suing for $100 million because of a canceled CO2 supply contract and customers are alleging Southern failed to fully disclose facts related to the plant’s cost. An institutional investor filed suit against Southern on Jan. 23, accusing the company of giving false information about the project.

Southern recently told state regulators that the five-year operating and maintenance costs of the facility have nearly quadrupled to about $1 billion from the original estimate, according to a regulatory filing. When some of those costs are passed along to ratepayers, as they inevitably will be, the project will grow harder and harder to defend.

EIA Annual Energy Outlook for 2017: Summary and Thoughts – 1/31/17

The EIA has released its annual energy outlook for 2017 so here is the short version with some additional analysis.

For starters, the EIA sees no growth for nuclear power industry. Nuclear generation is expected to decline slowly from now through 2040 as units are retired and relatively little new nuclear capacity comes online.

In contrast, EIA’s assessment of the renewable sector shows strong growth. From 612 billion kwh in 2016, renewable generation is expected to climb to 1,212 billion kwh by 2040.

The third major finding in EIA’s analysis has coal generation moving little from its initial 1,232 billion kwh, reaching 1,400 billion kwh in the late 2020s before falling back to 1,390 billion kwh in 2040. Overall, coal’s share of the electric generation market would decline from 30.3% to an estimated 27.8% of annual generation.

Keep in mind that the EIA projections do not reflect the possibility of future regulations such as the now assumed defunct Clean Power Plan. Should another administration or even a number of state governments implement emission reduction targets then coal share would drop relative to other power sources. The federal government has never set a comprehensive national energy policy anyways whereas many states have their own policies planned or in place making this a real possibility.

The EIA previously released data on the LCOE for new generation resources projected for 2020 which helps to explain some of its conclusions in the 2017 Outlook.

(click image to enlarge)

For context:

Fracking and horizontal-drilling capabilities have vastly lowered the cost of natural gas as reflected in the table above.

Prices for solar power modules have fallen 70% in the past six years.

Wind power costs have dropped 58% in the past five years.

Battery prices, which are seen as complementary to intermittent power sources like wind and solar, have also fallen approximately 14% annually since 2007.

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.

EIA: Natural Gas Fuels Cleaner Power Sector – 1/26/17

Full EIA articles on natural gas and its effect on the power sector: first, second

For the first time since the late 1970s, U.S. CO2 emissions from the transportation sector exceeded electric power sector CO2 emissions on a 12-month rolling total basis, measured from October 2015 through September 2016. Electric power sector emissions are now regularly below those of the transportation sector  despite making up a larger share of total U.S. energy consumption.

The reason for this is a significant decline in carbon intensity for the power sector as natural gas replaces coal as the preferred fuel of electricity generators. On average, emissions associated with combusting coal (~206 to 229 lbs CO2/MMBtu) are higher than those associated with combusting natural gas (~117 lbs CO2/MMBtu). Natural gas electric generators also tend to be more efficient than coal generators, because they require less fuel to generate the same output.

In the 12 months from October 2015 through September 2016, coal and gas accounted for 31% and 34% of electric power generation, respectively. However, their shares of electric power sector emissions were 61% and 31%, respectively, as coal is much more carbon-intensive. Overall power sector carbon intensity has also decreased as generation share of fuels such as wind and solar has grown.

Emissions from the transportation sector are primarily from fuels which have carbon intensities lower than coal but higher than natural gas. For example, gasoline emits an average of 157 lbs of CO2/MMBtu. In the months observed, motor gasoline represented 60% of the total emissions from the transportation sector, while 23% was from distillate fuel oil and 12% was from jet fuel.


Falling prices for natural gas have helped fuel the shift from coal to natural gas in the power sector.

Natural gas spot prices in 2016 averaged $2.49 per million British thermal units (MMBtu) at the national benchmark Henry Hub, the lowest annual average price since 1999. Warmer-than-normal temperatures for most of the year and changing natural gas demand were the main drivers of natural gas prices in 2016.

In the first quarter of the year, much warmer-than-normal winter temperatures and large amounts of natural gas in storage caused prices to decrease. Prices began to gradually increase in late spring, with increasing demand and decreasing production, before sharply increasing at the end of the year with the onset of cold temperatures in mid-December.

Because of warm weather, natural gas consumption in the residential and commercial sectors in 2016 declined 7% and 4%, respectively, from the previous year. As a result, natural gas storage inventories were at or near record levels throughout most of the year.

In November 2016, the United States became a net exporter of natural gas on a monthly basis for the first time since 1957, based on data from PointLogic.

U.S. pipeline exports to Mexico continued to grow throughout 2016, making up 87% of all U.S. natural gas exports and, in May 2016, the Sabine Pass terminal began commercial operations in the Gulf Coast to export liquefied natural gas.

Despite growing demand, low prices resulted in lower natural gas production in 2016. Based on preliminary data, the EIA estimates natural gas marketed production to face its first annual decline since 2005. The number of active natural gas drill rigs is down 19% from the year-ago count, however, production has not fallen as sharply as the number of active rigs, as producers have continued to make gains in drilling efficiency.

Energy in the U.S.: 2016 and 2017 – 1/12/17

Ten years ago, coal accounted for about 49% of the electricity generated annually in the U.S. This year, the EIA’s December Short Term Energy Outlook has it close to 30%, compared to 34% for natural gas and 5% for wind which both more than doubled their shares of total generation for the same period.

Almost 50 GW of coal-fired capacity has been retired since 2010 with virtually no new coal-fired capacity added or planned.

On average, the coal power plants retired were more than 50 years old while the average life of such plants is 40 years, according to the National Association of Regulatory Utility Commissioners. That capacity, and by extension the main point of consumption for coal, is expendable for utilities and being replaced almost entirely by natural gas, wind, and solar power assets.

As Gerard Anderson, chairman and CEO of Detroit-based DTE Energy, in an interview with mlive.com said “All of those retirements  are going to happen regardless of what Trump may or may not do with the Clean Power Plan [referring to the company’s plans to close another eight coal power plants in the years ahead]… I don’t know anybody in the country who would build another coal plant.”

Or as Robert Murray, CEO of Murray Energy Corp., the largest underground coal mining company in the U.S. has a similar opinion saying in an interview with POWER: “I’ve asked President-elect Trump to temper his comments about bringing coal miners back and bringing coal back. It will not happen. The destruction that has happened is permanent.”

Apparently, even if it played a part in moving utility companies away from coal, there are other forces at work besides government regulation. The most likely suspects are changing economics and customer preference for cleaner fuels.

Natural gas at least appears cleaner than coal when it comes to CO2 emissions, and natural gas prices are so low in some places that coal cannot even compete on a price basis. With the abundant supplies unlocked by fracking and horizontal drilling, that fact doesn’t look likely to change. As a result, energy generation from natural gas has rocketed upwards at coal’s expense.

source: wikipedia

Renewables are also chippng away at coal’s market share. Wind power generated more than 4.4% of the nation’s electricity in 2014 versus 2.3% in 2010 and 0.2% in 2000, and solar’s growth rate and future potential are staggeringly high. From essentially zero installed utility-scale generation capacity in 2008, operating capacity jumped to 14 GW by the end of 2015 and the latest Solar Market Insight report estimates that more than 10 GW of utility-scale generation will come online this year alone. The Solar Energy Industries Association projects that another 20 GW of capacity will come online by 2020.

And as far as jobs in energy, the solar and wind industries reportedly create more jobs than coal each.

At least according to the latest census by an entity affiliated with SEIA, there were more than 200,000 solar industry jobs at the end of 2015, 150,000 of which were in installation and manufacturing. In wind, the American Wind Energy Association credits the industry with some 88,000 jobs at the beginning of 2016, of which 21,000 were wind-related manufacturing jobs and 38,000 were project development and construction jobs.

Meanwhile, data from the Bureau of Labor Statistics puts the number of coal mining jobs at about 68,000.

On top of winning by sheer numbers, many of those wind jobs are located in Republican-led districts. Earlier this year, AWEA released data showing that 86% of all the wind generating capacity in the United States is located in congressional districts represented by Republicans.

EIA: Coal Production Declines in 2016 – 1/11/17

EIA data for the coal industry in 2016 shows U.S. coal production declining significantly, 17% lower than in 2015 and at its lowest level since 1978.

Low natural gas prices (see: Natural Gas: Now and Later), warmer-than-normal temperatures during the 2015-16 winter that reduced electricity demand, the retirements of some coal-fired generators (see: The Difficulty of Bringing Back Coal Jobs), and lower international coal demand have contributed to an eight-year decline in U.S. coal production.

Nearly all coal use in the United States is used for electricity generation where it has faced increasing competition from natural gas and renewables (see: Power Producers and Clean Energy p.II). The average daily natural gas spot price at the Henry Hub, a key benchmark, fell from $2.63 per million British thermal units (MMBtu) in 2015 to $2.40/MMBtu in 2016, resulting in increased natural gas-fired electricity generation.

In 2016, natural gas-fired electricity generation also surpassed coal-fired generation for the first time, accounting for an estimated 34% of total electricity generation compared with coal’s 30% share. The most recent Short-Term Energy Outlook forecasts total 2016 power sector coal consumption at about 681 MMst, the lowest level since 1985.

New generation capacity additions estimated by the EIA for 2016 also show dominance of solar, natural gas, and wind power over other power sources. Coal was expected to have negligible additions.

U.S. coal exports also declined in 2016 on the lower international coal demand. Approximately 26 MMst of coal were exported to Europe in 2016, down nearly a third from 38 MMst in 2015. Coal exports to Asia, particularly to South Korea, declined as well. Exports to South Korea saw a 43% decrease from the 2015 level. The EIA estimates that the United States exported 57 MMst of coal in 2016, a 23% decline from 2015.

Unrealistic Expectations for Coal’s Future – 1/4/17

Even Robert Murray, CEO of Murray Energy Corp., the largest underground coal mining company in the U.S., does not expect coal’s mining jobs or new coal-fired power plant construction to make much of comeback.

“I’ve asked President-elect Trump to temper his comments about bringing coal miners back and bringing coal back. It will not happen,” Murray said in a recent interview with POWER. “The destruction that has happened is permanent.”

In 2007, coal accounted for more than 48.5% of net generation, according to the U.S. EIA. Through the first nine months of 2016, only 29.9% of the county’s net generation was from coal. Murray doesn’t see that going up much in the future.

He points out that electricity generated by natural gas as a particularly insurmountable barrier to a revival in coal. Historically, electricity from natural gas has cost about 15¢/kWh to produce, but with the boom in hydraulic fracturing ballooning gas supplies, the price of the power has fallen to about 5¢/kWh, giving it a competitive advantage over coal.

Murray also expressed doubts about the future of carbon capture and sequestration (CCS), saying it isn’t going to fix coal’s fundamental problems. He speaks as someone who helped build the Great Plains coal gasification plant, the largest carbon dioxide (CO2) capture project in the world.

“Carbon sequestration is not practical. It is not economic. It’s a pseudonym for ‘no coal,’ ” Murray said.

Yet, CCS plants could soon get a financial lifeline thanks to the President-elect’s interest in clean-coal initiatives as a way to preserve mining jobs.

The biggest winner could be Southern Co.’s Kemper County power plant, a facility designed to capture about 65% of its carbon-dioxide emissions and sell it to oil companies. Construction and technology issues have doubled the cost of the Kemper project since it was approved in 2010, to nearly $7 billion.

Proposals set for debate in Congress over coming months are largely aimed at increasing tax breaks for capturing CO2.

One of the bills, filed by Republican Rep. Mike Conaway of Texas, seeks to raise subsidies and continue them indefinitely rather than have them expire once 75 million metric tons of carbon dioxide have been captured, a threshold expected to be reached by 2019.

Another bill supported by Sens. Heitkamp and Sheldon Whitehouse — co-sponsored by Republican leader Mitch McConnell — would increase the current tax credit of $10 a ton of carbon emissions captured to $35 a ton for the first 12 years a plant operates.

Brett Wingo, a former project manager for the Kemper plant, presents a harsh critique of the project. He predicts Kemper wouldn’t make its year-end completion target, missing out on $250 million in depreciation expenses this year. Earlier delays have already resulted $2.6 billion in Kemper-related charges. Southern also had to refund $412 million in subsidies to the federal government as construction dragged on.

When the people actually managing companies in the coal industry tell you to get more realistic about coal’s future, then it might be time to listen.

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.

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