12.18.12

A Desperate Need for Electricity in China and Other Developing Countries Is Fueling Global Coal Use

In the United States, natural gas and renewables are taking a bite out of coal’s market share. But outside America’s borders, massive electricity demand is fueling an insatiable demand for the stuff.

Amidst all the hype about renewable energy, worries about climate change, and surging domestic production of natural gas, the global coal market continues to boom like never before.

Proof of that can be found in a report released today by the Paris-based International Energy Agency. The agency’s medium-term coal market report shows that while demand growth for coal is slowing, its share of the global energy mix is still rising. This line is particularly telling: “By 2017, coal will come close to surpassing oil as the world’s top energy source.” Within five years, global coal use will increase by about 1.2 billion tons, which is “more than the current annual coal consumption of the United States and Russia combined.”

The IEA’s coal report proves, once again, that talk about reducing carbon-dioxide emissions is easy, but  actually doing something about those emissions is infinitely more difficult. This fact was underscored by the failure of the recent climate talks in Doha to achieve any substantive deal. Farukh Khan, Pakistan’s lead negotiator, called the meeting’s agreement “the weakest text I have ever seen.” He continued: “It can be summed up in two words: ‘We’ll talk.’”

The IEA report cuts through the hyperbole and goes directly to the heart of the entire debate over climate change and carbon-dioxide emissions. It shows—once again—the vast divide that exists between the rich countries and the poor ones. While environmental groups, activists, and rent-seeking companies in the U.S., Western Europe, and elsewhere aggressively push policies that provide big subsidies and mandates for renewable-energy projects, poorer countries are building coal-fired power plants as fast as they can. They are doing so because coal allows them to provide large quantities of reliable electricity to consumers at prices they can afford. The divide between the rich countries and everyone else is fundamentally about electricity, the fuel of modernity.

Coal demand is soaring because electricity demand in places like China, India, Indonesia, and South Korea, is soaring. Since 1985, on a percentage basis, global electricity demand has grown by 121 percent, which is nearly three times the rate of growth in oil demand. And that soaring coal use largely determines global carbon-dioxide emissions. According to the IEA, coal accounts for 45 percent of all energy-related carbon-dioxide emissions.

Since 1985, global coal use has increased by the equivalent of about 33.4 million barrels of oil per day, an increase of 80 percent. Today, global coal consumption stands at the equivalent of 75 million barrels of oil per day. In 2011 alone, coal use increased by about the equivalent of 3.9 million barrels of oil per day. That’s approximately equal to the entire contribution from all global solar, all global wind, and all global biomass, combined.

Coal continues to present a compelling value for electricity production because deposits of the fuel are abundant, widely dispersed, easily mined, and are not controlled by any OPEC-like cartels.

The IEA report makes clear that the global coal story is largely about China. Last year, China alone accounted for more than two-thirds of the global increase in coal consumption. Putting China’s coal use into perspective requires the use of some comparisons. And given that nuclear energy provides one of the few viable alternatives to coal, let’s start with this fact: about 62,000 megawatts of new nuclear reactors are now being built around the world. (The U.S. has four reactors under construction with a total capacity of about 4,400 megawatts.)

The divide between the rich countries and everyone else is fundamentally about electricity, the fuel of modernity.

Now for the China numbers: Between 2000 and 2011, about 500,000 megawatts of new coal-fired electric generation capacity came online in China. And according to data published by the U.S. Department of Energy (PDF), between 2013 and 2016—another 315,000 megawatts of addition coal-fired capacity will likely be built in China.

But let’s be clear. The boom in coal use isn’t limited to China and other developing countries. In mid-October, the Swedish utility Vatenfall began operating a new 675-megawatt coal-fired generation unit in Germany’s eastern state of Saxony. The $1.3 billion project is fired with domestically produced lignite, a fuel that a Saxony state official touted because it “guarantees security of supply.” That project follows close on the heels of a 2,200-megawatt coal-fired power plant that began operating outside of Cologne in August.

Over the next two years or so, Germany is expected to add about 8,000 megawatts of new coal-fired generation capacity and another 5,500 megawatts of coal-fired capacity is awaiting approval. In fact, thanks to the slumping European economy, electricity producers in the region are not relying on renewables to meet electricity demand. Rather, they are ramping up their coal plants. In May, Reuters reported that German utilities are likely to produce about 12 percent more electricity from coal this year than they did in 2011 thanks to the abundance of cheap permits issued under the EU’s faltering emissions trading scheme.

Indeed, the latest data from the U.S. Energy Information Administration shows that about half of U.S. coal exports are now going to Europe. Between 2006 and 2011, U.S. coal exports to the EU more than doubled and now stand at about 54 million tons per year. In the first half of 2012, the five biggest buyers (PDF) of U.S. coal were, in order: China, Netherlands, United Kingdom, Italy, and South Korea.

Of course, none of this news is likely to persuade the Sierra Club to give up its “beyond coal” campaign. Nor will it slow the ongoing skirmish over the expansion of U.S. coal-export facilities in the Pacific Northwest. With the Obama administration planning to prevent construction of all new coal-fired power plants in the U.S., domestic miners are planning to ship more of their coal production overseas. To do so, they are seeking new export terminals in Oregon and Washington. If they can’t ship it from there, they will ship it through terminals on the Gulf Coast.

There are two obvious punch lines here. First: the boom in coal is continuing despite concerns about climate change and carbon dioxide. Second: unless or until inventors and entrepreneurs can find and deploy an energy source that can compete with coal on scale, price, and reliability, the market for the black, carbon-heavy fuel is going to continue its torrid growth.

Those are inconvenient truths. But they are readily apparent in the IEA’s latest coal report.