How To Profit From The World's Fastest-Growing Energy Source
By Sean Brodrick | June 25, 2014 |

What's the fastest-growing energy source in the world? Solar? Nope. Natural gas? Nope.

It's old king coal.

Yep, coal is often seen as one of the world's dirtiest power sources. But it's also one of the cheapest. And that led to an explosion of coal use in developing countries last year.

The industry is worried that new regulations that President Obama pushed through the EPA will destroy coal. But coal will survive the war that's being waged against it. And many of the big coal companies could thrive.

Global consumption of coal grew 3% last year. That put coal's share of total global energy use at 30.1%, just below the 32.9% for crude oil, according to a new report from energy giant BP (NYSE: BP).

China was the world's biggest consumer of coal, followed by the U.S. and India.
In China, coal accounted for 67.5% of the total energy demand. Now here's the crazy part. Other sources of power - solar, wind, you name it - are growing so fast in China that even though coal provided more than two-thirds of energy supplied, it was the lowest share coal had of the total energy market since they've been keeping records. Coal was 69% of China's energy supply in 2011.

Worldwide, energy consumption rose 2.3% in 2013. That's faster than the 1.8% rise of the previous year, but below the 10-year average of 2.5%. Emerging economies like China accounted for 80% of demand growth.

In the U.S., coal supplies 39% of electricity.

The EPA's new rules target reducing carbon dioxide pollutants by 30% by 2030 from 2005 levels.

But in a move that shocked many, there is no change to coal pollutant levels for at least the next six years.

And utilities are already phasing out inefficient old coal-fired plants, so hitting the 2030 targets should not be devastating to coal.

In fact, American coal use will drop about 25% by 2020. But we'll still use a lot of coal. In fact, coal will still be used to generate nearly a third of U.S. electricity by 2030, according to the EPA.

So the new EPA regs are hardly a nail in the coffin for the coal industry.

In fact, if there's any threat to coal producers, it's low price. Coal is near a five-year low now.

However, many in the industry expect that to change next year as India, China and other emerging markets ramp up their coal use even more.

So who could win in that equation?

I think big coal companies like CONSOL Energy (NYSE: CNX), Peabody Energy (NYSE: BTU) and China Shenhua Energy (OTC: CSUAY) could be winners. Also, equipment providers like Joy Global (NYSE: JOY) and United Tractors (OTC: PUTKF) could benefit.

And you can find them all in the Market Vectors Coal ETF (NYSE: KOL).

Looking at a chart, you can see that the ETF is way off the highs it hit early in 2013. Coal companies were decimated as prices fell.
But Market Vectors Coal has tracked sideways for a year now, coiling up. Sure, it could go lower. But coal stocks are beaten into the dirt. As hard as this industry sold off, the easiest path might be higher.

--Sean BrodrickSource: Investment U

 

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