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Updated June 2021

 

In Summary

  • Demand for subbituminous coal is expected to decrease within Alberta over the forecast period (2021 to 2030) as coal-fired power plants are converted or retired.
  • International demand for metallurgical and thermal coal is expected to remain stable, especially from Asian markets and other developing regions over the forecast.

Subbituminous Coal

Demand for Alberta’s subbituminous coal is expected to decline through the end of the forecast period because of the anticipated retirements and conversions of the coal-fired electricity generators, such as Heartland Generation Ltd. (formerly Canadian Utilities Limited, a subsidiary of ATCO), Capital Power, and TransAlta.

Retirement of Coal-Fired Power

The retirement of Alberta’s remaining coal-fired power plants by the end of 2029 is expected to significantly affect production from the Highvale, Genesee, Sheerness, Paintearth, and Vesta subbituminous coal mines, as these mines directly supply the power stations.

Some coal-fired power plants will be converted to gas over the longer term, to extend asset life, reduce further emissions, reduce compliance costs, and save on operating and maintenance costs.

Federal regulations once required coal-fired power plants to either 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 in 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 December 31 of the calendar year that is 50 years after the commissioning date, or on December 31, 2019.
  • For units commissioned after 1974, the earlier of December 31 of the calendar year that is 50 years after the commissioning date, or on December 31, 2029.

The outlook for subbituminous coal production has declined due to an acceleration of Capital Power’s coal phase-out. The target date to transition its Genesee site to 100 per cent natural gas has shifted from 2029 to the end of 2023.

TransAlta’s commitment to transitioning from coal to natural gas is also significant to the forecast. It is currently aiming for its Alberta thermal fleet to fully transition to natural gas by 2022. This will result in the closure of the Highvale mine.

Maxim Power Corp completed the Milner 2 power plant in mid-2020, which will replace generation from the Milner 1 generating station, a dual fuel generator capable of burning natural gas and coal.  

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 2020: Metallurgical coal export deliveries decreased by 40.2 per cent between 2019 and 2020 as a result of the suspension of the Grande Cache mine and the closure of the Cheviot mine.

Exports

Alberta markets its metallurgical coal to a variety of international customers. In 2020 the most notable destinations included the following:

  • China: Volumes decreased in 2020 by about 0.43 megatonnes (Mt) to 0.45 Mt.
  • Japan: Demand for metallurgical coal decreased by about 0.22 Mt to 0.53 Mt.
  • South Korea: While demand fell in most destinations, deliveries to South Korea increased about 0.15 Mt to 0.26 Mt.

International spot prices for metallurgical bituminous coal fell due to worldwide lockdown measures to contain the spread of COVID-19. Prices recovered in the fourth quarter, due to an uptick in Asia’s steel manufacturing industry. Going forward, coal will remain a large share of China’s energy mix even as the country transforms its energy system.

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 2020: Alberta’s thermal bituminous coal export deliveries increased by 50.5 per cent from 2019 due to higher production at Coalspur’s Vista mine.

Exports

The majority of exports of thermal coal were delivered to three countries:

  • Chile: 1.0 Mt was exported from Alberta in 2020, after recording none in 2019.
  • Japan: Increased its demand by 0.84 Mt in 2020 to 1.4 Mt.
  • Korea: Increased its demand by 1.1 Mt in 2020 to 1.7 Mt.

Despite declining coal demand in Canada, the United States, and most of Europe, coal remains a dominant fuel source for power generation in Asia. Demand in Asia is projected to increase over the forecast period due to significant coal generation capacity either planned or under construction as new coal-fired power plants are being built to supply affordable and reliable energy to the continent’s growing economies. This includes countries such as India, Indonesia, South Korea, Thailand, and Vietnam. China is the world’s largest producer and consumer of coal, but southeastern Asian economies are increasingly driving current and projected coal demand.

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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