THE FUTURE OF COAL Bruce Watzman Senior Vice President National Mining Association April 23, 2013 1
Coal Becomes World s Primary Energy Source 6 Billion TOE 5 4 3 Coal Oil Natural Gas 2 2000 2005 2010 2015 2020 2025 Sources: Wood Mackenzie, IEA 2
BTU-Hungry World 2013 World of Coal Ash Conference in Lexington, Kentucky - April 23, 2013 Plenary Session (www.flyash.org) Developing Economies Will account for 80% Global GDP by 2050 Energy Intensities Remain just a fraction of developed economies China Only part of the story unfolding 3
Scale and Pace of Developing World Urbanization Total Urban Population in China, India and Africa (million) +950 2,350 Total Population in Developed Countries (million) By 2020, developing countries will account for almost 80% of the world s total urban population 650 +750 1,400 ~500 ~370 The global growth is equal to adding the population of Mumbai every second month or Shanghai every third 1990 2010 2030 Source: McKinsey & Company EU 2030 US 4
Large Upside to Steel Intensity Potential Drives Met Coal Emerging countries driving met coal demand through greater urbanization and higher steel consumption Significant steel increases required to reach levels of developed Asia economies Stable stage intensity may take 20-40 years to reach 2013 World of Coal Ash Conference in Lexington, Kentucky - April 23, 2013 Plenary Session (www.flyash.org) Countries will rely on imports for met coal needs Kg/Capita 2011 Steel Consumption Per Capita 1,400 1,200 1,000 800 600 400 200 0 ~1.2 billion tons of met coal required to reach stable stage steel intensity of 900 kg/capita 59 173 466 851 924 1,402 India Brazil China Japan Taiwan Korea Source: Peabody Global Energy Analytics 5
Build Out of Coal Generation Drives Growth in Thermal Coal Gigawatts 450 400 350 300 250 200 150 100 50 New Coal-Based Generating Capacity, 2011-2016 0 2013 World of Coal Ash Conference in Lexington, Kentucky - April 23, 2013 Plenary Session (www.flyash.org) Rest of World India China New coal-based generation expected to grow 395 GW by 2016 ~ 1 billion tons of additional coal demand Vast majority of growth in China and India, driving higher seaborne demand 73 GW of new coal generation in rest of world Source: Platts Worldwide Power Plant Database and Peabody Energy analysis 6
Planned Export Capacity Location Current Planned West Coast 6 50 Southwest 5 15 Gulf Coast 36 66 East Coast 86 100 Midwest 14 14 Southeast 10 31 TOTAL 157 276 Source: UBS, NMA, ACI 7
Projected Plant Retirements as a Percentage of Total Capacity by Region - 2020 4.4% 7.4% 21% 30.3% 36.8% Nationwide Retirements: 68 GW = 20% of capacity
Coal Fleet Size 400 350 300 Smaller units (<300MW) comprise 75% of the retirements Capacity (GW) 250 200 150 201 200 500+ 300-500 200-300 <200 Almost 75% of the coal fleet will be larger than 500 MW 100 53 50 33 43 0 51 19 14 2011 2020
Coal Fleet Age 400 350 By 2020 Capacity (GW) 300 250 200 150 100 82 122 80 34 63 117 <30 30-40 40-50 50+ 65% of the existing coal fleet is >40 years old Youngest segment-<30 years drops by half to 13% of entire fleet 50 0 54 62 2011 2020
Coal Fleet Heat Rate (MMBtu/MWh) 400 350 300 97 Emission Profile (#/MWh) 250 SO2: - 25 % Capacity (GW) 200 150 188 92 <10,000 10,000-11,000 11,000-13,000 13,000+ NOx: -11 % CO2: 0 % 100 154 50 0 47 30 5 2011 1 2020
Higher Capacity Factors for Remaining Plants Offset Retirements U.S. Coal Fleet (In gigawatts of capacity) U.S. Coal Plant Utilization (Remaining 277 gigawatts) 68 GW 76% 66% 57% Source: EVA, NMA 277 GW Capacity at risk of retiring by 2020 Expected capacity to remain online Includes 7 GW New Capacity 2010 2012 2020 2020: ~100 MST recovery from 2012 levels 12
EPA GHG NSPS for Power Plants New Units EPA proposed NSPS for new units April, 2012 Final rule April-June 2013 Creates a new single-source category for fossil fuel-fired power plants Proposed standard at 1,000 lb/ CO 2 per MWh Can only be met by NGCC plants Includes unworkable CCS rolling average option for coal plants Uncertainty about potential exposure for existing plants that modify/reconstruct to comply with MATS or other regulations Existing Units Required after a final new unit rule EPA does not establish direct regulations EPA calls for State plans and issues emissions guidelines, not standards Must include costs, technological feasibility. Rarely used provision Extent of State discretion in submitting plans is uncertain EPA publishes final guidance; states submit enforceable plans within nine months 13
Our Future The Facts 14
310 Coal Generation 2013 World of Coal Capacity Ash Conference in Lexington, and % Kentucky Change - April 23, 2013 in Plenary Generation Session (www.flyash.org) from 2012 30.0% 300 25.0% 20.0% Capacity (GW) 290 280 270 260 0.0% 9.4% 13.1% 2.1% 7.7% 9.3% 11.0% 12.5% 15.0% 15.0% 10.0% 5.0% 0.0% % change in generation from 2012 (GWh) -5.0% 250-10.0% 240 2012 2013 2014 2015 2016 2017 2018 2019 2020-15.0% Source: EVA GW GWh
The World Needs Coal Share of people without electricity access for developing countries Source: WHO 16