Coal use set to increase in
the global energy mix
May 1, 2008 - Datamonitor
A combination of strong demand, record oil
and gas prices, concerns over energy security
and a reluctance to recommit to nuclear energy,
has seen a renaissance of coal in the European
energy mix. This is a trend closely mirrored
in the US and Asia. However, while coal might
help to fill growing energy security gaps, it
raises some profound environmental questions.
No less than 50 coal-fired plants have been
slated for construction over the next five years
in the EU alone, while India and China are currently
constructing a new coal-fired plant every week.
Coal is also continuing to gather momentum in
the US; 150 proposals for coal-fired plants
were put forward in 2007, most of which are
likely to gain permits.
The fact that coal is becoming more prominent
in the generation mix should, however, come
as little surprise. The International Energy
Agency has long projected a rise in coal usage
based on energy security grounds. Indeed, there
are 200 years worth of coal reserves in geographically
dispersed areas, with deposits evenly distributed
between the US (27%), Russia (17%), China (13%)
and India (10%). Latest estimates suggest that
coal will account for 27% of the global generation
mix by 2030, up from the 24% that it holds today.
Coal also accounts for 60% of global energy
Given the abundance of resources and coal's
geographical spread across politically accessible
states, a number of countries are starting to
see the fuel as the only viable option to alleviate
energy security concerns. In effect, coal allows
countries to place a reasonably stable and predictable
egg into supply side baskets. Within the EU,
Poland still relies on coal for around 90% of
its generation mix, followed by the Czech Republic
(65%), Greece (62%) and Germany, (around 50%).
That said, like its liquid relation (in the
form of oil), coal prices are beginning to increase.
Coal has seen a threefold price increase over
the past few years, driven by supply disruptions
in producer states such as South Africa. However,
rather than pushing investors away from carbon-based
fuels and towards other forms of energy production
such as renewables; as yet, the core result
has been to bring previously uneconomic sites
across Europe and the US back into consideration.
However, despite coal's advantages when it
comes to energy security, the fuel has numerous
disadvantages in relation to climate change.
Coal remains the dirtiest carbon-based fuel,
already accounting for 40% of global emissions.
With coal forming a core part of the next European,
US and Asian investment cycle, this places a
major premium on developing carbon mitigation
strategies, such as clean coal technology and
carbon capture and storage (CCS). So far, the
signs do not bode well; CCS is not yet technically
or commercially viable.
Although there are a number of small demonstration
CCS projects in Europe and the US at early stages,
most have either failed to make progress or
face crippling cost overruns. In January 2008,
Washington cancelled the US's largest CCS demonstration
project in Illinois on a cost basis. A number
of European projects are hitting similar problems.
Nevertheless, the greatest environmental concern
is that new coal-fired plants are being built
every week in India and China, most of which
are not constructed in a way that is amenable
to CCS. The same problem is also cropping up
closer to home. Adaptable plants cost around
10-20% more to build than conventional plants,
with only a handful of such plants in existence
today in Europe. For most coal-fired plants,
the costs of converting would be extremely high,
perhaps too high even once an implied price
for carbon is factored in.
An additional problem is where the carbon would
actually be stored. Geologists have warned that
the number of sites that could be considered
safe for storage are limited, and have even
gone as far as to warn that carbon storage could,
potentially, be just as dangerous as trying
to store nuclear waste.
This is not to say that greater investment
in clean technologies will not be forthcoming
as coal usage increases. However, at this stage,
there remains a blunt trade-off between security
of supply and greenhouse gas emissions. Indeed,
what plays well for one, does not always play
well for the other. Given the perilous warnings
voiced by the Intergovernmental Panel on Climate
Change (IPCC) regarding the need to tackle climate
change by 2020, the need for new technology
to be both developed and dispersed is crucial
if the black stuff is to be turned green.