Coal has been hailed as an abundant, cheap source of energy for over a century. Compared to oil, it is abundant with its 3.3% production increase in 2007 versus oil’s decline. But even with the increase in supply, demand is currently growing faster and driving price increases that rival its fossil fuel cousins. Additionally, as I mentioned a few blogs back, the annual BP Statistical Review of World Energy reported a huge drop in proven reserves of 7.3%. After printing a reserves total of 909 billion tonnes at the end of 2006, the number fell to 847 billion tons at the end of 2007. The largest downward revisions occurred in India, Poland, Indonesia, Brazil, the Czech Republic, Turkey, and Pakistan and are left unexplained as they surpass the amount produced.
The price of internationally traded coal has doubled over the last year, as the price per tonne in Europe moves toward $200. Now that several coal producers aim to replace some oil imports with coal-to-liquid fuels, demand could climb even faster. And if oil does move to ~$200 per barrel, further coal demand as a substitute could make prices like $300 thermal and $400 metallurgical per tonne a possibility in 2009. Such a price would make wind energy the least cost option for new electricity throughout much of the world.
The fact that relatively cheaper wind may happen, on top of the potential for additional costs for carbon dioxide output, should lead utilities in windy regions around the US to make much larger investments in wind farms. And with US coal reserves accounting for more than 28% of the global total, coal export growth could help us remedy our trade deficit if we can reduce our domestic consumption. It seems a win-win situation for us to follow the trail blazed by Germany of fossil fuel energy consumption reduction and renewables share increases.
Many of my friends have been worried that higher oil prices would lead to a rush for coal, but record high coal prices seem to show that sound policy can shift the rush to renewables and build a sustainable energy transition for the US and the rest of the world. Let’s make it happen!
[...] Last week, I wrote of the march upward in coal prices. And this week saw further huge gains as Richards Bay South African coal hit $144 (up 5.5%), Australian Newcastle coal hit $162.61 (up 1.5%), and ARA European coal hit $185.53 per ton (up 4.6%). As the Northern Hemisphere begins to turn the air conditioners on, it will be interesting to see if records reach $200 per ton in the months ahead, closer to the value of coal’s fossil fuel competitors. [...]