Investing & Day Trading Education:  Day Trading Academy

Time For Investors To Take Another Look At Coal

Coal_anthraciteMost investors in energy have no idea that coal continues to be the cheapest fuel for generating electricity and heat in most parts of the world. Despite the efforts of environmentalists and some national leaders to move to alternative and renewable fuels the worldwide demand for coal proceeds to grow. Coal will remain the essential fuel to those nations and groups of people that are experiencing energy poverty. Another important thing to remember about coal is that it is the cheapest and most plentiful fuel on earth. It can often be mined locally and is not controlled by a cartel, like oil is with OPEC (Organization of the Petroleum Exporting Countries).Men_of_the_Mine-_Life_at_the_Coal_Face,_Britain,_1942_D8263

Another advantage with coal is that it is relatively cheap to extract and put to immediate use. It does not need to be processed and manufactured into an alternative state. These are benefits that coal possesses over natural gas, nuclear, solar, tidal, oil, wind-power, and other forms of generating electricity. There are not the immense costs that are involved in harvesting the energy as in hydro or thermal energy either. Little maintenance is required in the burning of coal.

220px-Coal_mine_WyomingHowever, more than 80% of the world’s total proved coal reserves are in just ten countries. The United States tops the list with 25% of proven global reserves with 237 billion tons. The United States is the second largest consumer of coal after China.

Russia has the second largest proven reserves of coal, at 18% of the total. The amount is estimated to be 157 billion tons.

After China the remaining top ten countries are in order of the largest reserves: Australia, India, Germany, Ukraine, Kazakhstan, Colombia and Canada.

World Reserves

World Reserves

It is important to note that coal provides 40% of the electricity produced worldwide and is increasing.

In the United States, the Obama Administration has made an effort to mostly bankrupt the industry through government regulation. The EPA (Environmental Protection Agency) has made the building of new power plants that use coal, cost prohibitive. The American government at present, seeks to phase out the use of coal as a main source or electricity in the United States. In 2007 for example, 49% of the electricity generated in the country originated from coal. In 2013 the percentage had declined to 39%. This was made possible, by the rapid expansion of the use of natural gas in the United States. The practice of fracking has permitted a vast expansion of available supplies, so prices naturally declined making the conversion from coal to natural gas feasible. There are now only 600 coal-fired plants in the United States. Worldwide, the number of such plants is 7000.

United States Coal Regions

United States Coal Regions

The coal industry has survived in the United States, mainly because demand for coal globally is expanding rapidly. Exports from the United States have now reached record highs.

In China for example, the government is building a power plant to generate electricity weekly. That means that 50 new facilities will come on line yearly, in that country alone. These installations will all use coal to generate power. As a result, the biggest market for coal is now China. More than ¾ of the electricity generated in China comes from coal. China alone burns more coal than almost the rest of the world combined. China is set to double the number of coal powered plants by 2040. Although China is rapidly expanding alternative sources of energy like solar and wind, rising need for electricity keeps the demand for coal strong. The Chinese have the third largest reserves of coal in the world at 114.5 billion tons.

India is also rapidly increasing the use of coal.

Transporting Coal

Transporting Coal

Coal is the fastest growing energy source since 1973, replacing oil that year. Since 1990 it has brought an additional 1 billion people a reliable and cheap source of electricity. There are a number of emerging nations that are totally dependent on coal, to meet their energy needs for heating and cooking.

The problem with coal for some, is that it is the biggest source globally of carbon dioxide emissions. It also releases other pollutants, such as sulfur dioxide. With coal use on the increase, it is unlikely that these discharges will decrease anytime soon. China alone produces ¼ of greenhouse emissions which is more than any other nation. The output of carbon dioxide is expected to double and maybe even triple in the next 25 years. Rather than attempting to eliminate the use of coal as in the case of the United States, it makes more sense to strive for greater efficiency.

Coal Deposits

Coal Deposits

Alternative and renewable sources for power generation has been attempted on a much wider scale in Germany. This was the result of the government decision there, to close their nuclear power plants in the 2020s. It has made electricity costs higher in Germany than elsewhere. However, the country is still using coal to generate power. Germany gets more than 50% of its power from coal. The country opened more energy plants using coal in 2013 than it had in the past 20 years.

Other nations that are attempting to reduce imports of energy, are increasing their use of coal. These countries include Australia, Indonesia, Israel, Japan, Poland, South Africa and South Korea along with a host of others. The demand for coal globally is expected to grow by 37% by 2040. Poland alone gets 86% of its electricity from coal. Well over 1000 new power plants in over 50 countries, are being planned for construction which will use coal.

Coke Ovens

Coke Ovens

In the past decade, the burning of coal has added more to the supply of energy worldwide than any other fuel source.

Coal also in instrumental in the global production of steel and cement.

Since the use of coal will not be declining, there will be renewed international efforts to make the burning of this fossil fuel cleaner. The standard practice for big plants is to scrub out ash and soot. The next step will be to capture and store other pollutants and carbon dioxide as well.

Coal Fired Power Plant In The United States

Coal Fired Power Plant In The United States

Other efforts are being made to convert coal to a liquid state where it can be used as any other fuel. Liquified coal unfortunately, releases even more carbon dioxide into the atmosphere than turning coal into electricity does.

There are two large investment opportunities in coal. One is to be involved in the ownership and sale of coal, the other is to deal with the pollutants caused by coal.

If as an investor in energy you would like further information for specific companies, please sign up for our investment newsletter. It is also offered through the Day Trading Academy website.

Post a Comment

Your email address will not be published. Required fields are marked *

Call Now Button