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FAQs: Coal

How much of the world’s electricity needs are provided by coal?  Does still coal contribute to the energy mix globally?

As of March 2012, approximately 40% of the world’s electricity needs were provided by coal. Yes, coal is the second source of primary energy after oil.


What are supercritical and ultra-supercritical plants?

Supercritical (SC) and ultra-supercritical (USC) plants produce heat that drives water above the critical point where there is no difference between steam and liquid. This marks them as different from the traditional, subcritical plants, which run below this critical point and produce a mix of water and steam. While the SC and USC plants require higher financial investments, they are more efficient, and therefore save coal and reduce carbon emissions.


Is coal production declining?

No, far from it. Since the start of the 21st century, coal production has been the fastest-growing global energy source. It is the second source of primary energy in the world after oil, and the first source of electricity generation. Coal consumption increased by nearly 60% from 4 600 million tonnes (mt) in 2000 to an estimated 7 200mt in 2010. The IEA Medium-Term Coal Market Report 2011 noted that this boost in coal demand corresponds to rising coal usage, which amounted to approximately 720 000 tonnes every day in 2011.  Growth in coal demand varies from country to country: while coal consumption has stagnated among OECD countries since the beginning of this century, the surge in global coal consumption is driven primarily by developing economies, such as China and India.

 

Will production of coal continue to increase?

Although coal was the fastest growing primary energy source from 2000-10 at 5.5% per year, this growth is unevenly distributed. Most of the growth in coal consumption came from Asia, particularly China, while coal consumption growth in the OECD region was sluggish.

Economic growth is likely to be robust in both China and India over the medium-term (five years). Coal is the key fuel in both countries’ energy mix and since economic growth and energy use are highly correlated, coal demand prospects for both countries are bullish to 2016. This will not be offset by sluggish coal demand growth in OECD countries. Therefore, global coal demand is likely to grow at firm rates for at least the next several years. China has announced plans to increase the role of natural gas, nuclear and renewables in its new five-year plan.

 

Are there geopolitical risks associated with coal supply?

Coal reserves and resources are widely dispersed over the globe and supply is not concentrated to a few regions only, as is the case for natural gas and oil. The key exporting countries, Indonesia, Australia, Russia, South Africa, Colombia, and the United States are politically stable. Nevertheless, the fact that around 90% of coal exports come from only these six countries suggests the need for further diversification.

 

How significant is China’s share in global coal production and consumption?

China’s share in global coal production is almost four times that of Saudi Arabia’s production of oil. (Saudi Arabia is the world’s largest oil producer). China’s share in global coal consumption is more than twice that of the demand for oil in the United States. (The United States is the largest consumer of oil). Overall, the Chinese domestic coal market is more than three times that of the entire coal trade worldwide. In 2011 China became the largest coal importer in the world, however, China’s coal imports make up just 5% of its total coal consumption. Therefore, any fluctuation in Chinese production and demand has the ability to have a large impact on global coal trade.     

 

How did coal demand and prices fare during 2008-09 recession?

Compared with oil and gas, coal demand growth was more robust during the 2008-09 global financial crisis. In fact, of the three fuels, it was the only one for which demand still grew in 2009. However, the recession’s effect on coal demand varied from region to region. While coal demand remained strong in Asia, it plummeted in the United States in 2009. Despite the fact that coal prices collapsed in the second half of 2008 after reaching record levels in mid-2008, they remained relatively high throughout the recession compared with pre-recession price levels.

 

Why have supply costs for coal risen in recent years?

Firstly, prices for crucial inputs in coal mining like diesel, steel, explosives and tyres have risen sharply. Secondly, labour cost increase in some countries and exchange rate fluctuations have had a marked effect. Thirdly, some collieries experienced a deterioration of geological conditions and/or lower coal qualities. Finally, new projects are moving to more remote areas to tap into new sources of coal and have, hence, experienced an increase in transport costs.