Shale Vs Coal: The Ironic Twist Of Flawed Climate Policies
Reuters: Shale gas has jolted traditional roles in the planet’s climate drama, giving cleaner fuel to the United States, whose displaced coal has headed to Europe to pollute the old continent. Britain’s coal use was 43 per cent higher in the first half of this year compared with a year ago.
It is an ironic twist for the European Union, whose energy policy is largely based on promoting renewables and a target to cut emissions b y 20 per cent by 2020. The U.S. did not ratify the Kyoto Protocol to combat global emissions and its national goals are far less ambitious than Europe’s.
Analysts at Point Carbon, a Thomson Reuters company, estimate increased EU coal-use will drive a 2.2 per cent rise in EU carbon emissions this year, after a 1.8 per cent drop in 2011.
U.S. emissions, meanwhile, are expected to fall by roughly the same amount – 2.4 per cent – chiefly because of reduced coal use, according to estimates from the U.S. Energy Information Administration (EIA).
Still the U.S. remains a bigger emitter than the EU as a whole, ranking second in the world after China, and the 2012 trend is not expected to last as U.S. coal burn will rebound and the share of renewable sources in Europe will rise, cutting carbon emissions.
“The renewable energy sector is to a large extent politically-determined. EU member states have committed to legally-binding renewables 2020 targets and therefore, we expect to see renewable energy capacity grow,” Morten Hultberg Buchgreitz, acting deputy chief executive of DONG Energy’s wind power division, said.
European power producers benefit from cheaper coal
While shale gas production has provided a glut of cheap energy in the U.S. it has also driven out an oversupply of lower-cost coal to Europe.
U.S. coal exports to Europe rose 29 per cent in the first quarter of this year compared with the same time in 2011, a trend that has curbed European gas demand by around 3 billion cubic feet per day, according to Bernstein Research.
European gas demand, on the other hand, has dipped in power plants as prices rose, driven by a pricing link to a rising oil market and increased competition for liquefied natural gas as Japan replaces lost atomic power following its nuclear disaster last year.
Germany offers a stark illustration of this price difference. Its power producers have so far this year earned an average of 6.5 euros per megawatt-hour (MWh) for power produced the following month in coal plants, compared with a 7.9 euro per MWh loss when burning gas, Reuters data showed.
Coal burn varies as utilities constantly assess profit margins of gas compared with coal-fired plants. Figures depend on costs for fuel, carbon permits and electricity prices.
“In Europe it would take a 50 per cent increase in coal prices to erase the price advantage over natural gas,” said Paolo Coghe, senior analyst at Societe Generale.
In France, which is mainly powered by nuclear plants but uses coal and gas when demand dictates, coal plants generated 44 per cent more electricity over the first eight months of 2012 than in the same period in 2011.
Britain’s coal use was 43 per cent higher in the first half of this year compared with a year ago, grid operator data from both countries showed.