Energy Finance 2015 Conference: ‘The Markets Right Now Are in Flux, and in Trouble’

“Good ideas, even great ideas, don’t win by themselves.”

That’s Tom Sanzillo, IEEFA’s director of finance, speaking today at our Energy Finance 2015 conference in New York, where he made a powerful pitch for the importance of forming energy-market alliances that have legs.

“What will make the changes that we want is the leadership in this room,” Sanzillo said, adding that while the new-energy economy continues to gain momentum it will require informed and sustained advocacy to carry it into the future.

Seize the day, Sanzillo implored, because old energy models are vulnerable now: “The markets are in flux, and in trouble. We have a huge opportunity, maybe once in a lifetime, to move toward getting these countries away from these fuels that cause so much volatility in their economies and probably all their pollution problems … it’s up to us.”

The conference this year is drawing a record number of participants—from 17 countries and 30 states in addition to Washington, D.C., and Puerto Rico. The four-day event, on the campus of New York University, is co-sponsored by the Institute for Policy Integrity at NYU’s School of Law. (Here’s the agenda.)

CHINA’S APPETITE FOR COAL IS WANING

Anthony Yuen of Citigroup and IEEFA’s Tim Buckley.

Also on hand: Anthony Yuen, the global commodities research strategist from Citigroup, explaining how energy economies worldwide are in a time of profound metamorphosis.

Here’s a quote from Yuen: “What you’re going to see in energy markets in the next 10 years is nothing like what you’ve seen in the past 30.”

Yuen noted that Chinese demand for coal may already have peaked, and that if it hasn’t yet, it’s close. He pointed to last year’s historic emission-control agreement between the U.S. and China as a long-term market-changing event and said coal demand continues to be undercut by the rise of natural gas.

Costs of coal production have fallen, driving supplies up, while demand globally —not just in China—continues to show weakness, he added.

SEABORNE THERMAL-COAL MARKETS; INDIA’S IMPORTANCE; THE HIGH COST OF FOSSIL-FUEL EQUITY AND DEBT

Tim Buckley, IEEFA’s director of energy finance studies, Australasia, noted that seaborne thermal coal markets face a growing threat from the embrace globally of higher energy-efficiency standards. Among the many components of modern energy efficiency, he explained, is diversification away from coal-burning plants and into other methods of electricity generation.

Meantime, interest in nuclear energy is flat-lining globally as interest grows around renewables.

India, the second-most populous nation on the planet, will drive much of the change in energy markets, Buckley said, predicting that India’s seaborne thermal-coal imports may drop to zero by 2020 and noting that its energy minister has said that importing coal doesn’t work economically for the country.

Buckley said developing wind- and hydro-powered electricity in India is already cheaper than importing coal, and that the cost of solar-powered electricity is only slightly more expensive. Solar costs, he added, have come down exponentially in recent years. Saddled by pollution problems similar to China’s, India will look to the Chinese as a model for a practical route forward, and may even enter into a trilateral pollution-control agreement with the U.S. and China.

Buckley, speaking with energy investors in mind, specifically, on this point, emphasized how the cost of both equity and debt for fossil-fuels holding is rising, while the cost of equity and debt for renewables is falling fast.

Jim Flood is an IEEFA contributor.