In one for future textbook definitions of unintended consequences, the example of increased coal use in Europe provides a spectacular own goal for green shale gas opponents:

Shale gas has jolted traditional roles in the planet's climate drama, giving cleaner fuel to the United States, whose displaced coal has headed to Europe to pollute the old continent.

It is an ironic twist for the European Union, whose energy policy is largely based on promoting renewables and a target to cut emissions by 20 percent by 2020. The U.S. did not ratify the Kyoto Protocol to combat global emissions and its national goals are far less ambitious than Europe's.

At Gastech on Tuesday,  Anne-Sophie Corbeau, Senior Gas Analyst of the International Energy Agency described the current situation as being a Golden Age of Coal and the Dark Ages of Gas, as opposed to the Golden Age of Gas the IEA describes for the rest of the planet. Here's how we got into this mess:

  • US electricity generators are switching to natural gas as even without any carbon pricing incentives that the EU Emissions Trading Scheme provides over here,  gas is the cheapest (and cleanest) fuel for generation
  • US generators still have contracts for coal from US producers.  They buy that coal and sell it into Europe where it is cheaper than gas linked to oil prices
  • A key driver  for the continuation of the oil index link shattered in the US, and looking shakier every day in Asia is opposition to shale gas.  Increased shale supply would break down the link.  Opposition to shale and thus increased supply, means the oil link continues in Europe.

Stefan Judisch of RWE made an interesting observation Monday at Gastech when I asked him about the potential impact of shale on European energy markets. He said that Europe is benefiting from Henry Hub prices in the  form of lower priced US coal exports. They moderate electricity prices in Europe.  What they do for carbon emissions is completely counter to the desired outcomes. He also pointed out:

RWE Supply & Trading’s Stefan Judisch said Continental Europe, as exemplified by Germany, is “inflicted” by renewables because, he said, subsidies for solar-generated energy skew demand vs. gas-fired electricity generation.

“Oil is a global commodity, he said; “gas is a regional one…. Price integration must reflect the dynamics of supply and demand for gas not for oil.”

But with no increased supply of gas, then we are condemned, thanks to green opposition to shale, artificially supporting the oil link, to lower supplies and higher prices for gas. It sounds complex, but it's simple: Coal is cheap and likely to get even cheaper as China coal demand falls due to macro economic drivers:

BEIJING -- China's coal prices have fallen sharply this year, as a slowing economy has reduced industrial demand and coal supplies have continued to grow, an official said Thursday.

Thermal coal prices at China's benchmark Qinhuangdao port fell to 635 yuan ($100.79) per metric ton in early October, down from 800 yuan per ton at the start of the year.

Wu Yin, deputy director of the National Energy Administration, said at an industry meeting that the country's economic slowdown, especially in energy-intensive industries, has greatly reduced domestic demand for coal.

A key driver for China shale is provided by the energy security and cost implications of increasing coal imports. So the future for European coal could be that Europe will be a demand sink for orphaned coal, aggravating both CO2, energy security and trade flow imbalances.  Absolutely no one is winning here. Coal miners get low prices, Europe has even less energy security, we export money to pay for energy as we forgo the benefits of gas in tax revenue and give up substantial economic advantage to every one else.

But the number one problem is coal aggravates the very CO2 emissions that Greenpeace, WWF and FOE insist is the number one challenge facing the planet.  

If that is the prime challenge, and I'm prepared to accept that it is, they need to accept their role in making the issue far worse today in their quixotic journey to a carbon free future that is decades off.  

Overall Rating (0)

0 out of 5 stars

Leave your comments

Post comment as a guest

0 / 3000 Character restriction
Your text should be less than 3000 characters

People in this conversation

  • Andy

    It was only two weeks ago, when in response to a quote you had about coal by a European analyst, that I started to look at the US stats. I was surprised to see how much US coal exports have shot up. Thank you for explaining the why.

    0 Like
  • Andy

    In reply to: Andy

    EIA has updated year-to-date coal stats. US coal exports to the UK are up 85%. US coal exports to Europe are up 31% . To Germany 23%. To Asia almost 23%.<br /><br />Not all is lost. US coal exports to Australia have declined 99.7%!

    0 Like
  • roger

    In reply to: Andy

    [quote]EIA has updated year-to-date coal stats. US coal exports to the UK are up 85%. US coal exports to Europe are up 31% . To Germany 23%. To Asia almost 23%.<br /><br />Not all is lost. US coal exports to Australia have declined 99.7%![/QUOTE]<br /><br /><br />Note USA exports for those 3 months were 37.5m tonnes.<br /><br />Multiply that by 4 and you have 150 million tonnes per year<br /><br />That tells us that America has the ability right now to export at least 150 million tonnes of coal per year with zero upgrades.<br /><br />Also its biggest customer Europe doesn't need as much coal during April to June as it does December to march so maybe she could export even more in the colder European months

    0 Like
  • roger

    Shale represents the possible death of coal almost completely in both America and Europe in electricity generation yet the greens are against it. Mad<br /><br />In America shale output must have been curtailed by lack of more demand. If they output more it just crashes the price further as the market is saturated. Who knows maybe if the demand was there shale could meet 100% of usa gas demand. Now that would be no less than a miracle gift to humanity.<br /><br />I would ask you to consider this Nick, surely a lot of coal stations in the states are obliged to take the coal as they will have contracts into the years. As these contracts fall off and utilities are able to switch more and more coal to gas we will be in a situation where American coal miners need to export more and more and more likely close more and more mines. Shale will green America further <br /><br /><br />Hopefully the usa will start exporting lng big time soon so her gas can displace coal in Europe & elsewhere too

    0 Like
  • jim south london

    If the Shale Gas Drilling Site in Blackpool was up running and on line,<br />would British Gas Customers be getting a £100 increase in their Heating Bills<br />Nice unpleasant surprise for everybody just as Winter rolls in.

    0 Like