MAC: Mines and Communities

Longer term forecasts for coal positive ... or not

Published by MAC on 2013-10-20
Source:, statements, Huffington Post

The claim by energy consultancy firm Wood Mackenzie, noting that coal is set to overtake oil as the world's main source of energy by 2020 has set off a debate. They do have form for this sort of thing (as they als claimed that China would double its coal consumption by 2030.

They also seem to be the only analysts not projecting a peak and reduction in China. 

In response, campaigners noted that coal use in China and India seems to be slowing or shrinking. Certainly coal is facing new short problems (see: USA & China Bans New Coal Plants). Of course, such figures tend to be short-term, and longer term projections will be much more difficult to figure.

However, if the Wood Mackenzie figures are right then that is very depressing news for the climate.

Coal to overtake oil as main source of energy by 2020

Cecilia Jamasmie

15 October 2013

Despite government efforts to reduce carbon emissions, coal is set to overtake oil as the world's main source of energy by 2020, with potentially devastating effects in the environment, energy consultancy firm Wood Mackenzie said Monday.

According to William Durbin, president of global markets at Wood Mackenzie, China and India are turning to coal since it is cheaper and more reliable than oil or renewable energy sources. In the US, Europe and the rest of Asia coal demand is expected to hold steady.

China's dependence on coal is well known. Annual consumption exceeded 1 billion short tons per year in 1988 and has exploded since then, to an estimated 4 billion tons this year. This means the Asian giant gets about 70% of its energy from the fossil fuel, a number the government hopes to reduce to 65% by 2017.

However, the consultancy doesn't seem to agree. Speaking at the World Energy Congress, Durbin said China alone would drive two-thirds of the forecast growth in coal demand. Half of the power plants expected to built between now and the end of the decade will be coal-fired.

According to the latest report by the International Energy Agency (IEA), coal will be the main winner in Southeast Asia's energy mix.

This, says the IEA, will contribute to a doubling of the region's energy-related carbon dioxide emissions to 2.3 gigatonnes by 2035.

"To the degree that affordable coal has allowed hundreds of millions of people in emerging economies to enjoy the conveniences that the industrialized world began taking for granted long ago, its proliferation is a blessing," the agency's executive director, Maria van der Hoeven, wrote last year. "Yet for a society increasingly concerned about the amount of carbon it is sending into the atmosphere, the surge in coal burning is not good news."

She added that, despite some governments' recent initiatives to cut down on carbon emissions, the world faces the prospect of an increased risk of environmental damage as a result of a roaring consumption of the highest carbon fossil fuel.

Wood Mackenzie Says Carbon Policies Unlikely to Prevent A Coal-Fuelled World

Wood Mackenzie press release

14 October 2013

DAEGU/EDINBURGH/HOUSTON, - At the World Energy Congress (WEC) today Wood Mackenzie's President of Global Markets, Mr William Durbin, said that global government policies to reduce carbon emissions will not prevent a hydrocarbon world as coal will surpass oil as the dominant fuel later this decade. China and India's aggressive power requirements will be responsible for coal's burgeoning role in energy but US, Europe and Asia will still contribute to coal demand. As such, Wood Mackenzie expects existing carbon policies to have a muted impact. Instead, the pace of coal demand will be influenced more by local governments of emerging markets needing to balance economic growth, energy demand and environmental needs.

Mr Durbin says, "China's economic growth will continue to be driven by urbanisation and industrialisation as the government seeks to improve housing as well as create economic opportunities. At the same time, the pursuit of increased national wealth is needed to support a shift to growth based on consumption. Coal will be used to fuel the growth because, unlike alternatives, it is plentiful and affordable. Consequently, China's demand for coal will almost single-handedly propel the growth of coal as the dominant global fuel."

"Even with environmental concerns and global pressures, China and India just do not have the same latitude that more developed economies have to focus on carbon emissions at the risk of reducing economic development from higher cost alternative fuels and technologies. China could have cleaner air and use more coal to fuel its growth if current emission control technologies were deployed and used more effectively"

Global demand for oil in the year 2000 was 3,500 million tonnes of oil equivalent (Mtoe) compared to coal at 2,300Mtoe. By 2010, coal demand grew to almost 3,600Mtoe, just behind oil demand of 4,000Mtoe. Looking forward to 2020, Wood Mackenzie expects global coal consumption to reach 4,500Mtoe, overtaking oil which reaches 4,400Mtoe. This is a 25% growth in coal consumption from 2010-2020 with two-thirds of this growth being driven by Chinese coal-fired power generation.

China's power requirements will increase from 5,000 Terawatts per hour (TWh) in 2012 to 8,600TWh in 2020. Coal fired power generation accounts for 46% of that growth. Mr Durbin explains China's preference towards coal, "Firstly, there is limited availability of natural gas supplies due to the rapid pace of domestic demand growth and little progress in developing unconventional gas. Secondly, LNG and pipeline imports are two to three times more costly than domestic and imported coal. And thirdly, renewables cannot provide base load power. This leaves coal as the primary energy source."

Outside of China and India, global coal demand will be sustained. Mr Durbin says," If you take China and India out of the equation, what is more surprising is that under current regulations, coal demand in the rest of the world will remain at current levels. Even though natural gas and renewables make up the bulk of incremental power capacity in Europe, the US and other parts of Asia; coal demand will be sustained because of its price competitiveness."

In Europe, the struggling economy and low coal prices has rendered the European Union (EU) Emissions Trading Scheme (ETS) ineffective. The carbon price will need to reach €40/t to encourage fuel switching, which is unlikely before 2020. In North America, despite plentiful quantities of low cost natural gas, relatively inexpensive coal remains competitive in many locations. Southeast Asia has traditionally relied on low cost domestic gas for power needs but as gas supplies struggle to keep pace with demand, coal will become the dominant fuel into power by 2020. Lastly, throughout Northeast Asia, high fuel import costs, security of supply and nuclear issues will support growth in coal generation going forward.

Mr Durbin concludes, "We are unlikely to escape a future dominated by fossil fuels any time soon. And while carbon policies have their role in the more developed economies like Europe and the US, developing economies must first implement and enforce environmental regulations that limit other detrimental gases like sulphur dioxide, nitrogen dioxide , mercury and particulate matter before adopting carbon policies that rely on higher cost fuels or technologies. Hence, local issues in developing countries will do more to influence government policy as they will motivate a need for balancing economic development while managing localised environmental impacts in the foreseeable future."

India's Coal Bubble

Huffington Post

15 October 2013

A few short years ago the assumption that coal demand was essentially endless in China and India was seen as irrefutable. Now this 'coal consensus' is breaking as analysts from Citi Bank to Bernstein predict a rapidly approaching peak in Chinese coal demand. But while the end of the Chinese coal bubble has generated headlines the situation in India has flown entirely under the radar. Now the Indian coal bubble may have popped and no one seems to realize they're standing in the rubble.

To understand the depth and extent of the Indian coal bubble you have to first understand the country's unique problem: Despite sitting on the world's 5th largest supply of coal it can't secure affordable coal supplies. That's because the country can't mine coal fast enough, and has failed to expand transportation infrastructure (largely railways) to move coal where it needs to be (the power plants). The resulting supply crunch is so acute that power plants operators and Coal India have fought for years over 'Fuel Supply Agreements' while scores of coal plant developers have moved to India's coastline to bypass domestic supply problems in favor of expensive imports. In sum, this supply crunch is structural, and it's not going away anytime soon.

But it's not that India's coal supplies have stagnated for lack of effort. Even now Coal India and the Ministry of Forest and Environment have green lighted mine expansions across the country. The problem is expanding mining operations is easier said than done. You see if you layered maps of mineral resources, tribal populations, and endangered wildlife on top of each other you'd see a scary picture. That's because what's left of India's cheapest coal reserves lies in the exact same places as the country's remaining forests which also happen to be home to the country's remaining tiger populations and large numbers of tribal populations. It's this combustible mix that has fueled 'naxal' insurgencies in many parts of the country's coal belt.

What that means is that India's drive to expand coal supplies (as well as build new power plants) runs face first into fierce local resistance. These local communities have held back the goliath of coal expansion with little more than a slingshot and a rock. That heroism, aided by the beauracratic inefficiency of Coal India and a decrepit transportation infrastructure, has caused stagnating production, and heightened project delay (all of whichinvestors in Coal India would do well to take note of).

Of course tight supplies alone would not merit the title economic 'bubble.' That was formed by a deregulated energy sector given the green light to build a whopping 455 coal plantsunder the assumption that a coal expansion was inevitable. You see developers rushed headlong into new projects without properly assessing the underlying risks around fuel supplies, and worse, were underwritten by billions in investment from Indian banks. The result is a massive asset bubble whose financial rot could now affect the entire economy.

Unfortunately this is exactly the situation the Reserve Bank of India warned of in 2012 saying 'over-exposure to the coal sector posed systemic default risk' to the Indian economy. It was this warning that should have put the sector in deep freeze. Instead analysts around the world have predicted galloping coal growth, ironically much like they did in China until only a few months ago. But while the RBI warning failed to slow investment, or the narrative that a coal expansion was inevitable, two outside shocks began the inevitable process of deflating this bubble.

First came the coal-gate scandal which exposed $33 billion in coal leases that were simply given away to powerful companies and rich individuals developing power plants. With Anna Hazare awakening a middle class furious over rampant corruption the coal sector became tarred with the brush of corruption. The result is that dozens of mining expansions around the country have been quietly held in limbo as beauracrats seek to avoid any political exposure to the ongoing scandal. The already tight supply of coal squeezed even further.

Next came capital flight and the current account deficit (CAD) crisis. This was perhaps the knockout blow because it made financing coal projects more difficult while putting a macroeconomic strain on even big companies who might have been able to weather the storm. Particularly hard hit were projects reliant on already expensive imported coal because they have to pay for their fuel with foreign currency at a time when the rupees value continues to plummet. The most emblematic of these, Tata Mundra, has become in the words of Anil Sardana managing director of Tata Power an 'albatross around the neck.'

All of which brings us to our saga's climax: the news that a whopping 30 'distressed' coal projects are up for sale in India - and no one wants to buy them. This is the moment when the true nature of the coal expansion has been exposed for what it always was: an illusion. The problem is the fallout is only just beginning as State discoms who are supposed to buy the power, have said they simply can't afford it. That means these 30 projects may become stranded assets while new projects will find it nearly impossible to secure financing given that their customers are bankrupt.

But in every crisis is an opportunity and a phoenix may yet rise from the ashes. Already there are high profile calls from Akhil Gupta and Blackstone Group to diversify India's energy mix starting with solar. After all India still needs energy and it will have to come from somewhere. But the only way deliver is to heed the hard learned lesson from this bubble: coal won't deliver, it's time to diversify.

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Data: China coal surge flatlines

Damian Kahya & Lauri Myllyvirta

Greenpeace release -

18 October 2013

Chinese air pollution has prompted steps to cut back on coal use

Chinese coal use grew at less than 2% in the first 8 months of this year, in what appears to be a sharp slowdown in the country’s coal burning.

Reuters reports suggest that Chinese coal output fell 3.4% in 2013. The lower production was only partially compensated for by higher imports - which rose 15.5% in the first 8 months of the year.

Taken together an analysis of this data - alongside changes in inventories (though these are less certain) - suggests Chinese coal use grew by 1.4% compared to the same period in 2012, previous years had seen double digit increases.

The slowdown in coal use was much more pronounced than the slowdown in the wider economy and comes as analysts are suggesting global coal use could peak over the next decade despite claims that in the shorter term coal could overtake oil as the world’s most used fossil fuel.

Analysts at Citi argue that Chinese demand for thermal coal in power generation could peak even before 2020, because of slowing economic growth, a surge in renewable and nuclear capacity, efficiency improvements in coal power plants and reductions in energy demand.

China has recent taken a series of steps to cut down on coal use including caps in key regions. The city of Beijing recently claimed it intended to phase out all its coal-fired power generation capacity by the end of next year.

In India, the other major growth market for coal, coal use remains strong but the industry is reportedly beset with difficulties and recently 30 Indian coal projects failed to find a buyer.

Analysis by Lauri Myllyvirt

China to shut down two coal mines every day

Frik Els

12 October 2013

Of the 2.9 billion tonnes of global coal demand growth since 2000, China accounted for 2.3 billion tonnes or 82%.

China now accounts for 47% of global coal consumption - almost as much as the entire rest of the world combined.

But even as the country burns coal at an astonishing rate, it is working hard at cleaning up the industry.

The Chinese government will close at least 2,000 small coal mines over the next two years, the State Council said in a statement on Saturday.

China has some 12,000 operating coal mines and the closures will target coal mines with annual output of less than 90,000 tonnes and those with substandard quality coal or have bad safety records.

The new rules also tighten approval rules for new coal mines and introduces a ban on construction of coal mines with annual capacity of less than 300,000 tonnes. Mines with annual capacity of less than 900,000 tonne with low-quality coal and safety problems will also not be approved.

The latest initiative follows rapid progress in consolidating the industry in 2012.

China's large-scale coal ventures decreased by 1,500 to 6,200 in 2012 through a number of measures.

China shut down 628 small coal mines, improved technological processes of 622 mines, merged 388 mines and phased out 98 million tonnes of outdated production facilities during the year.

Despite the crackdown, production in the country reached 3.66 billion tonnes in 2012, up by 4% compared to the year before.

According to government data the fatality rate per million tonnes mined in 2011 was 0.564, down sharply from the 4.94 recorded in 2002 but a far cry from 0.019 rate in the United States.

Some 1,384 people were killed in coal mine accidents in China in 2012.

China to shut coal mines in safety overhaul


12 October 2013

BEIJING -- The Chinese government has pledged to close more unqualified and dangerous coal mines by 2015 as the country strives to improve its alarming safety record.

At least 2,000 small coal mines will be closed by the end of 2015, the State Council, China's cabinet, said in a statement on Saturday.

The closures will target coal mines with annual output of no more than 90,000 tons that fail to meet the safety rules, and mines based on substandard coal resources that are prone to accidents, according to the statement.

The government will also tighten the development threshold by ending approval of construction on coal mines with annual capacity of less than 300,000 tons.

Coal mines with annual capacity of less than 900,000 tons and with substandard coal resources prone to accidents will not be approved.

To support the upgrading of facilities, the government will allocate more funds to areas where small pits are closed.

China was once criticized for having the world's deadliest coal mines due to its deep reserves of coal and loopholes in regulating the nation's 12,000 coal mines.

To protect workers' lives and appease the growing public anger, the government has taken iron-fisted measures to reshuffle small pits, which are responsible for two-thirds of annual accidents, and intensify punishment for government and company officials accountable for the disasters.

According to data from the State Administration of Work Safety, the fatality rate per million metric tons mined in 2011 was 0.564, down sharply from the 4.94 recorded in 2002.

Some 1,384 people were killed in coal mine accidents in 2012.

Despite improving records, China still has a long way to go compared with developed countries. In 2011, the fatality rate per million metric tons mined in the United States was only 0.019.

Miners face cash crunch

Global Times

28 August 2013

China's coal mining sector faced an increasing risk of cash shortage caused by huge outstanding sales payments, mirroring the difficulty of thecoal miners dealing with sluggish market demand and falling price, theShanghai-basedNational Business Daily reported Wednesday.

The coal miners had a total of 330.8 billion yuan ($54 billion) in their account receivable in the first half of this year, up 18.8 percent from a year ago, hitting a decade high, the newspaper reported citing the China National Coal Association.

With falling prices of coal as a result of oversupply and withering market demand, the profits of coal mining sector is in a stark contrast to the downstream power producers.

The total profit of the coal mining sector slid 43.8 percent year-on-year on average in the first seven months, while the total profit of the power producers grew by 73.5 percent year-on-year during the same period, official data showed.

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