Not All Fossil Fuels Are Going Extinct
Bloomberg New Energy Finance’s latest New Energy Outlook points the way to a sunny, windy future for the global electric power industry. That doesn’t mean that fossil fuels (or nuclear power) will vanish. It also doesn’t mean that all fossil fuels are the same. The future of natural gas and coal is a tale of two resources -- one a story of rising fortunes, the other of slow decline.
The latest outlook on natural gas is brighter than ever: BNEF's forecast for gas shows a higher estimate for consumption in 2040 than in previous years, with a short decline at the end of this decade.
Coal is a different matter. Coal demand is expected to peak late next decade, then decline almost every year to reach a low of 3.1 billion metric tons in 2040, about 25 percent lower than at its peak.
This long-term outlook is nuanced, as it should be. The aggregated demand for each fuel from 2020 to 2040 has not changed much in three successive New Energy Outlook reports. Total gas consumption has only increased 6 percent since the 2015 report, while coal consumption from 2020 to 2040 -- despite the plunge that is now expected, as noted above -- has only changed 3.5 percent, and was exactly the same in 2016.
However, the shape of that coal curve is still important, even if the volume hasn’t changed much. A coal mine that opens today could have a 60-year life, but it is likely to be one fraught with oversupply and competition from other coal producers, as well as other technologies.
So how does the 2017 New Energy Outlook for gas and coal compare to how major oil companies and the International Energy Agency see it? 1
For gas, everyone agrees: Consumption grows. Royal Dutch Shell Plc expects gas consumption to more than double and, perhaps not surprisingly, Exxon Mobil Corp. and BP Plc also expect consumption to increase at least 50 percent. BNEF's expectations are a bit more muted.
The outlook for coal isn’t so uniform. Shell and Exxon Mobil's outlooks are both peak coal scenarios, at least for power generation. BP and the IEA expect slow increases in coal consumption.
Then there is BNEF.
Of these five coal outlooks, one is negative, two show eventual declines after future peaks, and the others are up and up. The differences are more than academic. Energy and resources companies make large, long-term bets on future demand for coal, gas and oil. The gap between forecasts and reality can be costly, in an era when a liquefied natural gas project can cost $54 billion. Companies (and energy markets) going long on gas for power generation are at least playing into a consensus view on overall increasing consumption. Companies and energy markets might be doing the same on coal -- but the long-term outlook doesn't bear them out.
- In the 1960s, a steel plant producing a half-million tons of wire a year employed 1,000 people. A plant today employs 14 people to produce the same volume.
- Driverless-trucking startup Starsky Robotics employs coders, of course. It also employs truck drivers: Bloomberg Businessweek’s Max Chafkin and Josh Eidelson on how “in its cabs, side by side, are representatives of some of the most and least promising careers in America.”
- The Los Angeles Times has a news robot that scrapes earthquake data from the U.S. Geological Survey and automatically creates stories. On Wednesday, Quakebot wrote about a magnitude 6.8 earthquake that hit Santa Barbara … in 1925.
- On Tuesday, it was too hot in Phoenix for aircraft to take off. Wired has an explainer on extreme heat and the momentum principle.
- Jason Bordoff of Columbia University looks at the informal transportation networks of Asian and African megacities.
- Uber’s founder and CEO Travis Kalanick has resigned -- and in so doing laid bare the failure of Silicon Valley’s startup machine. In February, Susan J. Fowler reflected on “one very, very strange year at Uber.” And Leila Abboud says Kalanick's replacement has their work cut out for them.
- Gadfly’s Shira Ovide says that Uber’s rivals should have their knives out now.
- Saudi Arabia has a new crown prince, Mohammed bin Salman, born in 1983. Last year Bloomberg Businessweek spent eight hours with “Mr. Everything,” who is spearheading a $2 trillion project to move the kingdom beyond oil.
- Gadfly’s Liam Denning looks at what Saudi Arabia’s new millennial in chief means for oil markets.
- Former U.S. Secretary of Energy Ernest Moniz has launched the Energy Futures Initiative, a countermand to the department's budget cuts and a “leadership void” under the new administration.
- Climate and energy scientists are waging a loud, contentious debate about the possibility of powering the U.S. with only wind, water and solar power by 2050.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Shell and the IEA each run several outlooks for energy, each based on different technology, policy and market expectations. Shell has its “Mountains” and “Oceans” scenarios, with Mountains featuring more natural gas and “Oceans” featuring more coal. The IEA has three scenarios: New Policies, Current Policies and 450 Scenario (which limits carbon dioxide emissions to 450 parts per million). Somewhat confusingly, “New Policies,” not “Current Policies,” is the IEA’s central scenario.
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