Coal Low Cost Fuel for the Future NCSL Jacob Williams VP Global Energy Analytics Peabody Energy August 19, 2014
Coal: The World s Fastest Growing Major Fuel Million Tonnes of Oil Equivalent 2009 2011 2020 2020 2035 60% 59% Growth 2002 2013 5,000 Growth to 2020 50% 43% 4,000 40% 30% 33% 3,000 20% 15% 2,000 10% 1,000 0% Coal Hydro Natural Gas Oil 0% Nuclear 0 Coal Oil Natural Gas Nuclear Hydro Bioenergy Wind/ Solar Source: BP Statistical Review 2014 Source: International Energy Agency, World Energy Outlook 2013 Current Policies scenario. 2
Greater Electricity Use Extends Longevity U.N. Human Development Index United Nations Links Affordable Energy to Quality of Life 1 Germany Japan 0.9 Brazil United States 0.8 China Russia 0.7 0.6 0.5 0.4 India Nigeria Life expectancy, educational attainment and lower poverty levels are all statistically connected to higher levels of electricity use 0.3 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Electricity Use Per Capita (kwh/year) Source: World Bank, 2012; United Nations, 2012.
Energy Poverty is the Number One Human and Environmental Crisis 3.5 Billion People Lack Proper Access to Electricity 140 1 65 18 988 496 348 134 436 29 210 589 Millions of People Who Lack Adequate Electricity Millions of People Who Have No Electricity Source: International Energy Agency World Energy Outlook 2012, The World Bank World Development Indicators 2012, CIA World Factbook 2012. 4
The Human Face of Energy Poverty 5
Low-Cost Coal Will Continue to Drive Global Coal Demand Growth Coal is the Most Affordable and Stable Source of Energy World Fuel Costs ($/mmbtu) $25 $20 $15 $10 $5 Forwards Brent Crude Oil Asia Gas / LNG Europe Gas / LNG Henry Hub Nat Gas Newcastle Coal PRB Delivered Coal $0 2009 2010 2011 2012 2013 2014 2015 2016 PRB - most affordable Btu source in the world at $2/mmbtu delivered; roughly half of current U.S. gas prices U.S. natural gas $5 10/mmbtu cheaper than EU and Asia gas Great incentive to export gas likely leading to increased gas prices Coal $6/mmbtu lower cost than natural gas in EU long term & $11/mmbtu below natural gas in Asia Mildest Winter in 60 years 6
Low-Cost Electricity from Coal Provides Competitive Advantage Coal-Dependent States Enjoy Considerably Lower Electricity Rates Hydro Coal-Dependent States 9.1 / kwh 48% Coal Northeast 14.8 / kwh 4% Coal California 14.6 / kwh <1% Coal U.S. EIA, 2013 data (March 2014). Average retail electricity prices per kwh. Weighted average of CA and NE states equals 14.7 cents per kwh. 7
Key Competitive Advantage Low-Cost Electricity from Coal Electricity Prices in Coastal States Significantly Higher Than Coal States 14.6 0.4% = average retail price per kilowatt hour for CY 2013 % = percent of total generation from coal for CY 2013 8.4 6.3% 7.1 6.0% 9.0 14.5% 7.6 0% 8.2 81.5% 10.2 39.5% 16.5 6.6% 8.6 53.3% 7.6 89.8% 9.8 63.7% 9.2 67.1% 33.3 14.8% 8.2 78.8% 8.8 28.6% 8.7 71.9% 9.6 61.3% 8.8 38.1% 7.8 40.8% 9.5 45.6% 8.1 57.5% 9.0 83.0% 7.8 54.3% 10.6 62.8% 8.0 29.0% 8.0 43.1% 9.2 17.4% 11.3 54.9% 8.6 86.6% 9.0 32.1% 9.2 70.0% 93.2% 7.5 9.2 41.6% < 10 > 10 Hydro 7.9 96.2% 9.8 39.8% 9.1 26.0% 9.5 34.3% 10.3 21.5% 15.6 3.4% 9.0 27.9% 9.2 38.2% 11.9 0.4% MA 14.5 12.4% CT 15.7 2.0% NH 14.3 7.4% RI 13.9 0% NJ 13.7 3.2% VT 14.5 0% MD 11.7 44.1% DE 11.0 24.0% DC 11.9 0% Source: Energy Information Administration, Mar 2014 8
Today St. Louis 1960s Technology Provides the Proven Path for Addressing Emissions More Coal Use Underpinning Economic Growth.with Cleaner Air 200% 150% Coal Used for Power Generation + 170% 100% 50% + 116% GDP per Capita 0% -50% Key Emissions/MWh from Coal - 90% -100% 1970 1980 1990 2000 2013 Source: USDA 2011; Energy Information Administration 2013; U.S. EPA Air Trends Data, 2013 9
U.S. Air Quality Among Best in the World U.S. and Australia Among Best Air Quality in World with 40+% Coal Generation Annual ug/m3 100 90 80 70 60 50 40 30 20 10 0 PM 10 Emissions per World Health Organization 1 Billion People 4.8 Billion People Over 45% Hydropower Single bars for countries w/ 5 million or more people Source: WHO Ambient Air Pollution Database, May 2014; World Bank 2012 Hydropower Database 10
$ cents per kwh EU Power Prices Increase w/ Renewables EU Renewable and Price Increases Faster than U.S. 25% Renewable % of Electricity Generation (2007-2013) 35.0 Electricity Retail Prices Residential Consumers (2009-2012) 32.2 20% 15% 2007 2013 *CAGR 30.0 25.0 20.0 17.5 20.8 20.0 26.2 27.5 2009 2012 *CAGR 10% 15.0 11.5 11.9 5% 0% 30.1%* 16.4% 12.8% 16.5% UK Spain Germany US 10.0 5.0 0.0 4.2%* 6.5% 3.8% UK Spain Germany US.8% Source: European Commission Energy Prices and Costs Report 2014, Eurostat, EIA 11
EPA s Proposed CO 2 Rule on Existing U.S. Electricity Generation Facilities Opposition Building Due to Legal, Economic and Other Concerns Proposes to reduce CO 2 in the power sector by 30% from 2005 levels System-based approach, not plant-by-plant as required by Clean Air Act and law in most states Implementation lies with states; assumes legal authority in the states that does not exist Substantial encroachment on state authority Conflicts with FERC, State PUCs and DNRs, State Legislatures and Governors authority to regulate electricity and environmental issues Aggressive assumptions that are very questionable Coal plant efficiency improvement of 6% for all plants 0-1% likely Wind and solar meeting 16% of all generation needs in the U.S. 5% today No cost increases for new electric transmission, new gas generation nor new gas pipelines Does not provide promised flexibility for states; those unwilling to act face EPA threat of Federal Implementation Plan (FIP) Implications Would stress the nation s electricity system and its reliability Increased natural gas demand for electricity generation would impact both power and heating costs for consumers, as well as input costs for gas-reliant industries Initial high-level analysis indicates an additional ~$180 billion annually in national power prices and gas bills in 2020 (versus 2012) Some states experience 30 60% electric price increases 12
Which States are a Model for EPA s Proposed Existing Fleet Rule? 22 Number of references in the text of EPA s 128-page Federal Register filing of proposed carbon rule California has the highest electricity rates west of the Mississippi New York s residential rates are 56% above U.S. average 7 6 5 0 Washington and Oregon are hydrobased, thus not relevant to the rest of the country California Oregon Washington New York All Other States Source: EPA, Federal Register, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units; Proposed Rule, June 18, 2014: Note: Contiguous U.S.; excludes listings of all 50 states 13
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