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Updated June 2020

In Summary

  • Announced and scheduled retirements of coal-fired power electricity generators continue to be a leading factor in the decreased consumption of coal.
  • Demand for subbituminous coal is expected to decrease within Alberta over the forecast period as coal-fired power plants are converted or retired.
  • International exports of metallurgical and thermal coal are expected to remain stable, especially to Asian markets and other developing regions over the forecast.

Subbituminous Coal

Demand for Alberta's subbituminous coal is expected to decline through to the end of the forecast period because of the anticipated retirements and conversions of the following coal-fired electricity generators:

  • Heartland Generation Ltd. (formerly Canadian Utilities Limited, a subsidiary of ATCO
  • Capital Power
  • TransAlta
  • Maxim Power
Retirement of Coal-Fired Power

The retirement of Alberta's 14 remaining coal-fired power plants by the end of 2029 is expected to significantly affect production from the Highvale, Genesee, Sheerness, and Paintearth and Vesta subbituminous coal mines, as these mines directly supply affected power stations. According to Alberta Electric System Operator (AESO), the remaining 5723 megawatts (MW) of coal-fired power generation will be removed by the end of 2029.

In the interim, some coal-fired facilities have already shifted to co-firing natural gas alongside coal; this is because power purchase agreements are expiring and economics currently favour lower emissions generation. Fuel blending reduces carbon costs and allows the use of currently low-priced natural gas as feedstock.

Those planning to convert from coal to gas over the longer term are doing so in order to

  • extend asset lives,
  • further reduce emissions,
  • reduce compliance costs, and
  • save on operating and maintenance costs.

Conversions primarily involve connecting to natural gas supplies, retrofitting boilers, and switching coal burners to gas-fired equipment. In addtion to lower compliance costs and the ability to use low-priced natural gas, coal power plants that convert to burning natural gas will also be subject to the federal Regulations Limiting Carbon Dioxide Emissions from Natural Gas-fired Generation of Electricity.

Former federal regulations required coal-fired power plants to retire after reaching 50 years of service, meet emissions performance standards equivalent to high-efficiency natural gas generation, or incorporate carbon capture and storage systems. These regulations were updated in December 2018 with the Regulations Amending the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations. Some of the major changes include redefining useful life, refining performance standards, and exemptions for units with carbon capture and sequestration.

The amendments for useful life require that assets be retired as follows:

  • For units commissioned before 1975, the earlier of 50 years after the commission date on December 31 or on December 31, 2019.
  • For units commissioned after 1974, the earlier of 50 years after the commission date on December 31 or on December 31, 2029.

The following is an overview of some of the power generators expected to affect subbituminous coal demand in Alberta.

  • Capital Power Corporation has announced an accelerated plan to proceed with coal-to-gas conversions.
    • With the approval for the construction of a high-pressure natural gas pipeline, Capital Power is looking to maximize the flexibility of dual-fuel at their Genesee coal power facilities. 
    • They plan to completely transform Genesee Units 1 & 2 to dual-fuel and add 40 per cent gas capability for Unit 3 before 2023.
    • Coal operations are planned to continue at the Genesee facilities until 2029, when this facility will fully transfer natural gas.
  • TransAlta has also committed to moving to natural gas.
    • It is retiring its 280 MW Sundance Units 1 and 2, while converting the remainder of the Sundance units from coal to gas over the forecast period.
    • TransAlta has received regulatory approvals for their Sundance Units (3-6) and Keephills units (1-3) for coal-to-gas conversion.  Co-firing infrastructure has been completed at Sundance and Keephills 3 to allow an increase in gas use prior to conversion.
    • TransAlta announced, during the second quarter of 2019, the completion of the Pioneer Pipeline ahead of schedule and has begun flowing natural gas to their Sundance and Keephills generating facilities, supporting the conversion from coal to gas between 2020 and 2023.
  • Canadian Utilities Limited (a subsidiary of ATCO) announced the completion of the sale of its electricity generation assets to Heartland Generation Ltd. Only limited public information is available at this time.
  • Maxim phased out its 144 MW HR Milner coal generating station at the end of 2019.

Metallurgical Bituminous Coal

Asia remains Alberta's primary market for metallurgical coal. However, the long distance required to transport coal from mine to market creates a competitive disadvantage for Alberta's exporting coal producers, often countered by supply shortages elsewhere, usually due to weather or climate policies and trade conflicts.

Demand in 2019: Metallurgical coal export deliveries increased by approximately 56 per cent between 2018 and 2019 as a result of higher production from CST Coal fully restoring production at their Grande Cache mine after it was temporarily shut in for the past couple of years.

Exports

Alberta markets its metallurgical coal to a  variety of international customers. In 2019 the most notable destinations included the following:

  • China: Volumes increased significantly in 2019 by approximately 0.80 Mt totalling 0.88 Mt.
  • Japan: Demand for metallurgical coal increased by about 0.13 Mt to 0.75 Mt.
  • India and South Korea: Combined, demand from these two countries increased significantly by about 0.29 Mt totalling 0.45 Mt.

International spot prices for metallurgical bituminous coal were strong in the first half of 2019 but declined drastically in the second half. An oversupply of coking coal, Chinese import restrictions, and the US-China trade dispute contributed to the decreased prices for the year.  Going forward, coal will remain a large share of China's energy mix even as their energy system transforms. China and India are anticipated to remain the world's largest sources of coal demand and therefore have a continued influence on world coal prices.

Thermal Bituminous Coal

Asia continues to be the largest source of demand for Alberta's thermal bituminous coal for use in power generation. Despite international demand, increases in exports throughout the forecast period will depend on whether new projects in Alberta proceed.

Demand in 2019: Alberta's thermal bituminous coal export deliveries increased by 67.2 per cent between 2018 and 2019 due to higher production and drawing down inventories.

Exports

Exports of thermal coal were limited to five countries:

  • Korea: 0.58 Mt was exported from Alberta in 2019.
  • Japan: Increased its demand by 0.35 Mt to 0.61 Mt in 2019.
  • Singapore: Decreased its demand by 0.10 Mt in 2019 to 1.6 Mt.
  • Taiwan: Increased its total demand demand by 0.16 Mt in 2019.
  • Egypt: Increased its demand by 0.33 Mt totalling 0.49 Mt in 2019.

Without supporting natural gas infrastructure such as LNG terminals or pipelines, we anticipate a growing need for lower cost coal overseas to generate electricity, especially in Asia. Demand in Asia is expected to increase over the forecast period due to significant coal generation capacity either planned or under construction. This includes countries such as India, Indonesia, South Korea, Thailand, and Vietnam.

Despite decling coal demand in Canada, the United States, and most of Europe, coal remains a dominant fuel source for power generation as Asia builds new coal-fired power plants to supply affordable and reliable energy to their growing economies. Besides environmental policies in North America, low-priced natural gas has supported the shift from coal to gas on economic merits. China is the largest producer and consumer of coal, but Southeastern Asian economies are increasingly driving current and projected coal demand.

Japan's demand for Alberta's thermal bituminous coal is expected to remain strong over the next decade as they continue to use coal to fuel a large portion of their electricity generation. Before the Fukushima Daiichi incident in 2011, Japan had planned to reduce their share of coal generation while boosting nuclear power to offset coal. As a result of Fukusima, Japan's Minstry of Economy, Trade and Industry projects coal demand to remain strong, accounting for 26 per cent of their energy mix through 2030, which is a larger proportion relative to 2011.

Japan's demand for Alberta's thermal bituminous coal is expected to remain strong over the next decade as they continue to use coal to fuel a large portion of their electricity generation. Before the Fukushima Daiichi incident in 2011, Japan had planned to reduce their share of coal generation while boosting nuclear power to offset coal. As a result of Fukusima, Japan's Minstry of Economy, Trade and Industry projects coal demand to remain strong, accounting for 26 per cent of their energy mix through 2030, which is a larger proportion relative to 2011.

Most of the Asian demand for thermal bituminous coal is expected to be met by other international suppliers, which will limit Alberta's potential for growth in these markets.

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