It used to be that coal dominated energy consumption around the world, as this fossil fuel was both abundant and relatively cheap to use. But as big oil stepped in, the past few decades have seen dependence on coal cool off. In more recent years, coal has taken an even bigger hit as developed countries have attacked the fuel source for its negative environmental impact. As fracking continues to pick up steam and alternative energy sources enjoy growth, many are left wondering what the future holds for coal [for more coal news and analysis subscribe to our free newsletter].
One of the biggest obstacles standing in the way for coal is the fact that many see it as a "dirty" energy source. Known for its harmful emissions, the use of coal has been subjected to a number of legislative actions that have put stricter control on how this commodity is used; however, there are a number of firms that look to change that.
Duke Energy (DUK) is just one of the firms looking to modernize coal with cleaner, more efficient coal gasification plants that actually turn the former into clean burning natural gas. While the company has assured investors that the venture will be a success, critics have stepped in, calling the process far too expensive for wide scale implementation. The first of Duke's gasification plants looks to be online and fully operational in 2013 [see also 13 High-Yielding Commodities For 2013].
Though some companies are looking to put a new spin on the old resource, others may be forced to call it quits altogether. Upcoming legislation from the Obama administration dictates that by 2016, "power-plant operators will have to start installing costly new emissions controls at their coal units to comply with stricter standards for sulfur dioxide, particulate matter, and mercury" writes Brad Plumer. One study estimated that the upcoming law could make up to 65% of current plants uneconomical.
Fracking is another major roadblock for coal, but it appears to be one that isn't going anywhere anytime soon. Many have made a case against fracking, but the fact remains that it may be the answer to energy independence for the U.S. Natural gas production continues to soar and will likely keep prices from getting too expensive, putting more pressure on coal as time goes on.
Of course, investors should keep in mind that a number of emerging markets still heavily depend on coal for their energy needs. China, in particular, relies on the commodity, consuming nearly three times that of the U.S. on an annual basis. While developed markets may be moving away from this "dirty" resource, emerging markets can always inject a bit of momentum as the years go on.
Don't forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.
Disclosure: No positions at time of writing.
This entry was posted in Asset Allocation, Coal, Commodity ETFs, Commodity Futures, Energy and tagged DUK, KOL. Bookmark the permalink.Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constituteindividual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securitiesor investment assets. Read the full disclaimer here.