Environmentalists would have you believe that coal is a bad fuel option. While there's no doubt that coal is a dirty fuel, Peabody Energy (BTU) isn't ready to see its business pushed aside and is fighting back. Even if you don't agree with this coal giant's take, you should consider its side of the argument.

Not enough power
One of the lead issues of the Peabody-backed Advanced Energy for Life campaign is the fact that billions of people in the world lack access to reliable electricity. Coal is a cheap and plentiful resource that can help solve this problem. That's good news for miners, particularly those with coal operations in Australia, like Peabody, Rio Tinto (RIO 2.25%), and BHP Billiton (BHP 0.92%).

(North Korea compared to South Korea at Night. Source: NASA)

That's because Africa and Asia are two of the regions in desperate need of more power. Although developed nations are looking to reduce coal's percentage of the overall energy pie, developing nations don't have that option because they are still trying to build their pies. And that spells a huge opportunity for coal: According to Advanced Energy for Life if just China and India, "...used the per-capita energy of Europe, the world would use twice as much coal... than it does today."

With operations strategically located near these still developing countries, Rio, BHP, and Peabody are well positioned to supply the region. That said, thermal is a much bigger piece of coal-focused Peabody's business than at diversified miners Rio and BHP.

Sticker shock
Access to reliable energy is the really big picture, but it's not the only issue. Cost is increasingly important, and the U.S. market is a perfect example. According to Peabody, "The states that don't use coal pay electricity rates that are more than 50 percent above states that use substantial coal for electricity generation." No wonder developing nations like coal.

Natural gas is the fuel that has been displacing coal domestically because of relatively low prices, a situation not replicated in other regions of the world. However, this winter's frigid temperatures pushed up demand and prices for gas and electricity prices weren't far behind. Consolidated Edison (ED 0.64%) customer Jerilynn Mabry of Harlem told the New York Post that her bill jumped 17% between December and January, and is about double the norm. The 64 year old was angry enough to complain to AARP.

Con Ed passes on the cost of generating electricity via a supply charge. That charge was up over 80% year over year. Since Con Ed is just passing on its costs, it's hard to blame the company for spiking energy prices, but customers don't care why they are paying more and obviously see the utility company as the adversary.

Cleaner options
The biggest knock against coal domestically, however, is pollution, an area in which Peabody points out change is happening. For example, "Coal used for electricity generation has increased more than 170 percent since 1970, while key power plant emissions have been reduced by nearly 90 percent per unit of electricity." Now that carbon has taken center stage, there's no reason to believe that it, too, won't see a similar improvement.

(Source: ineligible, via Wikimedia Commons)

Southern Company's (SO 0.90%) Kemper plant is the test case. Kemper is using the newest coal burning technology and employing carbon capture. The plant is expected to be as clean as a similarly sized natural gas plant. Southern is the first to try this technology combination and is over budget. However, if the plant works as planned, it could be an important step toward cleaning up coal's image. That, in turn, would be a boon to the domestic coal producers; Peabody is one of the largest.

Vested interest
There's no question that Peabody has a vested interest in coal's future. However, its arguments shouldn't be disregarded out of hand. Demographics, costs, and technology could all work together to make coal more desirable the world over. While coal is still down and out, you might want to reconsider your take on its future.

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