Summary: Coal is apparently back. We have seen more and more commentary that suggests the surge in coal use means the switch to renewables is stalling. Just as one swallow doesn't make a summer, the current crisis doesn't mean that coal will make a comeback.
Why this is important: Its easy to get carried away with short terms trends. In this case, a combination of supply chain issues and the impacts on O&G prices from the war in the Ukraine. It's led to a rise in coal use in some countries, but this feels to us like a short term bridge rather than a big theme. But economics will win out in the medium term.
The big theme: While the trend of more solar and wind generation in our electricity supply mix is clear, how quickly we can get there is harder to define. We should never forget that electricity supply is about reliability, resilience and flexibility. Which means that in some cases we might have to make short term decisions, such as using more coal, that seem to take us away from our desired end destination. But we caution against interpreting this as meaning that coal, or even in many cases gas, has a positive long-term future from an investing perspective.
Yes, we are using lots of coal, but for how long?
Summary of a story from The Sydney Morning Herald
The biggest clash between the mining industry and federal government in more than a decade is brewing over a cap on fossil fuel prices after the Australian Energy Regulator confirmed rising coal prices are a key driver of soaring power bills, a claim the miners have fiercely denied. The regulator said higher power prices came about when more coal than usual was bought on the spot market after domestic supply was reduced by wet weather. This meant soaring international coal prices were unusually influential in driving up wholesale prices.