The future of coal gets three ticks

“THE news of my death has been greatly exaggerated”. If Mark Twain hadn’t said it first, then Hogsback reckons the coal industry could claim it as a motto after a week in which three high-powered studies acknowledged coal has a long future ahead.

Tim Treadgold

First cab off the coal rank was an oil company, ExxonMobil. Then came an Australian Government commodities forecasting agency, followed by the people who ought to know best, analysts at the prestigious International Energy Agency.

Of all the reports which acknowledged continued high levels of demand for coal, the most important was that released by the Paris-based IEA, if only because it was the first detailed look at coal by the world’s premier energy agency which normally specialises in oil.

Suddenly, or so it seems, everyone has a view on coal, which is more than flattering to an industry which the politically-correct environmental lobby wants to kill.

It is an acknowledgement that there is currently no viable alternative to coal.

For delegates recently returned from the United National organised climate-change gabfest in the South African city of Durban, the reports which give coal a tick are the equivalent of a wake up call delivered in the form of a bucket of cold water.

What the hard heads at ExxonMobil, the IEA, and the Bureau of Resource and Energy Economics have recognised is that coal has a bright future thanks to four powerful forces – demand, price, availability and lack of competition.

What a pity the Durban delegates didn’t have the documents when they gathered to discuss a coal-free world – or was the timing of the publications a deliberate act in avoiding controversy at a gathering of the politically correct and practically naive?

No one can say for certain that the reports were held back until after the Durban conference but The Hog suspects there was a degree of suppression to avoid controversy and to not be seen rubbing the noses of the anti-coal brigade in a bowl of reality.

And it is very much a case of reality meets dreams when the case for coal is stacked up against the arguments mounted by the cheer squad for renewable and alternative energy schemes which, laudable as they are, simply fail to pass the simple tests of, “Do they work as advertised, what do they cost, and who can afford them”

Coal clears those three hurdles comfortably, especially after one of its potential rivals in the energy game, nuclear power, suffered its Fukushima setback earlier this year.

Consider the core message of each report.

The IEA said it expected coal consumption to rise over the next five years at a rate of 600,000 tonnes a day, slightly slower than the breakneck expansion rate of 720,000 tonnes a day over the past 10 years, but with the slowdown all about the global economy slowing.

BREE, an agency working for the squeaky-green Australian Government, reckons coal’s share of national electricity production could drop from 74% to 38% by 2035, but only if the price of its primary competitor, natural gas, stays low. If the gas price rises, which it probably will as exports grow, then coal will retain a 52% share of the electricity market.

ExxonMobil, in its Outlook to 2040 report, can envisage coal’s share of global energy consumption declining, but only as a proportion of the overall energy mix and largely due to rising consumption of natural gas.

By 2040, the three major fossil fuels (oil, coal and gas) will still account for 80% of the global energy mix. Heavily promoted renewables will see their share of the cake rise from 3% to 7%.

If there is a common message from the three different attempts to forecast the world’s energy future it is that coal, despite what the critics have to say, will remain a cornerstone of the global economy – and that multiple predictions of the demise of the fossil fuel family have been more than premature, they’ve just been wrong.

And of the three forecasts, the one which probably deserves the closest attention (because it has more chance of being less wrong than most attempts to predict the future) is that from the IEA, if only because an international agency which has energy as its middle name has finally turned its sights to coal, a belated recognition that oil ain’t the only global energy source.

As well as seeing strong demand growth out to 2016, the IEA also sees strong coal prices with the European imported price for thermal coal rising from US$127 a tonne to US$138/t, and Asia’s imported price rising from US$131/t to US$142/t.

The IEA document is one that really ought to have been circulated in Durban if only to remind delegates at the climate-change conference that while it’s good to dream, it’s equally important to be realistic – though there’s a fair chance that no one present wanted to hear something so practical.