1. Is there a future for coal?
Framing the discussion
Rodrigo Echeverri, Research Fellow
March 20, 2015

2. 2
What is at stake for the stakeholders?
Who cares?
Government
Energy Security
Economic development
Royalties and taxes
Local content
Energy efficiency
Policy
Markets
Producers
Return on Investment
Risk (Capital, country,
regulatory,
counterparty)
End-users
Economic growth
Demand for product
Fuel Economics
New technologies
Global
Environment
Sustainability
Civil society

3. 3
• In real terms, coal
prices have been
remarkably stable
over the last 25
years
• Gas is now 40%
more expensive
than it was in
1991
• Geopolitical risks
are higher in gas
than coal
Fuel price competition
Hard to beat coal…
It is very hard to challenge coal on purely economic grounds
Sources: KAPSARC Analysis, BP, IEA, IHS McCloskey

4. 4
Modern Coal Market Cycles
Internationally Traded Market
Coal prices are now where they were in 1991…

5. 5
Modern Coal Market Cycles
Internationally Traded Market
But the global coal market has grown fivefold in the last 25 years…

6. 6
Modern Coal Market Cycles
Internationally Traded Market
In the 1990’s, the structure of the modern international market was just emerging

7. 7
Modern Coal Market Cycles
Internationally Traded Market
In the period 2001-2012 coal became a true global commodity,
while policies were being enforced…

8. 8
Modern Coal Market Cycles
Internationally Traded Market
Have policies started to catch up with coal?…

9. 10
Energy Demand Changes in China
Perhaps coal demand in China is responding to policy…
Sources: KAPSARC Analysis, NBS, IHS McCloskey

10. 11
Example of shifting Economics
LCOE in coastal China in 2010
Sources: IEA, 2010; KAPSARC Analysis
Long-term coal demand is defined by the relative cost of fuels, as
well as the position of emerging technologies…

11. 12
Sources: IEA, 2010; IRENA, 2015, KAPSARC Analysis
Fuel prices have fallen, but so has the price of renewable energies.
It all makes electricity cheaper…
Example of shifting Economics
LCOE in coastal China in 2015

12. 13
Sources: IEA, 2010; IRENA, 2015, KAPSARC Analysis
Policy implementation seems to become easier as the cost
gap between alternatives closes…
Example of shifting Economics + Policy
LCOE in coastal China in 2015 + CO2 Sensitivity

13. 14
Sources: IEA, 2010; IRENA, 2015, KAPSARC Analysis
But it doesn’t, as fossil fuels usually adjust to compete…
Example of shifting Economics + Policy
LCOE in coastal China in 2015 + CO2 Sensitivity
?

14. 15
• Despite policy challenges, the seaborne coal
market has grown fivefold over the last 25 years
• Policies designed to curb demand have
underestimated the resilience of coal
• However, policies are getting tougher on coal
• In the future, Coal may have to compete harder,
as the long-term impacts of policy exacerbate
Is there a future for coal?
Conclusions