2015 is shaping up to be a fateful year for
the coal industry.
After coal prices tumbled from their highs in
2011, the industry hit a rough patch. Years of buildup in mining capacity hit
the markets at the same time, sending prices crashing. By the beginning of
2014, things were looking pretty grim. But optimists hoped it would be merely
temporary; a supply glut that would ease once demand picked up.
However, demand has not been nearly as strong
as expected. The US has been moving away from coal for a few years now, with
cheap natural gas, more renewables, and energy efficiency.
China’s economic growth slowed a bit, but its
efforts at reining air pollution have gone a long way at reducing coal demand.
In fact, China may have already hit a peak in its coal consumption, which would
be a shocking development considering the country was aiming to hit its peak no
later than 2020.
With the world’s largest coal consumers
trying to rid themselves of the dirty fuel, it appears that there is little
room to maneuver for coal producers. The industry is in structural decline, and
2015 may be the year in which it all starts to fall apart.China continues to
ratchet down its coal use, achieving an 8 percent reduction in consumption
between January and April of this year, over the same period in 2014.
In the US, 2015 will also be a dark one for
coal. An estimated 13 gigawatts of coal-fired power plants are expected to be
shuttered by December, as strict pollution controls kick in. The Mercury Air
Toxic Standards (MATS) required plants to upgrade pollution controls.
For some, the costs of upgrading don’t make
sense, so the only alternative is to shut down. Environmental groups like the
Sierra Club have fast-tracked this dynamic, assaulting coal plant owners with
legal challenges, a story nicely laid out in a Politico article by Michael
Grunwald.
In many places across the US, renewable
energy is now a cheaper option than coal. The pace of retirement will only
accelerate in the coming years – pending regulations on carbon emissions would
slash the number of coal plants by one-third by 2025.
To be sure, a lot of those plants are older,
smaller, and are not run at full capacity, but they make up a huge loss for the
coal industry. Fewer power plants burning coal means less demand for coal from
miners.
But it gets worse. Not only is coal starting
to lose the economic argument, but it is losing the moral one as well. In early
May the Church of England announced that it would divest its assets from coal.
And on May 27, the divestment campaign claimed an even larger victory in
Norway.
Representing the world’s largest sovereign
wealth fund – over $890 billion in assets – the Norwegian government came to an
agreement to divest its holdings from coal companies. Having already announced
that it would pull out from pure-play coal operators, the latest agreement
would go farther. The agreement would block investment in any company that
operates in multiple sectors, but receives more than 30 percent of its revenues
from coal or in utilities that generate more than 30 percent of their
electricity from coal.
Source:
mining.com