by Justin Guay via Sierra Club’s Compass Blog
I’ve recently seen a few articles that claim that historically low coal consumption in the United States doesn’t mean much because dramatic growth in global coal consumption is inevitable.
Assertions like these rely on mind-boggling (and admittedly scary) global coal-consumption growth rates. But, for all the scary numbers, analysts are missing the writing on the wall about coal development around the world: Widespread grassroots opposition, dramatically rising costs, and increasingly competitive alternatives threaten “the inevitable.” It’s time to take a closer look, because international coal is far riskier than you might think.
First, what happens in the U.S. does matter globally. Given that the developing world has based its current plans on what the Western world has done, do we really think they aren’t paying attention to what we are doing now? That’s exactly why historic standards like the EPA’s carbon-pollution rule have a cascading effect by demonstrating to the rest of the world that coal is not the right fuel source for modern countries (something the dramatic ramp-up in clean energy investment in China clearly shows).
What do developing countries see when they look to the West today? In the United States, plans for 168 new coal-fired power plants have been abandoned, and another 100 existing plants are scheduled for retirement due in large part to increased financial and environmental costs as well as intense grassroots opposition. The handful that have sneaked through have raised rates by as much as 30 percent because they simply aren’t competitive in today’s energy market. As a result, coal-fired power generation has fallen to its lowest share of overall generation in the past 35 years. Things are so bad for coal that fully constructed coal plants are being mothballed because they can’t compete.
What many people don’t realize is that the same thing is happening in Europe. Coal’s share of generation has declined from 39.4 percent to 25.7 percent over the past 20 years. Of the 120 coal fired power plants proposed in Europe in 2007, none have been brought to the construction stage. In 2011, clean energy accounted for 71 percent of the new electricity capacity in the European Union, while another 22 percent was natural gas-fired generation. That’s overwhelmingly not coal. The heart of this revolution is Germany, which now aims to generate 100 percent of its power from clean-energy sources by 2050 — and is well on the way to meeting that goal.
If developing countries are paying attention to what’s going on in the US and EU you can bet they are paying attention to international coal markets, which can really only be described in one word: risky. The truth is new coal plants are experiencing huge cost over runs as initial estimates are woefully out of date and international steam coal prices skyrocket. Add to that mounting local opposition and you have a very similar recipe for moving beyond coal as you do in the U.S. and the E.U.
The best example of this is India where an enormous pipeline including 720 GW of new coal plants has been proposed. Nowhere is the narrative of coal inevitability more poignant than there. The problem is reality doesn’t match the rhetoric.
Across India, a battle is being waged in opposition to this vast pipeline by determined local opposition who are being met with violent repression. But despite the odds they are winning. Last year a 4GW coal plant was scrapped due to farmer protest. Then came Sompeta where a few thousand villagers stood up to corrupt politicians and businesses to stop a proposed project. Then came Kutch and on and on…
Where grassroots pressure is not enough, harsh economic realities are. A full-fledged coal crisis has hit India resulting from domestic coal shortages, skyrocketing international coal prices, and a wave of subprime coal loans so great that Indian banks worry it poses systemic default risk.
It’s quite clear that what now defines coal markets globally is risk. These risks are wide ranging — from grassroots opposition to soaring fuel prices — and they are not easily mitigated. To believe a new era of coal is upon us in the face of these risks is to close one’s eyes to the reality of the global coal market.
Justin Guay is the Associate Washington Representative for the Sierra Club’s International Program. This piece was originally published at the Sierra Club and was reprinted with permission.