Gue contends new EPA regulations and low natural gas prices will not stymie long-term global coal demand, plus China's new president's energy agenda may well trump anything Obama's regulators can cook up
WASHINGTON, Dec. 17, 2012 /PRNewswire/ — Here in the US, reports of the death of King Coal by regulation may well be premature. Certainly, the Obama White House and the EPA anti-coal evangelists are hoisting new regulations that are aimed at reducing domestic coal usage. But, many utilities are burning natural gas as a base load fuel instead of coal simply because natural gas is now dirt-cheap in the US.
The EIA expects US utilities to shutter about 40 gigawatts of older, inefficient coal-fired plants in the next five years while still running the remaining larger plants — hardly the death of the industry.
Even with these capacity reductions, EIA forecasts that coal-fired plants will remain the biggest source of power in the US generation mix for at least the next two decades. Rising US electricity demand should require the remaining coal-fired plants to operate at a higher utilization rate, offsetting the effect of lost capacity.
What about the potential for US coal exports? How is coal faring in global markets?
In Europe, demand for coal has surged as a result of sky-high natural-gas prices in international markets and declining output from nuclear power as Germany phases out its fleet of reactors. London-traded natural gas futures currently fetch about USD11 per million British thermal units–more than triple prevailing prices in the US.
In the eurozone, coal-fired generation has increased by 14 percent year over year despite the recession there. India continues to build coal-fired power plants at a rapid pace, fueling demand for thermal coal; the nation's coal imports have already surged 15 percent in 2012.
What about China? Coal provides 80 percent of China's electricity, compared to about 50 percent in the United States. In the past five years, China has added coal capacity that exceeds all US power plants combined. And it is predicted that by 2015 Chinese coal-fired capacity will triple that of the US. According to the China Electricity Council, China's coal demand should reach 4.3 billion tons by 2015.
US coal companies are in position to ship $1.3 billion in coal exports annually to China if projects to build West Coast coal ports move forward. And, US coal companies already profit from China's voracious appetite for coal through their coal reserves in the Pacific Rim.
Bottom line — coal-fired plants in both the US and global markets will continue to provide the bulk of base load power generation for years to come. King Coal still sits on the world's power throne.
Elliott Gue's Energy & Income Advisor, www.EnergyandIncomeAdvisor.com, uncovers the most profitable opportunities in the energy sector, from growth stocks and IPOs to high-yield utilities, royalty trusts and master limited partnerships.
Contact: Elliott Gue at 1-888-960-2759 or email Email.