*In origine case study valido per il corso in Fundamentals of Global Energy Business; Global Energy Management Program; University of Colorado Denver.
The current share of coal in global power generation is over 40%, but is expected to decrease in the coming years, while the actual coal consumption in absolute terms will grow. Although countries in Europe, and to some extent North America, are trying to shift their consumption to alternative sources of energy, any reductions are more than offset by the large developing economies, primarily in Asia, which are powered by coal and have significant coal reserves. China alone now uses as much coal as the rest of the world. While the global reserves of coal have decreased by 14% between 1993 and 2011, the production has gone up by 68% over the same time period.According to the IEA in 2013 king coal represented 28.8% of total energy consumption, and even 42% of electricity production.
The reduction of global resources is attributable mainly to the increase in demand from developing countries, which exploit it as an engine for development.China, for example, makes use of coal for about 70% of its energy needs. But India and South Africa have seen their demand increase. The cause is due to the increase of the population inevitably results in a greater demand, and also the increase in the income of the population. In Europe 33% of electricity is produced from coal, but consumption in this region are set to fall for the political “Europe 2020”, which provides energy sustainability through a reduction in greenhouse gas emissions by 20% compared to 1990; 20% of energy needs from renewable sources and 20% increase in energy efficiency and the increased use of natural gas imports. Another phenomenon to consider is that in Europe coal is imported and not a natural resources: the cost. For a ton of coal from Wales costs 80 Euros; a ton of coal from South Africa and Australia – including transport – it only costs 20.The United States, despite being the second largest consumer of coal in the world due to cost, but and a strong geopolitical choice will invest more in shale gas. Although in 2013 the use of coal has bypassed the question of internal energy for heating, achieving increases of 4% (source: Federal Energy Information Agency) strong environmental legislation – increased pollution by 2% (source: EIA) – will help to drive up costs and discouraging domestic demand and focusing instead on exports to countries in need of energy. Therefore, developing countries stand out as the main cause of the decline in reserves of coal, which unlike the other exhaustible energy sources is characterized by the easy availability of the material. The Indian power system is characterized by a strong rule of coal in all energy sources used; in fact, coal contributes to 53% of total consumption of primary energy. According to the “Statistical Review of World Energy 2011” BP India possessed at the end of 2010, approximately 7% of the world’s coal reserves, with reserves of 196 years; India could then in theory meet all of its domestic demand with domestic mining. However, the production is plagued by endemic low productivity and inefficient distribution system in the area. The strong reliance on imports can be explained only by the low productivity of the Indian system, even by the high cost of supply of the local coal (which is often superior to that imported) and its low quality, which limits the efficiency and the capacity production. In general in the world to build a coal plant is cheaper and faster than building gas-fired plants or GLN. Until now we have seen so as to determine the coal are basically the countries that are industrializing, i.e those countries where there is a strong demand for coal for the production of electricity and coal for the development of the steel industry. Conversely, in the already industrialized countries – OECD countries – the demand has stabilized somewhat, or has had an exploit linked to gas prices. The future of coal primarily depends on the advance of clean coal technologies to mitigate environmental risk factors, CO2 emissions, in particular.
Coal is playing an important role in delivering energy access, because It is widely available, safe, reliable and relatively low cost.The performance of the coal market for the next five years is to be assessed primarily on the economic development of emerging countries or industrializing China, South East Asia and the Pacific, but also Africa. These are the biggest consumers of coal. For example, if China continues to invest heavily on renewable energy, accounting for almost 40% of the global expansion and 60% growth in non-OECD, by 2020 coal will be banned in six regions. Electricity and natural gas will replace coal for heating, cooking and other uses – the world’s largest consumer of electricity after overtaking the United States in 2011, China in 2013 had an energy matrix of 1247 gigawatts of which 801 came from coal. Coal – shows a report by Bloomberg New Energy Finance (BNEF) – is sucking huge quantities of water in mining and electricity production, about 98 billion cubic meters per year: 15% of the national water withdrawal. And if the development plans of this source of five large companies are realized, the thirst for this dirty source might grow even more, reaching 175 billion cubic meters a year, and then absorbing 25% of the national water withdrawal, which Beijing wants to limit to 700 billion cubic meters. The 5 great energy companies in the country – Huaneng, Datang, Huadian, Guodian, and China Power Investment – own about a hundred systems in areas prone to water shortages. To keep these plants safe from drought, BNEF estimated, would take at least $ 20 billion of investment, and in some cases companies will simply close down the plant which is less efficient in terms of water use, in the less rich in water resources. Another reason why you will tend to invest more in other sources is the problem of availability of water: one of the benefits is that renewable sources such as solar and wind power have over other ways of producing electricity is their lower water usage throughout their life cycle. All the thermoelectric power plants, gas or coal, do in fact need a substantial amount of liquid for cooling. Also one should also consider the costs for the construction of the dam and the Three Gorges Dam on the Yangtze giant plant opened in 2006 and completed in 2009 in need of investment, in time for a return of capital. On the production side, Russia has the second largest amount of coal reserves in the world, the country was estimated to hold 157.01Bt of proved coal Reserves as of December 2012, accounting for about 18% of the world’s total, and the sixth biggest world producer studies according to the International Energy Agency. Recently, Russian exports have increased more and more to meet the demand for energy coming from Asia
The final factor to consider in order to measure the future performance of the price of coal is the environmental issue. Although this is primarily a political phenomenon, some economic considerations can be addressed: the case of European phasing out the use of coal, followed by the United States and to a lesser extent Japan, could push more countries resort to this source of energy. Lower demand will push the countries exporting producers to adjust prices downwards, also caused by a phenomenon that until now had been overlooked, that public opinion and public awareness that is slowly affecting the price of coal and definitely will do so in the future. Taking again the China model as a benchmark for coal, pollution also has a significant effect on the national health system due to illness in 2008 spending on public health in proportion were around 7.1% of GDP.In conclusion then we can say that an increase in the use of coal will be encouraged mainly by towing the developing countries and the gradual abandonment of developed countries. It will be a growth determined by the poorer regions of the world because coal is a material readily available and easy to carry with obvious advantages on the final costs. It is generally found everywhere, and this also has a decisive influence on the price, especially on the question.The problem of searching for alternative sources of energy is related to the economic situation of the countries, the more developed a country is, the lower domestic demand will be; vice versa as in the past, the coal will be the driving force for the growth economies. The price is still very competitive compared to other energy sources, which will help to drive demand where per capita income is lower.The production of electricity is still mainly due to coal and will continue over the next five years as in the previous cases because the demand will be driven by countries which are not yet fully developed.
International Energy Agency (IEA)
British Petroleum Statistical Review of World Energy (2011 and 2013)
Energy Information Administration (EIA)
Istituto per gli Studi di Politica Internazionale (ISPI)
Bloomberg New Energy Finance (BNEF)
World Energy Council