PAGE Blog Business Weekly Magazine
Coal is a valuable and plentiful natural global resource. Not only does coal provide electricity, it is also an essential fuel for steel and cement production, and other industrial activities. World coal consumption was about 7.25 billion tones in 2010 and is expected to increase 48 per cent to 9.05 billion tones by 2030.
Total world coal production reached a record level of 7,678 million tones (mt) in 2011, increasing by 6.6 per cent over 2010. Worldwide, lignite production rose by 5.9 per cent to 1041 mt in 2011, reaching a level not seen since 1990. OECD lignite production rose by 3.5 per cent to 604 mt after three years of decline, led by increases in Germany, Poland and Turkey. Non-OECD lignite production rose even more strongly, increasing by 37.5 mt to a record level of 437 mt in 2011. Further more, coal plants are the most polluting of all power stations and it is identified 1,200 coal plants in planning across 59 countries, with about three-quarters in China and India. The capacity of the new plants adds up to 1,400 GW to global greenhouse gas emissions. China became a net importer of coal in 2009 but the biggest changes are fast-rising imports by Japan, South Korea and Taiwan, which all have large numbers of coal-fired plants but produce virtually no coal of their own.
However, Germany, UK and France remain in the top 10 importers, and coal use rose 4 per cent in 2011 in Europe as prices fell and plants due to close under clean air rules use up their allotted running hours.
Many developing countries, such as Guatemala, Cambodia, Morocco, Namibia, Senegal and Sri Lanka, and Uzbekistan, are planning new coal-fired plants even when they produce almost no coal at all.
USA
In 2009, the Energy Information Administration listed 594 coal-fired power plants in U.S, down from 645 coal-fired power plants in 2001. Of these 594 plants, 341 were owned by electric utilities, 100 by IPPs, and the remainder by industrial and commercial producers of combined heat and power. For the twelve months ending in June 2012, United States’ coal plants produced 1,563,298 gigawatt hours of electricity, or 38.4 per cent of total U.S. electricity production. Currently, more than 9,000 mg of coal-fired generation retired in the United States in 2012 as stricter federal pollution standards move closer to reality and cheaper natural gas makes coal plants less attractive economically.
China
Most power generated in China comes from coal-fired plants, which makes power producers heavily exposed to the prices of the commodity. In order to keep electricity tariffs stable, the government has asked coal suppliers for years to sell to power firms at contracted prices, which are far below market rates.
Presently, China’s coal and electricity companies signed deals for a total of 1.87 billion metric tons of coal for 2013, an increase of 55.8 per cent year-on-year.
India
India’s energy mix mainly comprises of coal (52%), oil (32%), gas (10 %), hydro electricity (5 %) and nuclear energy (1 %). Coal continues playing it’s dominate role in India’s efforts to achieve a targeted 7 to 8 per cent economic growth and its demand is expected to rise 41 per cent in the year ending March 2017. Shortfall in coal supply and low efficient power generation infrastructures are to blame for its constant power shortage especially this July’s worst-ever blackout in India’s history. The country produced about 578 mt in 2011. 68.7 per cent of China’s electricity comes from coal. The government of India has made various steps to promote clean coal technologies such as underground coal gasification.
Australia
Coal in Australia is mined primarily in Queensland, New South Wales and Victoria. It is used to generate electricity and 54 per cent of the coal mined in Australia is exported, mostly to eastern Asia. During FY 2000-01, 258.5 mt of coal was mined, and 193.6 mt exported. Coal also provides about 85 per cent of Australia’s electricity production. In FY 2008-09, 487 mt of coal was mined, and 261 mt exported.
Indonesia
Indonesia has introduced bench mark pricing mechanism for its coal since February 2010, and it has implemented for the domestic supplies as well the export market. Indonesian coal producers have shipped approximately 8.236 mt of coal to China in June, which was 0.24 per cent higher than May 2011 exports. However, Indonesian producers failed to push more coal to India in June. Indonesia’s coal production itself expanded from 217 mt in 2007 to 353 mt in 2011, nearly doubling in just 4 years, driven primarily by exports. It was estimated that the low prices are challenging for Indonesian small-to-medium coal companies with some of them having stopped production.
The government is expected to see a massive increase in power supply this year to 19 coal-fired power plants, with a combined operational capacity of 3,620 mw.
Pakistan
In Pakistan, Thar has one of the largest lignite deposits in the world that is 175 billion tones which has the capacity to meet energy requirements of the country for at least 100 years.
Pakistan’s existing power generation mix with 40 per cent reliance on imported furnace oil is not sustainable as reflected in country’s inability to utilize 100 per cent of its power generation capacity due to lack of funds for furnace oil purchase.
Development of power plants on imported coal will merely shift reliance from one imported energy source to another with inherent international pricing risks.
The government has decided to convert all the existing and new power plants on the specification of Thar Coal versus earlier plan of converting these on imported coal. In a historic decision, the government has also decided that a coal off-take agreement would be signed between Generation Company (GENCO) and Sindh Engro Coal Mining Company (SECMC). The government of Pakistan should finance mining projects in Thar in order to overcome the shortage of electricity in the country.
