Study: The coal industry is in far more trouble than anyone realizes

[FBaggins]

A brief moment of silence before dancing on their graves!

Here’s some bleak news for the coal industry: As much as 65 percent of the U.S. coal fleet could find itself under threat in the years ahead, thanks to cheap natural gas and stricter air-pollution regulations.

That’s according to a new peer-reviewed study by three researchers at Duke’s Nicholas School of the Environment, who take a detailed look at the costs of operating both coal-fired power plants and natural-gas plants around the United States. Their conclusion? Coal power is far more economically vulnerable than most analysts have realized to date. Here’s why:

Cheap natural gas is crowding out coal: Already, a glut of cheap natural gas from shale deposits in Texas, Ohio, Pennsylvania, and elsewhere is upending the electricity sector. The researchers found that around 9 percent of the U.S. coal fleet has become uneconomical — it’s now cheaper to burn natural gas for electricity than to keep running those coal plants, which are now slated for retirement. The chart below sums up the ongoing shift quite vividly. Many coal plants are now operating at far lower capacity in 2012 than they were back in 2007:



...snip...

By looking carefully at operating costs, the Duke researchers found that an additional 56 percent of the U.S. coal fleet could become more expensive than natural gas, assuming the ratio of gas prices to coal stayed around its current level. That poses a huge challenge to the coal industry — far bigger than previous analyses have suggested.

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/07/31/the-decline-of-u-s-coal-in-three-charts/

[pscot]

1. Doesn't this depend on the staying power

of natural gas? I've seen suggestions that the gas bubble may last only 10 or 15 years.

[FBaggins]

2. Sure

but predictions of 10-15 years are unlikely to be true.

It's more likely that the ability to export it in significant quantities will boost prices enough that coal will regain some competitiveness.

[Leslie Valley]

3. And there ya go

China will probably purchase all they can get their hands on. With our own money to boot.

[happyslug]

4. The Natural Gas bubble may not last that long, there are major problems with coal production

The biggest problem with coal is Coal has been in declined since 2002, if you look at energy content of the coal mined. While the amount of coal on a per ton basis has increased since the 1990s, the energy content has been in declined since the 1990s so that while we are mining more TONS of coal, the energy amount in that coal has dropped.

The USA, being the second largest producer, already passed peak production of high quality coal in 1990 in the Appalachian and the Illinois basin. Production of sub-bituminous coal in Wyoming more than compensated for this decline in terms of volume and – according to its stated reserves – this trend can continue for another 10 to 15 years. However, due to the lower energy content of sub-bituminous coal, US coal production in terms of energy already peaked 5 years ago (2002)– it is unclear whether this trend can be reversed. Also specific productivity per miner has been declining since about 2000

http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Report_Coal_10-07-2007ms.pdf

Thread from January 2013 on this same issue:
http://www.democraticunderground.com/112734161#post12

[pscot]

5. We're running on empty

[happyslug]

6. Yes and No.

We have to understand the concept of Peak Energy. It is the point when about 1/2 of any energy source (other then solar power) is used up. It will take about the same amount of time to pump or mine the remaining source as it did the first 1/2, but with less and less energy being produced each year.

Thus is peak oil was in 2005 (Which more and more evidence points to as the date), oil production (independent of the economy, for example today's economy is putting brakes on economic expansion and with it energy usage) will return to 1990 production level in 2020 (15 years each ways from peak year of 2005). Thus we will have a lot of oil (and other energy sources) for decades to come.

On the other hand, the third world consumption of oil has boomed since 1990, thus DEMAND for oil in 2020 will not only be from the same people who used oil in 1990 but also these third world users. Thus US demand for oil in 2020 will have to go MORE then the US usage in 1990, due to this increase in demand in the third world (mostly India and China). The Mechanism for this will be PRICE. If you look at US Oil consumption, most of it is in the form of personal transportation (Your car). In the Third world, while private car ownership was increased, the biggest increase in usage has been in providing electricity to area without electrical power (or the source is unreliable). Think about it, would you pay MORE so you can have a hot meal or MORE just to drive to work? If you only had money for one or the other, which would you pay for? That is the choice the third world is facing, and they want they hot food.

Another way to look at this is to remember a 20 pound bag of flour can feed a family of four for a month. If a village of 100 families get together, they can order 2000 pounds of food in a one ton truck. If that truck gets 10 miles to a gallon of gasoline and the village is 10 miles round trip. It costs that village one gallon of gasoline to get that one ton of food. If each family earns only $1 a day, that is $30 a month per family, $3000 for the village. Thus that village can pay up to $3000 a GALLON for the GASOLINE needed to get that food to them. That is your competition for oil, as the amount of oil declines.

Now the above example has some problems, first food prices will raise as oil prices goes up and in my example I ignored the price of the flour (but I also ignore how much money you are making in the job you drive to and from). But if we assume the village can spend only 10% of its income, that is still $300, they can pay for oil for the truck to haul the food the ten miles to and from the village.

In many ways, this is what a lot of people do NOT understand about peak energy, the poor will pay top dollar for food, and thus that will put the real push for the price of oil to go through the roof. For example, during the siege of Sarajevo during the breakup of Yugoslavia in the 1990s, the price of gasoline ran as high as $80 a liter, just to run the generators in the besieged city.

Zoning laws in the US came out of New York City in 1912, when people in the Mansions on Fifth Avenue found out they neighbors were selling their Mansions so they could build apartment buildings instead. Why Apartment buildings? The poor were willing to pay more per square foot for a place to live then the Rich were willing to pay (Thus Zoning was invented to prevent the poor from out bidding the rich). The poor can do so, when they are ready, willing and able to pay more per square foot.

The same when it comes to energy, the poor wants they food cooked and are willing, ready and able to out bid the rich, who wants the energy for their cars. This is going to cause all types of problems in the US, for the US has adopted a transportation policy that unless you use a car, you can NOT get there. How high must the price of oil (and other energy sources) go before the US transforms its society to use less energy? People will fight such an transformation and that is the down side to the 140 years we have to adjust to an oil less society.

[pscot]

7. You can't feed a family of 4 for a month

off one 20# bag of flour. There are 1537 calories in a pound of whole wheat flour; 30,740 total. That's 250 calories /day/person. They'll be dead in 2 months. I fear the rest of your speculation is similarly flawed. What I was thinking when I posted the above comment was that the level of civilization we enjoy is not a given. Rome was followed by a dark age. Our current situation seem to me to be somewhat tenuous. We've created a system so complex that mos tof us have no clue how it works or what is required to sustain it. In building to our present happy condition of near universal prosperity, we had the advantage of prodigious amounts of readily available raw materials, including energy, which are now gone, and therefore will not be available to those unfortunate souls who follow us. Physically, spiritually and metaphorically, we're running on empty.