SPEAKER

Greg Boyce Chairman and CEO Peabody Energy

CERA Chairman Daniel Yergin opened the Power Day I Luncheon with thanks for the three breakfast sponsors, AEI, Mintz Levin, and Ormat. Later he asked the keynote speaker to “help us make sense of the great changes happening in coal.”

The Keynote Luncheon speaker, Greg Boyce, Chairman and Chief Executive Officer of Peabody Energy, laid out the argument for clean coal as the sustainable fuel to meet fast-growing global energy demand, secure energy supplies, and serve climate concerns. Saying, “Black is the new green,” he stressed three themes—an era of energy and coal convergence, coal’s preference over increasingly scarce and expensive alternatives, and the key new technology, carbon capture and storage (CCS).

Peabody Energy, one of the world’s largest coal companies, serves markets on six continents. From that position, Mr. Boyce noted that coal demand has soared a cumulative 30 percent over the past five years; US exports are now supplying more of the world’s coal needs. China and South Africa halted exports to meet domestic requirements and now import, and net US exports to Europe have tripled in the past two years.

Mr. Boyce described a greater linkage of coal, oil, and natural gas pricing. Coal prices are setting records in every market; Powder River Basin’s price doubled in a year. Yet US net exports will more than triple over the next two years. Coal remains, said Mr. Boyce, advantaged above oil and natural gas on a fuel-per-generation basis. The power sector will drive most of the demand, with China, India, and the United States representing more than 80 percent of the need to 2030.

Mr. Boyce asked the audience to consider how the United States, with 27 percent of the world’s coal resources, will use its coal position. “We hold the resources to help oil and gas crises and energy independence.” Oil and gas will hit production ceilings and price rises; imports are not economic. All resources must satisfy exponential energy demand, but all have “yes but” factors; oil, gas, nuclear, renewables, ethanol, and efficiency face drawbacks of pricing, declining reserves, waste disposal, scalability, and competing land uses. “We cannot conserve our way to global prosperity,” he added.

Without coal the United States faces a generation shortfall. The North American Electric Reliability Council estimates demand growth of 18 percent, while new capacity is set to rise only 8 percent by 2017. Coal already meets low-cost power need; rates in states using more than 60 percent coal generation are cheaper by 40 percent, he noted.

In his final point he stressed coal’s role in a climate-conscious economy. Emissions have dropped while coal use has increased, and “we must do more” to support clean sustainability, he said. CCS technology, linked to enhanced oil recovery (EOR) and ample geological opportunity in the United States, is key. With coal gasification the carbon dioxide (CO₂) stream can be captured, compressed, transported, and stored in the same structures as coalbed methane and used for EOR. But with CCS costs unknown, government support is essential, and industry must be honest about increased costs for consumers. Mr. Boyce further suggested that an economywide energy fee and a national organization may be necessary to launch an aggressive CCS program.

Mr. Boyce concluded with a sense of urgency. “It’s time we recognized the shock we’re seeing in the energy markets,” he said. “Coal needs to be part of the mix.”

In the question and answer period with Dr. Yergin, Mr. Boyce addressed issues of infrastructure bottlenecks and investment needs; the impact of rising capital, equipment, and base costs; the need for regulatory support from politicians and utilities; and the need to build the current generation of coal technology now.