Goodbye To The World Bank’s Misguided War On Cheap Energy
In this newsletter:
1) China’s New Coal Boom As Country Starts Up New Mines
Reuters, 21 January 2019
2) China Spends $36bn On Coal-Fired Power Despite Emissions Goals
Financial Times, 22 January 2019
3) Goodbye To The World Bank’s Misguided War On Cheap Energy
Rupert Darwall and Myron Ebell, The Washington Times, 22 January 2019
4) Renewables Boom Fails To Dent Investment Allure Of Hydrocarbons
Financial Times, 22 January 2019
5) Germany’s Coal Imports Rising After Domestic Mining Ends
Reuters, 18 January 2019
6) German Industry Demands €Billions In Compensation If Coal Exit Pushes Up Power Price
Clean Energy Wire, 22 January 2019
7) U.S. Conservatives Want More Permanent Exit From Paris Climate Accord
The Washington Times, 20 January 2019
Full details:
1) China’s New Coal Boom As Country Starts Up New Mines
Reuters, 21 January 2019
BEIJING (Reuters) – China’s December coal output climbed 2.1 percent from the year before, government data showed, hitting the highest level in over three years as major miners ramped up production amid robust winter demand and after the country started up new mines.
Cranes unload coal from a cargo ship at a port in Lianyungang, Jiangsu province, China December 8, 2018. Picture taken December 8, 2018. REUTERS/Stringer
Miners produced 320.38 million tonnes of coal in December, according to data released on Monday by the National Bureau of Statistics. That is the largest volume since June, 2015.
China approved more than 45 billion yuan’s ($6.64 billion)worth of new coal mining projects last year, much more than 2017, official documents show.
That came after the country closed old and more-polluting coal mines as part of its battle to clean up the environment.
“Coal mining capacity coming online will lead to another increase in output this year after boosting December output to a more than three-year high,” said a Beijing-based coal analyst with a major broker. He declined to be identified as he was not authorised by his company to speak to media on the matter.
The new projects stoked overall coal output last year, with annual production rising 5.2 percent to the highest since 2015 at 3.55 billion tonnes.
Full story
see also GWPF report: The Road from Paris: China’s Climate U-Turn (pdf)
see also: GWPF coverage of China’s new coal policies
2) China Spends $36bn On Coal-Fired Power Despite Emissions Goals
Financial Times, 22 January 2019
Emily Feng in Beijing
China financed more than a quarter of all coal plants announced outside the country last year according to a new report, putting its clean energy image at risk as Chinese institutions fund coal-fired projects in emerging markets.
Chinese institutions last year provided $36bn of financing for coal plants outside the country, 26 per cent of the 399 gigawatts of such plants planned or committed last year, according to a report published by the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based non-profit.
As development banks scale back or completely halt their investment in coal-backed energy projects, China has emerged as a chief lender for such power plants, putting its international policies at odds with its domestic agenda (sic) to cut coal use, reduce carbon emissions and boost consumption of renewable energy.
“We’re at a juncture where the rest of the world has shifted to renewable energy investments (sic), but we’re seeing a whole set of legacy patterns for coal — patterns of the last generation — are being clung to and subsidised by Chinese institutions,” said Melissa Brown, a report co-author.
Full story
3) Goodbye To The World Bank’s Misguided War On Cheap Energy
Rupert Darwall and Myron Ebell, The Washington Times, 22 January 2019
The unexpected departure of Dr. Jim Yong Kim as president of the World Bank gives President Donald J. Trump the perfect opportunity to reverse the anti-fossil fuel, energy poverty agenda the bank has pursued since Dr. Kim’s appointment by President Barack Obama in 2012.
The World Bank is the world’s premier development bank. Its knowledge of developing countries means that its participation is often essential to leverage private sector investment into some of the world’s poorest countries.
Rather than development, Dr. Kim saw the bank’s principal job as waging President Obama’s war on coal across the developing world. One of his first acts was instituting a ban on World Bank participation in any funding of new electrical generation projects using coal, other than in the most exceptional circumstances.
The United States is the bank’s largest funder, but Dr. Kim behaved as if Hillary Clinton had won Barack Obama’s third term in the 2016 presidential election. In no area was the policy rupture between the two administrations sharper than on energy, where Mr. Obama’s war on coal has been replaced by the Trump administration’s doctrine of American energy dominance.
Yet Dr. Kim decided to defy his host government and largest funder. At the December 2017 climate summit, France’s President Macron threw to celebrate the second anniversary of the Paris Agreement, Dr. Kim announced that the World Bank was extending its financing ban to upstream oil and gas. To cap it all, in October 2017 Dr. Kim said the bank would be withdrawing its support for its sole remaining coal project, a badly needed clean coal plant in Kosovo, a struggling country in the Balkans.
It’s not only that Dr. Kim misread the politics. On the fundamentals of what is good for developing countries’ economic development and human welfare, the Trump administration is right and Dr. Kim wrong. The centralized electrical grid is the single most beneficial innovation of the 20th century. In developed countries, it is what separates the 20th century from the 19th century.
It’s hardly surprising that FDR’s rural electrification program in the 1930s was one of the most popular and lasting parts of the New Deal. Rural farmers and small towns wanted all the benefits that only reliable, grid-connected electricity can provide and that city and suburban dwellers were already enjoying.
A study out this month by the London-based Global Warming Policy Foundation shows why. In the 1920s and 1930s, small-scale generation and local distribution grids were increasingly replaced by much larger coal-fired power stations connected by a national grid. In those two decades, electricity prices more than halved, something that hasn’t happened again.
This is the energy transition developing countries want and need, but is being denied them by First World environmentalists. Because Dr. Kim was out of his depth at the World Bank, he allowed the bank to be captured by climate activists prioritizing green ideology over the interests of the world’s poor.
Only last month, the World Bank announced it would be committing $200 billion to climate action. “This is about putting countries and communities in charge of building a safer, more climate-resilient future,” Dr. Kim declared. That’s not going to make energy cheaper or more accessible or keep the lights on and the refrigerator chilled.
Wind and solar power are inherently unreliable and are not a substitute for a proper grid and thermal power generation. Despite Elon Musk’s claims, the developed world has not cracked the inherent intermittency of generating electricity from the weather.
For developing countries, the economics of wind and solar mean that the more renewables they have, the more it costs to build out a proper grid and invest in reliable generation. It is simply immoral to expect developing countries to solve the intermittency problem that has defied solution by the best brains in the West and inflict higher energy costs on those who can least afford them.
Dr. Kim’s departure opens the opportunity to end the World Bank’s walk on the dark side. In selecting the U.S. candidate to succeed him, the Trump administration will have the support of developing nations angry at the West’s climate imperialism and its attempts to obstruct their economic development. It will also have the support of energy-realist nations such as Japan and Australia, while China, consuming half the world’s coal, can hardly object. On energy realism, energy access and economic development, the goals and interests of developing nations and the United States are strongly aligned.
Full post & comments
4) Renewables Boom Fails To Dent Investment Allure Of Hydrocarbons
Financial Times, 22 January 2019
Nick Butler
The transition to a lower carbon economy has been long promised but the reality remains elusive.
There is no doubt that the costs of renewables — led by solar and onshore wind — are now materially cheaper than they ever have been, having fallen respectively to the point at which the International Energy Agency in its latest short term outlook sees prices falling to between $20 and $50 per megawatt hour.
That means they can compete with other fuels, even if some of the costs of providing back up to cover the intermittency of renewable supplies are included. In some markets, neither subsidies nor protected market shares will be necessary.
Why then is the pace of change in the sector, especially in the developed world, so slow?
Hydrocarbons continue to dominate with oil, gas and coal providing over 80 per cent of energy supply. Most serious long term forecasts suggest that dominance will decline only slowly and that renewables will still be providing little more than 15 per cent of the world’s electricity needs in 20 years’ time.
The challenge is investment and the economics of the industry. Readers might like to take a moment to consider the composition of the funds which provide their pensions or hold their savings. Unless you are a committed and active investor, most of those funds are likely to hold shares in the major oil and gas companies rather than in enterprises developing wind or solar power.
The reasons are straightforward. The energy majors continue to generate high yields. Despite price volatility, the returns look secure — the industry has successfully adapted to low oil and gas prices and most of the companies continue to generate plenty of new investment projects. For investors, the choice is easy.
The majors — from Chevron and Exxon to Shell and Total — can hardly be described as helping lead the way to a low-carbon economy in a profound way. Advertising such as Exxon’s promotion of its investment in the technology which produces oil from algae is highly visible. But corporate investment remains predominantly focused on oil and gas.
As reported in the FT in December, none of the majors invests more than 5 per cent of total capex on low carbon projects. In every case, oil and gas receive more than 95 per cent of the annual total.
This too has a rational explanation. Oil and gas fields are large scale investments providing high returns. Few projects with returns of below 15 per cent, even on highly pessimistic assumptions about market conditions and prices, are approved. Actual returns commonly turn out to be much higher, not least because advances in technology usually allow more oil and gas to be produced over time than is initially anticipated.
This makes it very difficult for renewable projects to compete for approval from any capital allocation committee. Solar and wind projects are much smaller — in many cases not meeting the materiality thresholds which companies usually set. Few offer returns which can match the oil and gas business. Supplying electricity is highly competitive and the barriers to entry (access to resources and experience in complex project development) are typically much lower. For all these reasons it is hard to see how the energy majors who are trying to integrate renewables into their existing business structures will ever lead the energy transition.
The other problem for investors is that the renewables sector remains fragmented, with thousands of small businesses often dedicated to a single geographic market.
With technology continually evolving it is tough for even the most committed investors to know where to put their money. The majors who do want to grow a distinct renewables business over time struggle to decide which of the existing ventures they should buy to create a base. The structure of the renewables business will always be different — the supply of solar and wind is inherently a widely distributed activity — but some significant consolidation of activity is essential if the energy transition is really going to take place.
One answer may lie in the already evident growth of renewables in China and elsewhere in the emerging economies of Asia. In China, government is leading investment in the field, reflecting state policy and the desire to create a new set of enterprises which can make the country a global industrial power. In such circumstances, short term financial returns matter less than growth and scale.
China already dominates the production of solar panels, wind turbines and batteries and is a world leader in grid technology. In the absence of a serious consolidation of the renewables sector in Europe and the US, we may soon find that the worldwide transition to lower carbon economy is a project led by Asia.
5) Germany’s Coal Imports Rising After Domestic Mining Ends
Reuters, 18 January 2019
Germany is expected to import 45 million tonnes of hard coal this year, up roughly 1.4 percent from 2018 despite mounting competition from renewable energy, as the closure of domestic mines reduces domestic supply, importers said on Friday.
The total would comprise an estimated 30 million tonnes for power generation and 15 million tonnes of coking coal and coke, products used in steelmaking, data from lobby group VDKI showed.
Germany’s last two hard-coal mines, in the west of the country, closed at the end of December under a deal to stop unprofitable mining in favor of imports. The pair had contributed an annual 2.6 million tonnes of power station feedstock.
The coal importer lobby said hard coal usage would benefit from a court ban on logging in an ancient forest, a move that will impede the mining of domestic rival lignite, or brown coal, by utility RWE.
The court ruling curbs supply to RWE’s brown-coal power plants, and hard coal could cover part of the deficit.
The two types of coal accounted for a combined 38 percent of German power production last year.
Full story
6) German Industry Demands €Billions In Compensation If Coal Exit Pushes Up Power Price
Clean Energy Wire, 22 January 2019
Open pit lignite mine Vereinigtes Schleenhain in Saxony, Germany. Photo: MIBRAG / Rainer Weisflog.
A state-driven closure of coal-fired power plants over the next 12 years would lead to higher power prices, which consumers have to be compensated for, say industry associations the Federation of German Industries (BDI), the Association of German Chambers of Commerce and Industry (DIHK) and the Confederation of German Employers' Associations (BDA) in a press release. Compensation is a “mandatory precondition” for their consent to a coal exit deal, the press release says. Germany's coal exit commission is expected to propose a plan by the beginning of February at the latest.
The industry lobby groups say a state-driven coal exit would create “significant additional costs of at least 14 to 54 billion euros”. They do not provide a breakdown of these figures, but say they are based on calculations by consultancy Aurora Energy Research. Aurora says shutting down coal plants will increase wholesale power prices, an effect that could be exacerbated if countries like China also switch from coal to gas, pushing up gas prices. The cost of securing Germany’s supply would also increase. However, the cost of supporting renewable energy development would fall as wholesale power prices rise, Aurora notes.
BDI, DIHK and BDA are calling for reviews of German energy, climate, industry and structural policy in 2023, 2026 and in early 2030s, to inform decisions on whether to shut down additional coal power plants. They say power prices for households and industry in Germany are already among the highest in the European Union and a further rise would dampen the country’s economic growth.
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7) U.S. Conservatives Want More Permanent Exit From Paris Climate Accord
The Washington Times, 20 January 2019
President Trump has announced the U.S. is withdrawing from the Paris climate accord negotiated by President Obama, but some activists say Republicans should do more and truly put the spike into it.
They fear that if Mr. Trump was able to withdraw based on his signature, a future president could easily rejoin with another signature. Their solution: have the Senate take a vote to ratify the deal as a treaty, and defeat it.
“The Paris climate treaty is clearly a treaty and not just an executive agreement according to the State Department’s own criteria,” said Myron Ebell, the director of global warming and environmental policy at the Competitive Enterprise Institute. “Every other country in the world treated it as a treaty and ratified it according to their usual ratification procedures.”
Mr. Obama negotiated the deal in 2015, committing the U.S. to a global agreement to try to limit greenhouse gas emissions to levels needed to keep temperature rises “well below 2 degrees Celsius.”
Mr. Obama said the deal was more a political commitment than a binding agreement among nations, so it didn’t count as a treaty and didn’t have to go to the Senate for ratification — a vote he was certain to lose.
But that also made it easy for a successor to withdraw, which is what Mr. Trump began the process of doing in 2017.
Yet withdrawal takes more than three years and full withdrawal won’t be finalized until after the 2020 election, according to the treaty’s terms, meaning if Mr. Trump were defeated, a future administration could reimpose it.
“President Trump made the least satisfactory choice among three alternatives when he announced he would keep his campaign promise to get the United States out of Paris,” Mr. Ebell said. “He accepted that President Obama’s mere signature accepting the treaty was valid, and that all he needed to do was send another signed letter of withdrawal.”
Some scientists who are skeptical of extreme climate change scenarios embraced the idea of forcing a Senate vote now.
“I think this is a good idea,” said Richard Lindzen, an emeritus atmospheric physics professor at MIT, and a prominent skeptic of the notion global warming presents an existential threat.
He said the Senate should go even further and revoke any consent it has given to the United Nations’ Framework Convention on Climate Change, launched in 1992, whose semi-regular reports help propel the debate and provided the framework for Paris negotiations.
“Bush 41 signed this to lay claim to being our ‘environment president.’ Unfortunately, he committed us to the global warming alarm narrative,” Mr. Lindzen said.
But as of now, there are no takers in the Senate.
Staff for Sen. James Inhofe, an Oklahoma Republican who is perhaps the Senate’s most prominent climate change skeptic, seemed intrigued by the idea of having the Senate formally reject the treaty. But his office failed to respond to questions.
Sen. Tom Carper, Delaware Democrat and the ranking member of the Environment and Public Works Committee, also did not respond.
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The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.
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