The Peabody Plan and the Social Benefits of Coal A Model for the - PowerPoint PPT Presentation

The Peabody Plan and the Social Benefits of Coal – A Model for the World 6th Annual Energy Supply Forum The U.S. Energy Association (USEA) Fredrick D. Palmer Senior Vice President of Government Relations

Electrification Powers Civilization “The top -rated improvement to the life of earthlings in the 20th Century was electrification . If anything shines as an example… it is clearly the power that we use in our homes and businesses.” – Neil Armstrong U.S. Astronaut, National Academy of Engineering 2 2

Electrification is Life; Coal is Electricity “ High rates, of course, bear hard “As a country with coal dominating on the individual. But from a social its energy structure, China still has a huge potential. We will… put in standpoint they are chiefly to be regretted because they restrict the place a system that supplies use of electricity.” stable, economical and clean – Franklin D. Roosevelt,1930 energy. ” – President Hu Jintao, PRC, 2009 3

Only Universal Electrification Can Eradicate Energy Poverty First, the United States “I had seen first hand the grim drudgery and grind which had become the common lot of American farm women… growing old prematurely; dying before their time.” - Senator George Norris, sponsor, Rural Electrification Act of 1936 Then China “Electrification in China is a remarkable success story… the most important lesson for other developing countries [is] that electrified countries reap great benefits, both in terms of economic growth and human welfare.” - IEA, 2007 And Now India “India has more people without adequate access to energy than any country in the world .” - National Resources Forum , 2008 4

The Primary Challenge of the 21 st Century: Eradicating Energy Poverty “ The greatest crisis we confront in the 21st Century is not an environmental crisis predicted by computer models… but a human crisis fully within our power to solve. Study after study – and pure common sense – tells us that access to electricity helps people live longer and better. For every agency voicing a 2050 GHG goal… we need 10 working toward the goal of broad ” energy access to reduce global poverty. – Gregory H. Boyce, Peabody Energy Chairman and CEO

Energy Is a Human Right and Rapidly Rising Need Half the World’s Population Lacks Proper Access to Electricity 70 378 136 1,054 21 184 2 493 209 585 449 31 Millions of People Who Lack Adequate Electricity Millions of People Who Have No Electricity 6 Source: International Energy Agency World Energy Outlook 2011 and The World Bank World Development Indicators 2012.

Electricity Enables People to Live Longer and Better United Nations Links Affordable Energy to Quality of Life Coal Electricity 16,000 $100,000 1 Global GDP Sweden Japan $90,000 14,000 0.9 USA France Singapore $80,000 Brunei Human Development Index (0-1) 0.8 12,000 World GDP (trillions of 2005 $) Electricity from Coal (TWh) $70,000 Philippines Malaysia 0.7 10,000 $60,000 Thailand Indonesia China $50,000 Vietnam 0.6 8,000 Cambodia Laos $40,000 0.5 6,000 Myanmar Every 10-Fold Increase $30,000 in Per Capita Electricity 0.4 4,000 Use Drives a 10-Year $20,000 Increase in Longevity 0.3 2,000 $10,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1970 1980 1990 2000 2010 2020 2030 Electricity Use per Capita per Year (kWh) Sources: CIA World Fact Book, United Nations Development Program’s Human Development Report.; Developed from International Energy Agency World 7 Energy Outlook (1995-2011); USDA 2011.

Do We Recognize the Enormity of the Challenge? Citizens Need 60+ Times IEA Benchmark for Human Development 6,963 Kilowatt Hours 2,036 542 566 144 137 40 63 Ethiopia IEA Indonesia Nigeria Bangladesh India Mexico Euro Area Benchmark Electric Power Consumption Per Capita Source: World Development Indicators 2010, International Bank for Reconstruction and Development, The World Bank; International Energy 8 Agency, World Energy Outlook 2010.

Population Growth Greatest In Developing World By 2050, 87% of ~9.6 Billion Global Population in Developing World 90% 10000 Global Population 87% (In Millions, %) 8000 85% 80% 6000 75% 4000 “Developing countries, 68% 70% 2000 especially in Africa, are still growing rapidly .” 65% 0 1955 1990 2013 2050 – UN Under-Secretary- General Wu Hongbo Developing World Developed Nations Sources: U.S. Census Bureau, 2013; 9 United Nations, 2013

Coal Is The Solution To Energize The World The World Needs More Energy Extraordinary Global Growth by 2050… • Global GDP up 285% • Electricity generation up 130% • Steel production up 125% • World population exceeds 9.3 billion • 15 billion tons of coal used annually Hong Kong 10

China is the Model: Coal Fuels Social Development China Out of Poverty Study: Energy & Progress Closely Linked Survive Live Drink Eat Are Better Childhood Longer Cleaner Water Better Educated Access to Under Five Life Expectancy Under- Literacy Improved Sources (%) Death Rate/1000 (years) Nourished (%) Rate (%) 25%, 70% and 90% average percent of population with access to electricity. “Out of Poverty” study, Frank Clemente, 11 Professor Emeritus, Penn State University

Coal: The World’s Fastest Growing Major Fuel Growth 2002 – 2012 ● Coal grows twice as 60% fast as average of other 53% 50% major fuels in past 39% decade 40% 32% ● Coal expected to pass 30% oil as world’s largest 20% 14% energy source in 10% coming years 0% ● New IEA report -10% increases global coal -8% 2010 2020 2035 growth projections to -20% Coal Hydro N. Gas Oil Nuclear 47% by 2035 Source: Peabody Energy Analytics, BP Statistical Review of World Energy 2013; Wood Mackenzie; International Energy Agency (IEA), World Energy Outlook. 12

Annual World Coal Demand to Grow 1.2 Billion Tonnes in Five Years ● New coal-fueled Expected Global Coal Demand (Tonnes in Millions) generation of ~425 4,890 GW by 2017 5,000 ● Steel production 4,069 4,000 growth requires additional 150 MTPY 3,065 2,886 3,000 of metallurgical coal in 2017 2,000 ● More than 80% of projected global 920 1,000 726 demand growth in 2017P 2012 China/India 0 India ROW China 13 Source: Peabody Global Analytics.

No Energy Alternative Can Replace Coal To Replace Coal Generation by 2035, the World Would Need … NUCLEAR 2,200 New Nuclear Plants 165 Trillion Cubic Feet NAT. GAS >7x Current Russian Gas Production HYDRO 215 new Three Gorges Dams WIND* 6 Million Wind Turbines SOLAR* 500x Current Solar Generation * Requires backup generation. Source: International Energy Agency World Energy Outlook 2012; U.S. Energy Information Administration International Energy Outlook 2012. 14

China, India to Account for 85% of Global Coal Demand Growth ● China and India coal China and India Coal Imports (Tonnes in Millions) imports expected to grow 220 million tonnes by 2017 500 ● Significant new coal 410 generation driving demand 400 – ~225 GW in China 325 – ~70 GW in India 289 300 ● China closing marginal 235 cost production 200 – Costs rising >10% per year 160 ● New port projects 137 underway to enable 100 2013P 2017P greater imports 2012 0 India China 15 Source: Peabody Global Analytics, China Customs, India Market Watch.

U.S., Too, is a Young and Developing Nation ● The U.S. population expands by 3.3 million people per year and will exceed 430 million in 35 years ● Urbanization proceeds apace and will reach 90% in the next generation ● Economic growth linked with this continuing rise of cities will spur the demand for energy – especially electricity 16

U.S. History Proves Social Benefits of Electricity from Coal ● Low-cost coal-based energy is engine for jobs, growth and prosperity ● Coal fuels 40% of power; America has 27% of global reserves ● Clean coal technologies work, lead to near zero emissions ● Beneficial electrification is the foundation of modern life: the positive externalities of coal overwhelm “cost of carbon” ● EPA’s plan to artificially increase the price of electricity is adverse to human health and welfare ● Coal is the only energy source that can meet the scale of future demand 17 17

Coal is the Cornerstone of America’s Energy System U.S. Has World’s Largest Coal Supply – Secure and Accessible Coal 2000 1750 1500 Terawatt Hours 1250 Natural Gas 1000 Nuclear 750 500 Other Hydro 250 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 18 Source: U.S. Energy Information Administration, 2012.

Coal Means Affordable Electric Rates 19 Source: EIA, Electric Power Monthly, August 2013

Rising Natural Gas Prices Drive Switching Back to Coal U.S. Natural Gas Cost Almost 2x Coal, Oil Cost 9x Coal in 2013 $25 Natural Gas Has Averaged Over Three Times the Cost of Coal This Past Decade $20 $15 Oil $10 $5 Natural Gas Coal $- 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Price of fuel delivered to the plant includes all commodity, freight, taxes and other costs incurred in the delivery of the fuel. Source: EIA Electric Power Monthly, Table 4.1. Receipts, Average Cost, and Quality of Fossil Fuels: Total (All Sectors) Jan 2000 – June 2013 (monthly). 20