The importance of the coal sector is often overlooked by the media when reviewing global energy. This is despite both its importance in many emerging economies and its impact on climate change. The current status and projections for coal use in Asia and Europe vary considerably. In Asia, growth in demand and availability of coal is resulting in its accelerated use. However, despite investment, production cannot keep up with demand, and coal trade in Asia is increasingly affecting international markets. In Europe, the environmental impacts of coal use, particularly CO2 but also particulates, are accelerating the closure of many power stations and delaying new build. Consequently, in most countries its contribution is set to decrease. However, some countries are planning new, large coal stations and are increasing operation prior to closure of some existing stations. The continued use of fossil fuels, especially coal, is resulting in emission levels that in the short term will exceed the internationally agreed climate protection objectives. Therefore, Europe and Asia need to accelerate their co-operation in developing carbon capture and storage and other new technologies and policies in order to minimise the emissions to the greatest extent possible

In Europe, the coal sector is at a crossroads. The age of existing coal-fired power stations coupled with new environmental requirements will lead to the closure of a significant number of them. Will they be replaced, like with like, or will the renewable revolution that has already begun across the EU accelerate and take over the coal market share? What is at stake is not just the climate credibility of the EU, but the future stability of the global climate. As the IEA points out, four fifths of the energy-related CO2 emissions permissible by 2035 under the climate protection scenario have already been “locked-in” by existing energy infrastructure. Furthermore, the situation is so critical that if the world continues on the current investment path, by 2017 all the sources for energy-related emissions under the 450 scenario will have been built. This will require all future investments to be CO2 neutral—an impossible task

Balancing climate and security of supply concerns

The Cancun Climate Summit in December 2010, for the first time under the United Nations (UN) framework recognised,

“..that deep cuts in global greenhouse gas emissions are required according to science, and as documented in the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, with a view to reducing global greenhouse gas emissions so as to hold the increase in global average temperature below 2 °C above pre-industrial levels.”

In order to meet the UN targets, greenhouse gas (GHG) emissions must be cut by about 80 % by 2050, which will effectively require a de-carbonised energy sector.

Coal has two import characteristics relating to climate change. Firstly, it is the most prevalent of the fossil fuels, with an estimated 118 years of resource available – at current production levels – double that of conventional gas and three times that of oil. Secondly, coal is the most carbon-intensive of the fossil fuels, emitting twice as much CO2 per kilowatt hour as gas. New technologies have an important role in meeting energy security and climate change; amongst these are more efficient power generation plants and carbon capture and storage. It is important to note that each of the added processes involved with CCS over conventional firing requires additional energy input, thus increasing the throughput of fuel. It is hoped that current developments in CCS technology will limit the overall “energy penalty” to around 10 to 20 %. Retrofitting existing plants will have a greater impact, with suggestions that it will decrease efficiency by 12 %, and therefore consume 20 to 30 % more fuel.

Europe has repeatedly stated that it wants to show global leadership on climate issues and has set itself both short- and medium-term targets. This will first require a zero emissions electricity sector, then ultimately de-carbonisation of the entire energy sector.

In Asia, the overriding concern is not climate change but energy security and meeting future energy and electricity demand. With rapid GDP growth at the heart of government policies in many emerging economies, even with steadily improving energy efficiency, an unprecedented increase in energy demand is envisaged. Therefore, the strategies of China and other important energy-consuming countries are not to reject any energy source. Consequently, they are seeking to accelerate domestic fossil fuel extraction rates, secure access to overseas resources (through joint development strategies and acquisitions) and to develop non-fossil-based technologies such as nuclear and renewable forms of energy. Within this mix, coal will remain vital until the economic conditions change significantly.

What role does coal play in European energy policies and politics?

Within the European Union (EU), coal is the largest source of electricity production (28 %). The following chart shows the extent to which both consumption and production have decreased over the last decade. Due to the relatively faster decline in production, the share of imported fuel has increased especially since 2000. However, coal import dependency is only about 40 %, compared to 64 % for natural gas and 84 % for oil.

European coal consumption and production (1981-2011)

The upturn in coal use in the last 2 years is a result of a number of factors, including the low carbon price within the Emissions Trading System (ETS), the relatively high price of gas and the impact of future restrictions on the operating hours of older stations, resulting in their greater use before the deadline. There are large variations across the EU in terms of dependence on coal. This is predictably based on the current, or in some cases historic, domestic availability of the resource. Many of the countries in Central and Eastern Europe which joined the EU in 2004 are more dependent on coal (hard coal and lignite) than those in the more Western part. Poland’s electricity system is the most dominated by coal at about 90 %, followed by Estonia, the Czech Republic and Bulgaria, which all use it for the majority of their electricity production. The overarching and most immediate driver of energy policy in Europe is climate change. The EU has set a tarfet to reducve emissions by 80 to 95% by mid-century. Meeting this target will require the transformation of Europe’s energy system and such changes will radically alter the current locations and volumes of energy supplies (as well as distribution requirements). In short, the most important policy assumptions include:

  1. A binding 20% target for the use of renewable energy by 2020
  2. Large Combustion Plants Directive (LCPD) and Industrial Emissions Directive (IED)

Strong dark spreads lead to the accelerated operation of many coal plants, especially in the UK, which if continued will lead to many closing well in excess of the 2015 deadline.

Changing landscape – From black to blades

As noted above, if the EU climate objectives are to be met, the energy and electricity sectors in Europe must change dramatically, through a change in energy sources and efficiency improvements. Already historic progress has been made. In the last few years, there has been a shift away from traditional and usually base load power plants to the much greater deployment of renewables and natural gas. An analysis by the European Wind Energy Association shows that while more than 166 GW of wind and solar were added to the EU power grid between 2000 and 2012, coal declined by 14 GW, and nuclear by 15 GW fuel oil by 17 GW.

One key reason for the changing fortune of coal is the economics of the current market and future projects (particularly, as they relate to energy and carbon prices). Analysis from Bloomberg New Energy finance shows that even without a price on carbon, coal is struggling to be competitive with gas, under a variety of operational and construction costs.

As result of these conditions, there are 19 coal power stations under construction in six member states but many of these have been delayed or suspended. If the 2020 renewable energy target is to be met, around 30% of the EU’s energy would come from renewable sources. Changing availability, political concerns and technology may make fossil fuels an unattractive fuel source over the next 30 years.

Finally, as this blog as commented on previously, a fundamental question will be how to integrate renewables into the existing electricity grid and management systems. Today’s grids were built on the basis of most of the power coming from large centralised power stations. However, future EU plans rely on increased contributions fro variable, geographically disperse, decentralised power sources. Fully integrating these new sources to maximise their utilisation requires a radical redesign of grid infrastructure, management and payment systems.


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