July 20, 2017
Issue #191  |  View Past Issues
CoalWire

Editor's Note

Last week the International Energy Agency made a strong declaration: global coal investments may have peaked in 2015-2017. China continues to face coal overcapacity, which threatens its water supply. Morgan Stanley has warned the low cost of solar may turn many of India’s coal plants into stranded assets. Economists predict a decline for Australia’s coal exports, and financial firms warn of climate risks in coal investments.

Yet many G20 countries continue to publicly finance coal projects abroad over renewables, with the US suggesting the UN Climate Fund should be used for coal. Chinese firms are competing for coal projects in the Balkans, while both China and Japan recently funded coal plants in Africa. And China’s industrial activity  along with its coal use  are up, although analysts say it is likely a short-term bump from a credit boost.

-Christine Shearer, Guest Editor

Bob Burton

Features

International Energy Agency says coal investment may have peaked

Pointing to coal overcapacity in China, declining demand in India, and uncertainty in other regions, the IEA’s World Energy Investment 2017 concludes financing for coal-fired generation “may have reached an all-time peak in the 2015-2017 period,” writes Simon Evans in Carbon Brief.

Chinese investors compete for Bosnia  and world  coal projects

There are five coal-fired power plants being considered in Bosnia & Herzegovina, with two of the projects – Tuzla and Banovici – just 30 kilometers from each other. Both are backed by different Chinese companies with loan offers from two different Chinese banks, reflecting a competitive push by Chinese firms to export coal projects abroad, writes Clare Nuttall in bne IntelliNews.

Top News

US wants to use United Nations climate fund for coal plants: In a G20 statement on climate change, the US added language saying the country will seek to use the UN’s Green Climate Fund (GCF)  designed to aid nations hard hit by climate change  to promote the construction of coal-fired power plants around the world. Although President Trump pulled out of the UN climate agreement, the US has a seat on the GCF managing board for a year. (Bloomberg)

China’s industrial output and coal consumption up: China announced its Gross Domestic Product expanded 6.9 per cent in the second quarter of 2017, reflecting a credit boost to heavy industry sectors such as steel. The growth in industrial output together with a below-average year for hydropower has led China’s coal consumption and carbon dioxide emissions to rebound, and air pollution to rise in industrial centers. However wind and solar power use are also up, increasing by 18 and 35 per cent respectively on year. (Greenpeace, Quartz)

Japan donates billions for Africa power projects, including coal: On July 6, 2017, the Japanese government announced it would donate US$6 billion to the African Development Bank (AfDB) to help fund power plant construction and other energy-related infrastructure projects in Africa. AfDB projects may include coal plants that use domestic coal. (Global Construction Review)

China loans to Africa coal plant days before low emissions pledge: On July 6, 2017, the China Development Bank (CDB) announced it would loan US$1.5 billion to Eskom to fund completion of its 4,800-megawatt Medupi coal plant in South Africa. The loan came just two days before a G20 climate action plan, agreed to by China, called on multilateral development banks to support low emission projects. Although the CBD is not a multilateral bank, it is a state-run institution. (Climate Home, CoalSwarm)

Arguably, China will not need new coal for quite a long time, possibly never,

said IEA chief economist Laszlo Varro during a press call about IEA’s World Energy Investment 2017.

News

Australia: Energy Minister said government has no plans to build a coal-fired power station despite public lobbying by senior Nationals.

Australia: New South Wales state government will buy half of coal exploration licenses held by China Shenhua Energy to protect fertile farmland.

China: The country’s domestic coal production rose 10.6 per cent to 308 million tonnes in June from a year ago.

India: Owners of Economic & Political Weekly delete articles accusing Adani Group of tax evasion after Adani threatens to sue, prompting the editor to resign in protest.

Indonesia: Analysts find Japan, China and South Korea financing 18 out of the 22 coal power deals proposed in Indonesia since 2010.

Poland: Energy Minister says country will generate 60 per cent of its electricity from coal by 2030, compared to current 80 per cent.

South Africa: Netherlands-based Vitol Group drops plan to buy a 7.61 per cent stake in the Richards Bay Terminal to export eight million tonnes of coal annually.

United Kingdom: Drax Group submits a planning application to convert one of its three remaining coal-fired units to gas before Britain’s 2025 coal phase-out.

Arctic: New study in Nature finds majority of mercury contamination in Arctic tundra came from burning coal.

Companies + Markets

Consol Energy to spin off coal operations: Consol Energy has filed with the US Securities and Exchange Commission its intention to split the company. Ownership of the company’s coal mines and coal terminal will likely stay under the Consol Energy name. Its natural gas operations, which have become the company’s focus, will be under a new, as-yet-unnamed company, possibly by the end of the year. (Pittsburgh Business Times)

Economists predict shrinking demand for Australian coal exports: While the Australian government has projected its coal export market will grow nearly 9 per cent by 2022, an analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) suggests the market for Australian coal will contract. The reduction would primarily be due to declining demand from Japan, South Korea and Taiwan, which currently make up 70 per cent of Australia’s export coal market. IEEFA projects declining demand in each country of up to 2 per cent each year. (Guardian)

India Ratings sees stagnant coal demand and decreased imports for India: India Ratings expects domestic coal consumption growth in India to remain tepid on account of stagnant demand from thermal power plants, due to the increased competition from renewables. Despite this, India’s domestic coal production is set to increase on account of government efforts to reduce imports. Given the flat demand for coal and increasing supply, India Ratings said India’s coal imports will likely decline 15 to 20 million tonnes annually over the next two to three years. (Economic Times)

Duke seeks rate hike to cover coal ash clean-up costs: Duke Energy Progress has proposed a 14.9 per cent rate hike in North Carolina to pay for closing and cleaning up coal ash ponds at eight of its current and former coal plants. Additionally, over a quarter of the estimated US$478 million a year in new revenue would go toward future coal ash pond closings. Environmental groups argue Duke mismanaged its coal waste for decades and should bear all the costs for the clean up. (Charlotte Business Journal)

Insurers and financial firms move away from coal, warn of risks: The world’s second largest reinsurer Swiss Re said it will take social and governance (ESG) criteria into account for its US$130 billion in holdings, including avoiding investments related to coal. Additionally, asset manager Schroders  which oversees US$520 billion for global investors  launched an online tool to track key climate indicators, including coal production, so that investors can decrease their risk exposure to climate change. (Swiss Re [PDF], Financial Times)

Morgan Stanley predicts coal overcapacity in India: Morgan Stanley Research has downgraded the Indian utilities industry, saying the market has yet to fully price-in the impact of solar power becoming the cheapest form of new electricity generation. The group argues coal plants currently without a power purchase agreement (PPA) may find demand undercut by solar, further lowering coal plant utilization rates and making it harder to recoup development costs and pay off loans. (LiveMint)

It is clear that over the next few years, the [India] state electricity boards will think hard before signing even short- or medium-term (3-10 years) coal-based PPAs given that solar has achieved grid parity, 

wrote Morgan Stanley Research in its downgrade of India utilities.

Resources

Overcapacity, Over-withdrawal: How tackling coal power overcapacity can ease water stress, Greenpeace, July 5, 2017.

This report finds nearly 20 per cent (213,000 megawatts) of China’s coal capacity will be redundant by 2020 and could be scrapped with no interruption to grid operations. Cutting these plants could also help provide water for 27 million people.

Why Are G20 Governments Financing Coal Over Renewables? NRDC, July 17, 2017.

This report examines international energy project financing by G20 export credit agencies and multilateral development banks. The analysis and accompanying database finds public finance for coal mining and power plants was about US$10 billion in 2016, compared to US$4 billion in financing for renewable energy projects.

Peak pollution: Eight months of independent monitoring of air quality in the Balkans, Bankwatch, July 2017.

This multimedia story examines eight months of independent monitoring of particulate matter in six countries in eastern Europe. The six countries are home to aging coal-fired power plants and open-cast lignite mines, as well as ongoing proposals to build more coal capacity, much of it financed by Chinese banks.

False Promises: Why coal isn't coming back, The Wilderness Society, July 6, 2017.

This report examines four US coal-fired power plants that historically received large shipments of coal mined from public lands in Wyoming, Montana, Utah and Colorado. The report looks at the health and social impacts of the plants on local communities, and includes data and figures on the changing economics of coal mining in the US.