War On Coal -- July 13, 2015

Updates

July 14, 2015: WSJ update. Not a pretty picture. It looks like the EPA bureaucracy has simply ignored four million comments and pressed ahead.

Original Post

 

It looks like President Obama can finally put this on his resume: he won his war on coal.

Bloomberg says coal is dead.

In the energy arena today, there are three huge dots to connect, actually four but I won't expand on the fourth one today:

• coal is dead -- Bloomberg
• Marathon buys MarkWest
• Black Hills Corp buys Source Gas
• Not enough surface area in the world for renewables to supply India's energy needs

In the big scheme of things, Warren Buffett has done very, very well with his purchase of Burlington Northern (some years ago, now) and will continue to do well with that deal. But one wonders if there might not be some anxiety in Omaha right now with regard to the railroad. It doesn't take a rocket scientist to see that natural gas is where the money is now, where the deals are being made.

I don't get the print edition of BloombergBusinessweek any more but I assume the linked article above was a huge article in this week's issue, maybe even the cover story. The lede:

Coal is having a hard time lately. U.S. power plants are switching to natural gas, environmental restrictions are kicking in, and the industry is being derided as the world's No. 1 climate criminal. Prices have crashed, sure, but for a real sense of coal's diminishing prospects, check out what's happening in the bond market.

Bonds are where coal companies turn to raise money for such things as new mines and environmental cleanups. But investors are increasingly reluctant to lend to them. Coal bond prices tumbled 17 percent in the second quarter, according to an analysis by Bloomberg Intelligence. It's the fourth consecutive quarter of price declines and the worst performance of any industry group by a long shot.

And then four data points:

• the US grid is changing: 17% of US coal-fired power generation will disappear over the new few years; the "small victory" over EPA's new mercury restrictions are seen as a "temporary reprieve"; there is a great graphic at the link with coal plants that will be closed; coal plants that will shift to natural gas; and "undecided." The largest group / largest plants are in the "undecided" column
• even China is approaching peak coal; Bloomberg thinks wind will replace coal in China (LOL)
• financial distress: the declining prices of bonds is a huge problem for US coal companies
• renewables are ...: according to BloombergBusiness, the coal industry is in  terminal decline; money and interest is with renewable energy; between now and 2040, two-thirds of the money spent on adding new electricity capacity worldwide will be spent on renewables; in the US: 32%

A lot can happen between now and 2040.