1. Big Surprise..not really. In 2003, global use of coal increased 6.9 percent over 2002 levels. Oil consumption, by comparison, increased a "mere" 2.1 percent. Prices jumped 80 percent to $50 a ton. US production measured nearly one billion tons, with 04 production estimates up another 3.7 percent to 1.2 billion tones. China's 2004 production is estimated to jump 10 percent to nearly 2 billion tons. The only thing missing is the usual doomsday chorus from the miserable claque of hydrocarbon depletionist-heat death carolers, tolling their Calvinist Christian curve shaped bells and bell-shaped curves, announcing the approaching, or surpassed, peak of coal production; the impending decline of coal reserves; the beginning of the coal wars.
So where are they? Why aren't our little anti-Santas out there, telling everybody that the one thing that for sure won't be in next years' stockings are lumps of coal?
2. It's electric....really. Coal accounts for 50 percent of US electricity generation, and accounts for it pretty cheaply. A current prices, coal costs $3 per million BTU while gas is $7 per million and oil cost $8 per million. Oil use for electricity generation reached 30 percent in 1979, declining almost steadily to 3 percent in 2003. That decline has been more than matched by the increase in use, and the increase in generating capacity, of natural gas fed units. In 2003, natural gas was used to generate 629 billion kilowatt hours, approximately 15 percent of the US total.
While natural gas usage grew 169 percent overall between 1970 and 2003, all of that growth occurred after 1990. Between 1970 and 1990, natural gas generation showed zero growth. Growth, consumption, supply, demands are, under capitalism, always functions of production. Production is a function of investment, and investment is always a product itself of profit.
Between 1960 and 1970, US electricity demand grew at 7 percent, doubling both the rate of growth of the overall economy, and its own size. US generating capacity also doubled, adding some 17 million kilowatts per year, to 336 million kilowatts. Despite, or rather due to, the increase in oil prices and the general slowing of overall economic growth in the 1970s, electrical generating capacity added another 23 million kw per year. In the 1980s, OPEC and Volcker finally got through to those fixed asset fetishists in the generating industry. Capacity growth was brought into a 1:1 correspondence with the overall (lack) of economic growth. Happy days weren't here again, and that was the good news the executive branch of finance capital wanted to hear.
Electrical generating is always to the story of too much too late, capital spending, and too much, too soon, capacity expansion. Between 1980 and 1999, capacity expansion grew a modest 10 million kw per year, but after 1995, capital spending began to accelerate at rates greater than both output replacement and economy wide capital expenditures. Utility expenditures in 1999 exceeded 1998 levels by 24 percent; expenditures in 2001 expenditures exceeded 2000 by 35 percent. Between 2000 and 2003, the US added 186 million kw of generating capacity, a rate of growth 3-4 times that of the economy as a whole, and 4 times the consumption rate of growth.
It's a gas... Utilities, whether power generation or goods circulating (transportation), are compelled to size capacity to peak demand. In electricity generating, capacity is summer capacity designed to meet the peak demand during the summer months. Between 2000 and 2003, summer capacity increased 125 million kilowatts. Eighty percent of that increase consists of natural gas fed, or dual-fired (gas, with oil backup) installations. In fact, ninety percent of all new capacity is gas or dual-fired.
Capacity margin is defined as the difference between total generating capability and actual or estimated peak load. The industry tracks peak loads separately for summer and winter months with summer loads 12-15 percent greater. During the prior slow growth period, summer capacity margins were reduced from approximately 30 percent in 1982 to 7 percent in 1999.
In 2001, capacity margins had increased to 12.2 percent, and by 2002 orders for future generating equipment collapsed. New generating installations were being discounted up to 50 percent in distress sales. Overproduction, the alpha and omega of capitalism was laying these plans of continuous, accelerating, expansion to rest, as it had with the telecommunications, semi-conductor, steel, and petroleum industries.
Increases in natural gas prices were not in fact the product of accelerated rates of consumption. The price increases were mechanism for devaluation of fixed assets, the overproduction of which were both product and producer of declining rates of profits.
Three quarters of electrical generating costs are fuel costs. Natural gas unit costs ($/BTU) are about twice that of coal in electricity generation. Operating costs are theoretically recovered through extended efficiency and reduced maintenance of the generating units themselves. But those are costs retrieved over time. The real meaning to overproduction, to reduced rates of profit, is that time is running out.
S. Artesian 11-27-04
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