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For the first time in US history, renewables briefly produced more electricity than coal in April of this year. according to the Institute of Energy Economics and Financial Analysis. This development is significant for America's clean energy champions, environmental advocates, and a coal industry that has entrenched American energy for much of the 20th century. The potential for renewable energy deserves a review of the evolving trends and dynamics in a rapidly changing US energy sector.
New innovations and technologies, including large-scale shale extraction, have led to an abundance of domestic oil and gas. The low price of natural gas has allowed it to overtake coal as the main energy source of the United States in 2016. Renewable sources of energy (eg wind, solar, hydro and bioenergy) have shown that they are able to outperform coal and should move to third place. place for the long term.
Natural gas and renewables are more efficient, cleaner and more economical than coal. In addition, the average US coal plant is about 40 years old and requires expensive maintenance and repairs. New coal plants are more expensive to build than their renewable counterparts and natural gas.
Coal is also the country's main source of carbon emissions that contributes to climate change. The American Lung Association estimates that the effects of coal pollution kill about 7,500 Americans each year.
These factors have had adverse consequences. The coal industry, which employed nearly 900,000 American workers at its peak in the 1920s, now employs about 53,000. The weekthere are more and more Americans "working in manicure salons, bowling alleys or Arby's". Since 2014, six of the 10 largest coal mining companies in the United States have declared bankruptcy.
President Trump tries to revitalize US coal
In this context, it seems strange that Donald Trump has campaigned to "end the war against coal" and "put our great miners back to work" to "mine a clean coal". He has denigrated renewable energies, claiming that "windmills" (windmills) produce noise that "causes cancer" and will cause a "75% reduction in the value of a home". He has broken the excessive regulation and environmental standards, not the global market forces, for the decline of coal. Related: WTI's worst day since 4 and a half years
This strategy apparently resonated in the 2016 presidential election. Donald Trump won with a margin of 15 to 47% in most major coal producing countries.
Robert Murray, CEO of lead coal producer Murray Energy, has played an influential role behind the scenes. Murray has donated at least $ 300,000 to Trump's presidential nomination and another $ 1 million to a Super Political Action Committee (PAC) to support Trump's program for the 2018 congressional elections.
January 2018 New York Times The article uncovered a "plan of action" developed by Murray and sent to the White House soon after the inauguration, which pointed to many requests. These include the elimination of environmental regulations and standards, such as the Clean Energy Plan; reject the scientific results; the abandonment of international climate agreements, such as the Paris Climate Agreement; recasting of American mining safety and health standards; and reduce the staff of the Environmental Protection Agency (EPA) by at least half. The EPA Administrator, Andrew Wheeler, former lobbyist for the coal industry and Robert Murray's lawyer, has been a key ally. According to Time"The White House and federal agencies have completed or are in the process of meeting most of the 16 detailed requests."
Despite these efforts, the demand for coal and the competitiveness of coal have not changed significantly. In President Trump's first two years, more coal-fired power plants were shut down than during Barack Obama's first term, according to data from the US Energy Information Administration (EIA). The year 2018 alone represents a near-record record for the closure of coal-fired power plants. Demand for coal for energy and steel production is declining in Europe, the main target of US coal exports. In Asia, where coal demand continues to grow, US coal faces logistical disadvantages and competition from China, the world's largest coal producer. In the future, the EIA projections for 2019 predict that coal production will decline even more rapidly than would have been the case under the Obama clean energy plan. Related: Oil Crashes as Trade War Intensifies
One of the measures currently under consideration is a 90-day warrant for coal stocks for national security purposes under the Defense Production Act. Such a requirement could artificially inflate domestic demand for coal. It remains to be seen whether it will be promulgated and if this, as well as the reform efforts as a whole, will help Trump's bid for re-election in the mining states or if it does not meet the expectations set in 2016.
Risk perspective
Coal currently produces 28% of the United States' annual electricity, compared with 34% of natural gas and 18% of renewable energy. On a global scale, coal accounts for about one third of today's energy production. About 90% of American coal is used for energy production, it is also used for steel production and cement manufacturing.
The coal industry has sometimes increased productivity and created jobs in the export market, especially when foreign markets needed to supplement supply. Increases in productivity and employment were temporary and short-term anomalies that tended to decline. The US EIA expects a slight increase in natural gas in the coming decades, a large increase in renewable energy and a steady decline in coal energy. By 2050, renewable energies are expected to provide 31% of US energy and 17% of coal.
Coal will undoubtedly continue to be an important part of the global energy sector in the near future. This future is likely to be characterized by fluctuating and declining demand, changing regulatory and market conditions, the potential for slowing global growth, and the likelihood of continuing technological advances offering cleaner, cheaper alternatives. For investors able to badume higher risks, there could be short term opportunities in the purchase and consolidation of coal badets. To make these opportunities profitable, there should be close market surveillance and rapid response capability. More conservative energy investors will want to diversify their portfolio and monitor the trends that have dramatically changed the industry in recent years and ultimately lead to a very different energy market than today.
By Global Risk Insights
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