Good afternoon. My name is jane nakano. Im senior fellow with csi energy and National Security program. And its my great honor to welcome peter fraser, who is the head of gas, coal Market Division for the International Energy agency based in paris hes here to launch the coal 2017 analysis and forecast of 2022. Thats the name of the publication. The coal has been the worlds dominant fuel for more than a century, but its future use has been under quite a bit of scrutiny today. In the power sector, certainly, i guess the robust deployment of renewables then combined with the cheap gas, particularly in north america, have been putting quite a bit of pressure on coal Power Generation. So the ieas coal 2017 is one of the ieas signature publications, and its previously known as the midterm coal Market Report. This report provides comprehensive analysis of recent trends and forecasts of 2022. In demand supply and trade, not only at the global level but at the regional level as well. And peters here to walk us through on some of the key highlights, highlights from its analysis and forecast. And essentially help us better understand whats happening in the coal market and also where the markets are headed to in the future, through 2022. Peter fraser rejoined the International Energy agency in december 2016 in the current position, the head of gas, coal, and power markets division. And previously, between 1998 and 2004, he was a senior electricity policy adviser with the iea. So this is his second tour. In between, peter worked at the Ontario Energy board, which is the Energy Regulator in the canadian providence of ontario. Most recently as the Vice President for Consumer Protection and industry performance. From 1989 to 98, he was an Energy Policy adviser at the Ontario Ministry of energy. So its with my great pleasure and peter will speak for maybe 20 to 30 minutes and then i will have a couple questions. And well have some discussion up here and then certainly open the floor for questions and answers. Please. Well, good afternoon, everyone. Its a pleasure to be here at the center for strategic and International Studies for the u. S. Launch of the ieas coal report 2017. Our analysis, the current state of global coal markets and a forecast of coal demand out to 2022. As jane mentioned, our global launch took place earlier today in delhi, the first time we have launched a major iea report of global reach in india. As india became an associate member of the international agency. Energy agency earlier this year. I want to thank csis and particularly jane for the work done in organizing this event. As jane mentioned, coals played a big role in the Worlds Energy system for a long time. And it took until around 1910 for the consumption of coal worldwide to reach about 1 billion tons a year. To get from 1 billion tons to 3 billion tons took nearly 90 years. In part because the increased role of oil in the 20th century. But to get from 3 billion to 5 billion only took 12 years. We have just come through the far side of a big expansion in coal demand. But since around 2012, 2013, demand was the first plateau, and then as ill get into now, demand actually then is dropping. In fact, last two years, 2014 to 2016, marked the biggest twoyear drop we have ever seen in coal demand. Unlike the previous occasions where we have seen such drops, this occurred during a period of Global Economic growth. It was also the third Consecutive Year that growth in consumption in china occurred. Thats not surprising since china was the source of much of the increase in that going from 3 billion to 5 billion tons a year. Its also worth noting that unlike many other areas, the chinese drop is actually driven more by consumption outside the power sector. Power sector consumption of goal actually grew during this period. But its not just china. The United States as well. In the u. S. , it is very much a Power Generation story. Its about to switch away from coal to gas, which is cheaper and also the growth in renewables, which ill get into in a little while. So these two large coal consuming countries have had significant drivers, but we also see in europe continued drop. Drop in demand. Now, despite these major coal users reducing their demand, there is growth in some regions. India and a few countries contributed to this growth, and those were driven primarily by Power Generation demand. Now, with the drop in the last two years, actually in 2017, we are seeing a rebound. Driven by growth in china and india, the u. S. May have a little bit of growth, but its really pretty flat. And this demand rebound is also supported higher prices throughout the year. So the question is, is what were seeing in 2017 a new trend or is it a blitz . Lets find out. Let me start by talking about Power Systems in transformation. Coal provides nearly 40 of the electricity worldwide, and coalpowered generation accounts for two thirds of global coal consumption. Its important to understand how the Power Generation mix is evolving throughout the world. Let me show you whats happening in four countries. Now, the chart shows coalPower Generation in 20122016 and changes in power demand and other generation supply in the period. This first chart is the United Kingdom. Its probably the case of the quickest transition from coal generation has occurred. A combination of an actual design in power demand, an old coal fleet, new environmental regulations, Strong Renewables growth, and last but not least, a co2 price floor of an extra 18 pounds per ton over the ets value forced the closure of some coal plants. Coal share in the power mix went from 40 in 2012 down to less than 10 in 2016. Thats quite a rapid change. Now, let me turn to the note th scale here. A factor of ten larger. In the u. S. , certainly natural gas has hit coal. We have seen a drop, but its not just the story about natural gas. Since 2012, we have seen a drop of about 275 tear awatt hours of coal electricity. To 2016. Thats explained both by natural gas, which is over half of that, but also by renewables, which has also grown considerably. Add into that, of course, the demand growth has been very weak. So coal share of the power mix, and you can go back ten years ago, which was close to 50 , is now down to 30 of the power mix today. And last year, as many of you may well know, Gas Generation actually accounted for more of the u. S. Electricity supply than coal generation. That was the first time that has happened. Next, germany, and note again the scale. Its double the uk, but i guess a fifth of the u. S. That this in the german case, we have a quite different situation. Quite interesting to compare germany and the uk here. Like the uk, theres a big growth in renewables. But unlike the uk, theres no corresponding shrinkage in coalPower Generation. A couple factors to explain that is you can figure out from the chart, one is of course a demand increase. And secondly, secondly, and this is the big difference from the uk, Gas Generation actually decreased in germany over the period. Main reason for that is relative prices, unlike the uk, they dont have a carbon price floor in germany. They just price the etf where carbon prices are really low. So as a consequence, theres been very little change despite the big introduction of renewables. And finally, lets look at china. Now, in china, youve got a combination of factors going on here. But diversification in Power Generation from coal, which is by far the dominant source, means a lot more renewables, more nuclear, and some more natural gas in the generation mix. But power demand growth has been bigger than that, than the others combined. As a result, coal generation itself has also increased during the period. So we see four different countries, four different stories with rather different impacts on coal generation. One of the common things in all of them is the growth of renewables. And certainly, thats going to be a big factor affecting fossil fuel generation in the years to come. But growth or lack of growth in these countries is not the whole story. Theres a reality in electricity access in developing countries many developing countries thats very different from the more developed oecd countries and different even from china. If we combine bangladesh, pakistan, india, and the aseaen region, the first four across there, and there are more than 2 billion people there. The per capita consumption, as you can see, is rather low. Averaging if you put them together, averaging about 1,000 kilowatt hours per capita. Thats already rather low compared to what you see in china. Which is already above the global average. Lower still when we start to compare the average of the oecd countries, which i think i can get. See, more than double again. Now, you notice also, i did not put the u. S. On this chart, and its because the u. S. Per capita consumption is literally off the chart. So its possible, its possible and even i think likely that developing countries will not reach the oecd level even in the future. Theyll probably follow a Less Energy Intensive pathway, but theres no doubt that electricity consumption in these developing countries will increase with economic growth. And while we remain quite optimistic about the development of Renewable Energy and the future role of natural gas in some of the countries, coal will also supply a significant share of the growing electricity needs. Lets now take a look at price. This chart will plot the prices in europe. Europe, the most liquid coal price index. After a long decline in coal prices over more than four years and by early 2016, futures markets had a very bearish outlook on the future of the prices. As you can see, they anticipated the prices to continue to fall. Reality is quite different. Large part of this was supply side reforms in china. Which pushed prices up and increased demand for imported coal in china. After a brief period of decline in the First Quarter of 17, prices have been moving up again. And price in china is one of the main reasons well talk about in a little more detail later. So heres part of the explanation, and part of the influence in prices Going Forward. Nearly half of the worlds coal is consumed in china and produced in china, Chinese Government policy on coal is going to be very important to the world coal markets. The government has in a very transparent way, has defined how its going to aim for having a price target for coal. And so its defined three areas. The green area, which is the i guess, their comfort zone, as the price moves, the price for chinese coal moves in that range, theyre fine with it. When it moves into the blue strip above or below, thats an area where they will say they will be monitoring but will not need action. But when it moves into the red, thats when they feel action is required. Now, if i just plot that over the last couple years, you can see their discomfort that they would have felt in 2015, early 2016. They took action to limit supply. Closed a lot of old and inefficient mines. Limited the number of working hours of miners. And that did push the prices up a little high, in fact. So prices since that time have been falling back down. Theyre now back down towards the range, towards the upper edge of the range, and certainly something that we think is going to be an important factor influencing prices in the future. Part of the reason we say that is that i have plotted the northwest europe price index. We can see a good correlation between the two. Let me also now briefly mention coke and coal prices. Because we have seen a lot of volatility in those prices in the last year and a half. So thats new capital. And thats the australian prime hard coking coal. And the reason for that is queensland, the world depends a lot on queensland coking coal. More than half of total exports of coal are coming from queensland. And when you have weather events such as cyclone debbie, it can have a very strong shortterm impact on the coking coal price. As you can see, prices jumping up from doubling in a very short time. Very short time, as a result of weather events, severe rain has also been a factor in one case. As a result, the prices jump up and down. Now lets turn to lets turn to the demand supply picture. What im going to present to you is a forecast and ill build it up to the total demand you see at the top. First of all, china. In china, we see a structural and flow decline in coal demand with annual fluctuations to meet market needs. In fact, this year, 2017, the strong power demand growth and weak hydroelectric production meant coal demands increase, but in the coming years, we expect coal use to decline, particularly in the nonpower sectors. As gas is substituted for coal in residential and small Industrial Boilers. Together with the economic changes that we have in china, lower Energy Intensive growth and progress in energy diversification, coal demand is not likely to grow substantially. In fact, we have it going down on the average of. 1 a year over the period. So if i turn now to india, power demand growth will be robust. This is the main driver of coal demand growth. This is despite the fact we forecast over 150 terawatt hours of win and solar Power Generation growth from 2016 to 2022. Electricity growth and demand in india will be more than this and gap will have to be filled by coal. Countries grow at a stronger rate, averaging 5. 9 a year. Indonesia, vietnam, malaysia and the philippines are increasing Power Capacity and investment in coalPower Generation is part of that additional capacity. Now, the u. S. In the u. S. , we see a decline driven by sluggish power demand, growth in renewables, and some growth on the gas side as well. However, the decline will be much slower than we have seen in recent years. The story in europe, this is the european union, has coals continuous decline. The eu represents only 6 of the global coal demand, and this year will decline over time, with more countries committed to phasing out coal plants. The main question about europe is to what extent that decline will actually accelerate. So with the others, other countries which i didnt mention here, some of which youll see increases in places like bangladesh and pakistan, and others where there will be decreases, canada, for example, but overall, theres a bit of a growth above. 8 of growth there. But what we see, what we see overall is demand being pretty flat after this years increase. In other words, this years growth is a blip. When you think about it with the coal demand plateauing in 20122013, what this means is about a decade where coal demand has been roughly the same. Roughly stagnant. So let me talk a little more detail about some of the countries. Again, let me start by turning to china. Should note that some other areas in china, the growth is going to grow. There is going to be some growth in coalpowered generation. There will be growth in demand for coal conversion, some coal to liquids conversion and coal to gas conversion. But as there are going to be more than offset they are going to be more than offset by this decline in consumption in the small residential and Industrial Boilers and the changes in the economic factors which are leaning to less energyintensive growth. Now, this also has some interesting geographic implications which is going to affect the International Coal markets more. So for example, when we look at where those boilers are being switched out, its the majority of those are in the coastal areas. As you can see here, the three areas on the right. Its significant also, coal phaseout in the other areas, amounts to over 100 million tons of coal we think will be switched out, coal use we think will be eliminated, switching principally to gas. Its not the only factor that will affect coastal consumption. A second factor affecting coastal coal consumption comes from the construction of ultra high voltage lines. Which in effect replace coal consumption in coastal areas with coal consumption from Power Generation in coal areas in the interior. In addition, of course, these power lines arent just going to take coal power. Not just going to be coal wire. Its also going to be wind and in the south, the lines in the south, hidropower by wire as well. But what it will do is reduce demand in the coastal areas. Thats important because thats where the imported coal goes to. It doesnt go to the interior. It goes to the coast. We think the impact of these developments on global coal demand, on global coal trade will be even more significant. Another country where this is important, where import dependency is a big issue, is india. And this slide is to show you how Coal Production increase has been reducing import dependency. The black bars here show the contribution from investing in renewables in reducing coal use in india, which we have assumed here comes from imported coal. But theres a second and more important factor, which i think you can see there in the light bars. And these second sets are the production increases were seeing in india as a result of reforms in coal in india and other efforts to improve Coal Production. As you can see, these are very significant, and we saw coal import decline in india in 2016, and our outlook, we see further decline in those imports out to 2022 from about 101 million tons in 2016 to about 89 million tons