A funny thing happened on the way to the energy transition, current version (there will be many). Coal, much maligned, is back in vogue.
In this transition, coal-fired power plants are being challenged as never before. The traditional providers of baseload power have moved to flexible operations in response to market forces and the need to balance the variable output of solar and wind resources to meet modern society’s need for a reliable supply of economical electricity. Power plants originally designed for baseload operation with maximized efficiency were not designed to operate flexibly, and the change introduces significant challenges in plant management and maintenance.
Post-pandemic, U.S. exports have climbed steadily – continuing a surge since the early 2000s. Coal prices have zoomed – in tandem with European power generation needs and wholesale pricing (see charts below). These dynamics are showing up equities values for global producers of fossil fuels – oil, natural gas and coal. Indeed, noticeably, inconveniently, the values of fossil fuels producer shares are considerably more attractive than those of clean energy tech companies. For that matter, clean energy tech has underperformed the broader market indices, even with inflation and recession fears triggering bumps to the S&P 500 and Dow Jones Industrials during 2022.
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