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  • Coal

    Coal has been the step child of our energy discussions.

    Coal equities dropped the hardest during the crash, perhaps partly due the thought the Obama administration would turn away from coal. The market now looks to be saying otherwise. There is also speculation that Berkshire's purchase of BN was actually a coal play.

    Coal Beats Solar as Analysts Favor Peabody While Subsidies Drop

    By Christopher Martin and Jeremy van Loon

    March 17 (Bloomberg) -- Wall Street’s contribution to the debate on how to curb global warming: Buy coal, sell solar.

    Peabody Energy Corp., the biggest coal producer, is rated a “buy” by 79 percent of analysts, while 44 percent recommend First Solar Inc., the largest maker of thin-film solar panels. The Stowe Global Coal index of 38 coal producers has gained 3.8 percent in 2010, and the Bloomberg Global Leaders Solar index of 38 solar module and component makers dropped 17 percent.

    While investors including T. Boone Pickens and Warren Buffett are pushing cash into green technologies, the tilt toward Peabody and away from First Solar is the widest in two years. It reflects a sense that government support for reducing air pollution may be waning, said Kevin Landis, whose Firsthand Alternative Energy Fund outperformed the solar index this year.

    “Until government policies favor renewable energy over dirty coal, solar may seem too risky now for some investors,” said Landis, whose $260-million fund include SunPower Corp. and Suntech Power Holdings Co. “Coal may make sense short term.”

    Solar companies’ profitability is falling because of competition from China and cuts to state support in Germany and Spain, where about 72 percent power-producing photovoltaic panels were installed in 2008.

    Peabody has rallied 9.8 percent since Feb. 12, when the benchmark coal price was $49 a ton, its lowest for 2010. First Solar was little changed. Coal is burned to make about 41 percent of power worldwide and will increase its share to 44 percent by 2030, the International Energy Agency forecasts.

    German Rate Cuts

    The Stowe coal index, led by Canada’s Western Coal Corp., has almost tripled its value in the past six months. That compares with a 15 percent loss for the Bloomberg solar index in the period.

    Manufacturers First Solar and Suntech have dropped as Germany, the biggest producer of power from photovoltaic panels, announced plans to cut consumer-subsidized rates for rooftop panels on July 1. Spain plans more reductions after dropping rates 29 percent for new solar plants coming online in 2009.

    Panel prices will sink as much as 10 percent in 2010 after dropping 30 percent in 2009, said Andreas Haenel, chief executive officer of Sulzemoos, Germany-based Phoenix Solar AG, which builds solar plants using those devices.

    ‘Bled Dry’

    “Everyone in Germany has been bled dry and made mega- losses last year,” Haenel, said in an interview. The company, which builds solar parks, said its profit before interest and tax dropped last year dropped 64 percent.

    The rationale for increasing investment in renewable energies was undercut when the United Nations effort to extend limits on carbon dioxide emissions failed in December in Copenhagen. President Barack Obama’s energy and climate legislation has foundered in 2010 as Congressional members sidelined it to tackle healthcare.

    UN-led talks failed to extend the 1997 Kyoto treaty’s carbon limits beyond 2012 for 37 regulated countries, undermining confidence at companies that they’ll need to own carbon-emission permits in future decades.

    The benchmark European Union carbon permit has fallen about 4 percent to 12.98 euros a ton in London trading on the European Climate Exchange since the Copenhagen talks ended Dec. 19, lowering the cost for coal plants that release carbon emissions.

    Coal prices, up about 13 percent this year to $54.45 a ton on the New York Mercantile Exchange, are likely to rise as demand accelerates in Asia, said Michael Dudas, an analyst at Jefferies & Co. in New York.

    Peabody Ratings

    “We’re going to see a strong recovery in both metallurgical and steam coals,” Dudas said in an interview, referring to types of coal used to make steel and burned in power plants. He rated Peabody a “buy” and estimates profit will almost double to $3 a share this year from $1.65 in 2009.

    Peabody is rated a “buy” by 19 of the 24 analysts covering the stock. First Solar is a “buy” for 18 of the 41 analysts. Buying a Peabody share and selling a First Solar share short on July 23, the date when Wall Street became more bullish on the coal miner than the solar-panel maker, would have returned a profit, Bloomberg data show.

    With economies in Europe and the U.S. coming out of recession, attention has focused on the costs of renewable energy. The price in the U.S. of a kilowatt-hour of power from renewable sources, enough to run a toaster for 60 minutes, is about 20 to 25 U.S. cents, American Electric Power Co. Chief Executive Officer Michael Morris said.

    ‘Politically Required’

    “Renewables are electrically inefficient, economically inefficient and politically required,” Morris, whose Ohio-based utility holding company is the biggest U.S. consumer of coal, said at a conference in Houston on March 11. The company’s cheapest coal plant makes power for 2.7 cents a kilowatt-hour, he said.

    Even with coal demand rising, solar photovoltaic panel sales will climb this year, said Martin Simonek, an analyst at Bloomberg New Energy Finance, which is hosting a conference in London starting today about the outlook for renewable energy.

    Germany may install 3,000 megawatts, or about a third of the world’s total, Simonek said. In the Czech Republic, a country of 10 million people, about 900 megawatts of solar power will be deployed, almost matching existing U.S. installations.

    The rising global demand will help some companies weather the slump in panel prices caused by Chinese manufacturers stepping up production and cuts in solar subsidies in Germany and Spain known as feed-in tariffs, said Richard Caldwell, chairman of Australia’s Dyesol Ltd., which makes a conductive dye that produces electricity on glass and sheet metal.

    “Companies in the industry like First Solar have had a shocker,” he said. “The Chinese have been flooding the market with cheap product. And we’re still getting over the change to the German feed-in tariff. It hasn’t been a good market.”

    To contact the reporters on this story: Christopher Martin in New York at; Jeremy van Loon in Berlin at

    Last Updated: March 16, 2010 20:00 EDT
    Last edited by BiscayneSunrise; 03-17-10, 07:20 AM.

  • #2
    Re: Coal

    You might also want to read - Peak Coal and Blackout

    Richard Heinberg is an important figure in the world of those interested in the energy crisis and its consequences, and one of the rare few, along with James Kunstler, to have had their work at least partially translated into French. A member of the Post Carbon Institute, he is the author of Party’s Over: Oil, War, and the Fate of Industrial Societies (available in French with the title Pétrole: la fête est finie), Powerdown: Options and Actions for a Post-Carbon World, The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Economic Collapse and Peak Everything: Waking Up to the Century of Declines. For a long time in his work he has studied and described Peak Oil and what it means for the future of our societies. His latest book, Blackout: Coal, Climate and the Last Energy Crisis, is dedicated to coal, and has aroused considerable interest, and this all the more so because it highlights a problem which had previously only been mentioned in relatively confidential reports: the imminent depletion of coal reserves.

    Richard Heinberg begins by noting that coal production in any given region follows the same curve as oil production. It too starts with an increase, reaches a maximum and then declines over time as the deposits run out. This evolution is markedly less visible, however, because numerous forms of coal exist, of extremely variable energy values. The best, that which is mined and therefore exhausted first, is anthracite. Next is bituminous coal of variable quality, then lignite and finally peat, which almost no one exploits to provide energy any longer. The poorer the quality of the coal, the less energy it produces per kilogram, to the point that there is no interest in transporting lignite over long distances because the energy needed to do this quickly exceeds that which would be produced by the lignite. And yet the official figures do not take these distinctions into account, or present them in an overly simplified fashion, something which creates a false impression of abundance.

    In addition, estimates of reserves are very often revealed to be of poor quality. They have very often been created decades ago and, more often than not, are later greatly revised downwards. Notably this is what happened in Germany and in Poland where formerly important reserves were reduced to almost nothing once it was decided to take a slightly closer look.

    To carry out his study, Heinberg bases himself on four recent works:
    • Coal: Resources and Future Production by the Energy Watch Group, an environmentalist think tank based in Germany and supported by the Ludwig-Bölkow foundation.
    • A Supply-Driven Forecast for the Future Global Coal Production by the Uppsala Hydrocarbon Depletion Study Group.
    • The Future of Coal prepared for the European Commission Joint Research Centre
    • Hubbert Linearization and Curve-fitting by David Rutledge, Jean Laherrère et al.


    The United States is the second largest global producer with more than a billion tons a year. They also have the most important reserves with 240 billion tons, in theory the equivalent of 250 years of production. These figures are misleading, however, because the quality of this coal is very uneven, and if American production continues to increase in volume it will decrease in energy value.

    52% of the high quality coal is produced in Pennsylvania, in Kentucky or in West Virginia, yet production there is either stable or in decline. The anthracite in Pennsylvania is almost exhausted and the production in West Virginia will soon begin to decrease.

    America’s reserves are mostly situated in Wyoming, in Montana and in Illinois, but they are comprised of coal either rich in sulfur (in Illinois) or of bad, or rather of very bad quality, and mining them would pose serious environmental problems. Added to that are the transport difficulties of a country whose rail network is in a poor state.

    In fact, the capacity of the United States to nourish their economy with coal depends principally on their capacity to mine the reserves in Wyoming, which, let us remember, are of poor quality. The peak in production will be reached between 2025 and 2040 – 2060 in the most optimistic of scenarios.


    • #3
      Re: Coal

      Also, based on my study of the matter, I believe that solar photovoltaic is now cost competitive with NEW coal fired powerplants.


      • #4
        Re: Coal

        The equities might have tanked but look at KOL. The ETF took off and never looked back.