Goldman Sachs Finds ‘Window For Profitable Investment In Coal Mining Is Closing’, Ditto For Coal Exports

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"Goldman Sachs Finds ‘Window For Profitable Investment In Coal Mining Is Closing’, Ditto For Coal Exports"

coalplantbackgroundGoldman Sachs has put out a must-read research paper, “The window for thermal coal investment is closing.” Thermal (or steam) coal is primarily used to generate power.

The U.S.-based multinational investment bank has some sobering findings for the dirtiest fossil fuel:

We believe that thermal coal’s current position atop the fuel mix for global power generation will be gradually eroded by the following structural trends: 1) environmental regulations that discourage coal-fired generation, 2) strong competition from gas and renewable energy and 3) improvements in energy efficiency. The prospect of weaker demand growth (we believe seaborne demand could peak in 2020) and seaborne prices near marginal production costs suggest that most thermal coal growth projects will struggle to earn a positive return for their owners.

Ouch!

Goldman projects demand for shipping coal by sea will be flat for years.

Coal

You may wonder why anyone would be building a coal export terminal — particularly on the West Coast where the obvious customer is China, whose near-term demand for coal imports is collapsing, according to Goldman:

Coal China

As it turns out, the state of Washington — under the leadership of climate hawk Jay Inslee — appears to be figuring this out. The state’s Department of Ecology recently said its review of the Gateway Pacific Terminal at Cherry Point, will include “an evaluation and disclosure of greenhouse gas emissions of end-use coal combustion.” Sightline analysts explained why that is “Bad News for Coal Industry“:

First, burning the 48 million tons of coal proposed for export at the terminal annually would release roughly 100 million tons of carbon dioxide, a staggering figure that amounts to as much carbon pollution as every activity in the state of Washington combined. In other words, it’s a clear environmental disaster that would overshadow every other effort the state has made to reduce climate-changing emissions.

Precisely. And as the Goldman report makes clear, it’s far from clear there is even an export market.

In short, because coal is terminal we don’t need any coal terminals! So where is there money to be made in coal, if not in new mines or new exports?

EnergyWire (subs. req’d) reports this week: “Winding down coal plants could account for a multibillion-dollar global business by the end of the decade, according to new research.” A Navigant Research report finds, “companies that smash buildings, haul away debris and salvage polluted land could rake in more than $5 billion,” by 2020.

Wow, getting paid to demolish coal plants — where do I sign up?

The Goldman Sachs report has a lot of analysis worth diving into. They note that “In contrast with technological developments in the non-hydro renewable sector, efforts to deploy carbon capture and storage (CCS) in the power generation sector have failed to gather momentum.” They find “CCS is on track to deliver just 2.3GW of installed capacity by 2020″ and “CCS has not delivered yet a viable solution for coal-fired plants”:

According to a range of studies quoted by the Congressional Budget Office (CBO), electricity generation at CCS plants is expected to be approximately 75% more expensive than for coal-fired plants without CCS. In the same report, the CBO states:
The Department [of Energy, or DOE]’s analysts believe that the current technology for capturing CO2 could never meet DOE’s goal of reducing the cost of CCS-generated electricity. Consequently, DOE has been seeking to develop next-generation CCS equipment and processes that would capture CO2 more quickly and more completely but use less energy than today’s technology does.”

This is consistent with Climate Progress’s analysis of CCS.

Interestingly, Goldman’s pessimistic view of coal is not based on a belief that aggressive climate action is around the corner. One of their “risks with the potential to undermine our forward view of the thermal coal market” is:

A catastrophic weather event: Climate change has been displaced by other issues as a top concern. However, public opinion could swing as a result of a weather event such as an ice-free summer at the North Pole, a particularly destructive hurricane season in North America or a weather disruption that materially impacts agricultural output. Under such a scenario, governments may be forced to respond with drastically tighter environmental regulations that would further erode the long term demand for coal.

That is, things could be even worse for coal if the world ever wakes up to the reality of the climate crisis.

Indeed, we’ve had weather disruptions materially impacting agricultural output for a couple of years now. And the Arctic has been losing ice decades ahead of what the climate models had predicted. That’s why I’ve said we will need multiple climate Pearl Harbors to jumpstart a true war on carbon.

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