Articles from 2012
Europe's Golden Age of Coal and Dark Ages of Gas
- Published Date
- Written by Nick Grealy
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.