The Dirty Truth About Coal
In last week's issue of The Energy Letter, we took a look at the recently released BP Statistical Review of World Energy 2013.The focus then was on the production, consumption and reserves data forpetroleum. Now let's turn to the trends for coal, natural gas, nuclearpower and renewables. In this week's issue of The Energy Strategist, Iwill take a deeper dive into some of these areas and discuss theinvestment implications.CoalDuringthe first few years of the previous decade, global coal consumptionbegan to rise rapidly. Between 2002 and 2012, global coal consumptionrose by 55 percent, from 2.4 billion metric tons of oil equivalents(btoe) per year to 3.7 btoe per year. This increase was overwhelminglydriven by increased coal consumption in China, which rose by 1.1 btoeper year (87 percent of the global increase).
China'scoal consumption increased by 6.1 percent from 2011 to 2012, and forthe first time has exceeded 50 percent of the global total. Chinacontinues to build out coal-fired power plants at a rapid pace, and thiswill likely continue to be the single biggest contributor to globalcarbon dioxide emissions, which set a new all-time high in 2012.
Sincethe Fukushima Daiichi nuclear accident in Japan in 2011, a number ofcountries have announced or have begun to implement a phaseout ofnuclear power. Two of those countries are Japan and Germany, and bothhave had to rely on coal-fired power in the short term to make up forthe loss of nuclear power. From 2011 to 2012, coal consumption in Japanincreased by 5.4 percent, and by 3.9 percent in Germany.
Coalconsumption in the US has continued to decline as electricityproduction from natural gas and renewables rises. Between 2011 and 2012,coal consumption in the US fell by 11.9 percent. US coal consumptionhas fallen in four of the past five years, and is presently 24 percentbelow 2007 levels.
Natural GasChinamay be the biggest story in the coal sector, but the continuedresurgence of US natural gas production is the biggest story in theworld of natural gas. US natural gas production has risen every yearsince 2005, and 2012's record production of 65.7 billion cubic feet(bcf) per day represented 20.4 percent of the world's total. Globally,natural gas production increased from 318 bcf to 325 bcf, a 1.9 percentincrease from 2011 to 2012. The US was responsible for just under 50percent of the global increase as the fracking revolution showed nosigns of slowing down in 2012.Globalnatural gas consumption also set a new record in 2012, with the US,China, Japan, and Saudi Arabia seeing demand grow by at least 1 bcf/dayapiece. The 2.9 bcf/day increase in the US led the world, and wasprimarily a result of coal-fired power plants switching to natural gas.Nuclear Power Theglobal picture in the nuclear power sector has been ugly since theFukushima accident. World consumption of nuclear power fell by 4.2percent in 2011, primarily due to the sharp drop in nuclear powerproduction in Japan. But 2012 saw output fall in more than a dozencountries. The total decline in 2012 of 6.9 percent was the largest everexperienced in the history of nuclear power.
China,South Africa and Pakistan bucked the global trend by notchingdouble-digit increases in their nuclear power consumption from 2011.Other countries increasing nuclear power consumption between 2011 and2012 include the Czech Republic, Spain, Sweden, Argentina, Russia, Indiaand Brazil.
Renewables
Globalconsumption of renewable energy has exploded over the past decade,driven by high oil prices and expanding government mandates. Growthacross all areas has been strong, with wind power notching the mostimpressive gains.
Denmarkwas the world leader in this area, deriving 19.9 percent of its energyfrom renewable sources other than hydropower. Portugal, Spain, NewZealand and Finland all obtained at least 10 percent of their power fromrenewables. For the US and China, 2.3 percent and 1.2 percent,respectively, of all power was provided by renewable sources.
Yetwhen compared with total global electricity consumption, the contributionfrom renewables barely registers. Further, the total increase inconsumption of renewable power pales in comparison to the total increasein electricity consumption.
However,the renewable fraction of overall consumption has nearly tripled since2002. The phenomenal growth rate from the past decade will likely slowover the next decade, but I expect growth in this sector will continuenevertheless.
