Keeping an eye on coal

Energy transition

Continuous Miner for underground coal mining (photo: Xlxgoggaxlx/Wikipedia)

With a global increase in renewable energy sources, we’ve now begun an era of energy transition moving towards a lower carbon emissions future. The diversity of possible energy sources – including the quickening pace of innovation and reductions in the cost of renewable energy production – does much to ensure energy security and hopefully to help provide energy for those who are now without access.

Also playing a large role are the declared intentions of governments to shape policy with the aim of meeting the goals of the original Kyoto Protocol in 1993 and the subsequent 24 COP conferences. In addition to policy incentives, raising energy efficiency, and carbon-neutral energy production, reducing climate gas emissions will ultimately require phasing out the most carbon-intense energy sources.

According to the International Energy Agency – the IEA – currently one-third of current global CO2emissions are the result of coal-fired plants, which provide 27% global energy production.

World generation capacity – renewables make up two-thirds of all capacity additions worldwide to 2040 (illustration: OECD/IEA)
World generation capacity – renewables make up two-thirds of all capacity additions worldwide to 2040 (illustration: OECD/IEA)

We’ve already seen the UK move from coal to natural gas to generate electricity, but more recently the technologies that disrupted the oil market some five years ago have also created a gas revolution that been a big part of the market shift away from coal – and COemissions from gas are roughly half coal emissions.

According to the World Coal Association, currently more than 7,269 million tonnes of hard coal are produced worldwide as well as 787 tonnes of lignite, with China, India and the USA as the top three producers. China (with over 3,243 tonnes in 2017) produces more than four times the amount as second placed India (708 tonnes).

At the end of 2018, the U.S. Energy Information Administration (EIA) reported that, “EIA expects total U.S. coal consumption in 2018 to fall to 691 million short tons (MMst), a 4% decline from 2017 and the lowest level since 1979. U.S. coal consumption has been falling since its peak in 2007, and EIA forecasts that 2018 coal consumption will be 437 MMst (44%) lower than 2007 levels, mainly driven by declines in coal use in the electric power sector.”

Early in 2019, EIA reported that of the 1,435 coal mines that were operating in 2008, more than half have closed:

“In the United States, decreasing demand for coal has contributed to lower coal production, which has fallen by more than one-third since peak production in 2008. As U.S. coal demand has declined, the number of active coal mines has decreased by more than half, from 1,435 mines in 2008 to 671 mines in 2017. As the U.S. market contracted, smaller, less efficient mines were the first to close, and most of the mine closures were in the Appalachian region.

“Although underground mines had a larger percentage of closures from 2008 to 2017 (60% versus 49% of surface mines), surface mines have seen larger declines in production, falling 39% compared with 24% for underground mines. Most coal regions contain a mix of both surface and underground mines, except for the Powder River Basin in southeast Montana and northeast Wyoming, where large surface mines account for more than 40% of total U.S. production.

“The uptick in mine closures since 2008 has largely been driven by economics, and smaller, less profitable mines have been more susceptible to closures. Several factors dictate the profitability of mines, including the method used to extract the coal.”

Although the US coal mining and consumption has declined, the IEA’s latest coal market report, Coal 2018 forecasts that, “While global coal demand looks set to rise for the second year in a row in 2018, it is forecast to remain stable over the next five years, as declines in Europe and North America are offset by strong growth in India and Southeast Asia….”

“Air quality and climate policies, coal divestment campaigns, phase-out announcements, declining costs of renewables and abundant supplies of natural gas are all putting pressure on coal. As a result, coal’s contribution to the global energy mix is forecast to decline slightly from 27% in 2017 to 25% by 2023,” says the IEA.

The IEA also laments, “…in a growing number of countries, the phase out of coal-fired generation is a key policy goal. But market trends are proving resistant to change.” Yet the Coal 2018 forecast is that China, which accounts for roughly half of the global coal consumption, will see coal demand falling approximately 3% though 2023.

Coal may be regionally down, but it’s are too soon to count it out. As the IEA forecasts, although energy sourced from renewables and gas will rise, the demand for coal is set to continue. And that’s something to keep our eyes on.