For close to a decade now, six new coal-fired power plants have been in the planning stages... but regulations aimed at limiting mercury and greenhouse gas emissions are making it difficult for the power plants to start construction.
At least, that's what the coal industry claimed in a Wall Street Journal piece earlier this week.
While such regulations will certainly make it difficult for coal to provide cheap power as it once did, there are bigger hurdles that will make it highly improbable that these new plants will ever get built. And if they do, they'll struggle to make a profit.
The truth is dirt-cheap natural gas is the primary reason these coal-fired power plants aren't getting built.
Hell, last year about 10% of total megawatts of coal-fired capacity was retired.
And it's no secret that a lot of these older coal-fired power plants are not being fitted with new technology to comply with regulations. Instead, they're being converted to run on natural gas — because with or without those regulations, it's just so damned cheap.
That being said, the coal industry itself won't die on the vine.
Sure, there's going to be some bumps and bruises in the short term. But if the coal industry plays its cards right — and starts worrying less about environmental regulations (which they will never be able to stop over the long term) and focusing more on exports, domestic coal will come back stronger and more profitable by the end of this decade.
Desperate for Coal
A few months ago, Kentucky-based Booth Energy Group and River Trading Co. inked a $7 billion deal with India's Abhijeet Group to supply nine million tons of coal from Kentucky and West Virginia.
The news went largely unnoticed, but it was actually a pretty big deal. It marked one of the first of many billion-dollar coal export deals soon to come down the pike, thanks to the Indian government's desperate need to meet its goal of providing power for all of India's citizens by the end of 2012.
Sad to say they're going to fall short — by a lot...
To date, more than 400 million people in India do not have access to electricity. And although the government's intentions are both honorable and economically necessary in order to facilitate continued growth, India remains short of the energy resources it requires.
While India relies heavily on coal-fired power generation, by 2017, domestic coal production in that nation will only meet 73% of demand... and this is after India has spent $7 billion to acquire outside coal pits in Australia and Africa.
Bottom line: Demand for coal-fired power in the United States will never be as strong as it is in India.
And don't even get me started on China: Despite doubling coal output over the past ten years to 3.5 billion tons, the Middle Kingdom still imported 5.5 million tons in 2011. And according to a recent report in Reuters, coal exports to China could reach 12 million tons this year.
King Coal Heads East
In 2011, the U.S. exported more than 107 million short tons of coal. This was the highest level of coal exports since 1991, representing a 25% increase over 2010 exports.
This year coal exports are expected to set new records, possibly climbing as much as 32% over 2011; shipments were already 24% higher in the first half of the year.
Look, it's real simple: Coal-fired power generation will continue to lose market share in the United States. Even without environmental regulations, the cost advantage for natural gas is just too great for coal to compete.
As well, renewables will continue to experience dramatic cost reductions, resulting in further integration.
By 2030, no less than 20% of our power generation will come from non-hydro renewables, e.g. solar, wind, geothermal, and biomass.
Natural gas will be well into the 40% category, and nuclear will be around 18%.
And while all of this knocks King Coal pretty far down the food chain, to suggest the coal industry is in dire straights because of regulations that everyone knew were coming is ridiculous.
The U.S. coal industry is going to do just fine, and it will ultimately thrive just as it always has — because India, China, Japan, and Korea can't grow without it.
And that, my friends, is not a bad position to be in.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.