Coal has driven the development of the 21st century. It is the energy source that has brought us into the modern age.
What will its future look like?
Coal was the fuel that made the industrial revolution possible, and coal pushed Europe into the modern age. Coal has made its mark on geography, and has shaped the geopolitics of entire nations. Germany’s industrialization would not have been possible without indigenous coal reserves. Without coal, European industrialization would not have had the energy necessary to turn iron ore into steel.
Modern coal excavation methods, such as bucket wheel excavators for open pit mining or LTCC (long wall top coal caving) changed the whole industry and made coal extraction more effective than in the past. New production techniques have improved the economics of coal mining.
To this very day, coal continues to be used to generate electricity: Every day, every week, throughout the year. Renewable energy sources are severely constrained by external factors such as the weather that reduce their energy yields, but coal does not suffer from any of these constraints.
In fact, coal production has increased globally since the 2000’s as we can see from the chart below.
Coal is standing in a league of its own: Coal has been used as a fuel for more than 130 years to power industrial activities, including steel manufacturing and electricity generation. In the 21st century, it is David and Goliath. Why? Coal is battling it out with another energy source. That energy source is natural gas. While all of that is happening, government-sponsored renewable energy (wind and solar) nibble away at the profits of coal power plants. Please keep in mind that coal has a pretty high calorific value (around 10 – 17 MJ/kg for lignite, 17- 23 MJ/kg for bituminous coal and above 23 MJ/kg or so for higher grade anthracite, according to the (World Nuclear Association, 2018).
Taking all that into account, we see that coal will continue to play a major role for Chinese electricity producers in the years to come. The calorific value doesn’t change very much for power plants. Coal can be transported relatively easily. For natural gas, it is a whole different story. Transporting hydrogen gas is even more difficult, it makes coal transport look like child’s play.
Let us begin with China.
Coal mining in China
China has some of the largest coal reserves on the planet and China is by far the largest producer of coal and produces roughly 3.7 billion tons of coal per year (World Atlas, Jessica Dillinger, 2019).
Believe it or not, it is actually quite difficult to correctly estimate how much coal is out there. Reserve figures are revised often. Governments publish reserve figures infrequently. Coal reserves in China were somewhere around 114.5 billion tons in 2012 according to (World Atlas, Jessica Dillinger, 2019).
Indigenous coal reserves are spread throughout China, but are heavily concentrated in the central part of China and Shanxi Province. Shanxi Province is one of the largest coal producing regions in the country (Reuters, David Stanway & Richard Pullin, 2018).
Luckily, much of China’s coal reserves are bituminous coal, but China also has a large amount of anthracite, which the premium grade that is sold on coal markets.
That wasn’t enough to still China’s thirst for energy, and Australia filled in the gap. Australia exports coal to power China’s industrial growth. China has been a major importer of Australian coal for some time now, but more recently demand has decreased. That has to do with slowing industrial production in China (steel manufacturing for example) and increasing competition from renewable energy sources.
Coal consumption is declining in China. More than three quarters of China’s electricity is being generated from bituminous coal, anthracite and lignite. Coal will continue to play an important role in the Chinese energy sector. Lignite isn’t used quite as extensively in China, and plays a minor role with respect to electricity generation.
Renewable energy sources compete with coal in the Chinese electricity market. China is heavily reliant on coal, and investments have been made in modernizing coal power plants. New plants became operational after the financial crisis of 2008. To put this into perspective: Germany and other industrialized countries have a long tradition generating electricity from coal, and we know the lifespan of existing coal fired power plants.
Coal fired power plants have a lifespan of around 54 years according to TriMedia Environmental & Engineering Services (2017).
O&M has a major impact for how long a coal power plant can operate. That means China will continue to rely on coal for a long time to come.
Coal mining in Russia
We see that Russia is the great unknown in all of this. Russian coal reserves are truly enormous and a large part of Russia’s coal reserves north of the Lena River Basin in Eastern Siberia has not been fully explored. Permafrost has prevented full exploration. Russia has not fully exploited the potential of its own coal reserves. Russia can also use its coal reserves to convert it into fuel using CTL (coal-to-liquid) technology.
What speaks against that is that Russia is also rich in oil and natural gas. New exploration projects have commenced on the Yamal Peninsula near the Kara Sea in the most northern part of Siberia. Once operational, the new platforms on the Yamal Peninsula will add to Russia’s gas reserves.
Russia could increase coal exports to China. This would be a game changer because Australia relies heavily on coal exports and this would inevitably lead to a market shift. In fact, Russian coal exports to East Asian countries are quite considerable. This gives Russia another outlet on the global coal market. Instead of sending all of its coal to Europe, Russia gains a foothold supplying fuel to countries located south of its border.
As one of the largest coal exporters in the world, Russia can take full advantage of its gargantuan coal reserves. Russia has large reserves of lignite, bituminous coal and anthracite which means Russia can send different grades. Within Russia, there is less of a need to use more coal. Other energy sources such as oil and gas are easy to come by.
Coal mining in the USA
Natural gas production has grown in the U.S., and it has become harder and harder for coal to compete with natural gas. Energy companies were able to tap into previously inaccessible natural gas reserves. Natural gas can be extracted from tiny fissures in the rock. To extract natural gas from the rock, chemicals and pressure are used to crack the rock (hydraulic fracking).
Environmental concerns are top of the agenda, for coal and for natural gas. In some cases, hydraulic fracking was linked to earth quakes and small tremors that effect local residents near the production site. In rare cases, toxic gases were released from underground and harmed the environment, damaging humans and animals. Gases such as carbon monoxide can damage human health, if we are exposed to them over a long period of time. Under specific circumstances, this may have a lasting impact on the environment.
Open pit mining creates dust that swirls up in the air. This can under very specific circumstances have deleterious consequences on human health. We always need to weigh the costs and benefits for every energy solution.
The United States has some of the largest coal reserves on the planet. With the new administration the U.S. government has made a U-turn and decided it wants to keep coal in the energy mix. This makes sense a lot of sense if you want to diversify, and not to rely on one energy source only.
Coal has strong backing by some states in the U.S., such as Wyoming. According to the Wyoming Mining Association (2019), Wyoming is a major coal producer in the U.S. Wyoming can increase its share of coal production in the U.S. In fact, Wyoming has so much coal that it has the potential to export coal to other countries such as China. According to Stephanie Roker, World Coal, 2019), the Wyoming Governor supports exporting coal to other countries.
In the U.S., some states lobby the government to increase the share of renewable energy, and to replace coal as part of the energy mix for electricity production in the U.S.
It is difficult to say what role coal will play in the United States. There is still so much coal underground. It really boils down to a cost-benefit analysis. There will likely be increased competition between natural gas and coal. It is not quite clear which energy source wins out in the next 10 to 20 years, to provide supply a reliable base load to the U.S. electricity grid networks.
Conventional natural gas supplies are dwindling in the U.S. Shale gas (hydraulic fracking) has a much shorter lifecycle. You just have a few years for resource extraction. That does not compare well to conventional gas production. From a financial point of view, shale gas is almost always more expensive. Shale gas is what is left after one has drilled for the good stuff, the stuff that is easier to reach and more economically viable.
Coal mining in the United Kingdom
The United Kingdom possessed substantial coal reserves. Coal was found in Northern England and Wales. The United Kingdom phased out deep coal mining after more than a century of activity. This has upended a tradition and way of life. We have to remember that the United Kingdom was the first country in the world to use coal on an industrial scale to power the industrial revolution that dramatically changed the British economy in the 19th century. Britain possessed enormous coal reserves, consider the time span involved: Coal was used since the 19th century to fuel the British economy.
Labor revolts fought against phasing out deep coal mining the 1970’s and 1980’s. Trade unions and coal producers lobbied the government but that didn’t help. At roughly the same time offshore oil and gas production facilities in the North Sea became an alternative to coal. Natural gas extraction in the North Sea has also contributed to this because natural gas became a competitive energy source. Instead of keeping the industry alive, the U.K. chose to rely on coal imports which were cheaper.
Coal mining in the European Union
Across the English Channel, coal producers had a better chance at winning over the government. The coal industry still has strong backing in Poland. Coal production in Poland shaped local politics in the south, and influenced government policy to a degree. Poland has increased the amount of electricity from renewable energy, but coal will play an important role in Poland’s electricity grid.
Coal has shaped local politics in Germany. In the Ruhr region in West Germany and Saxony / Brandenburg in East Germany local politicians and coal miners often spoke with one voice. These regions have left an indelible mark on Germany’s economy, and contributed to Germany’s industrialization. Coal formed the basis of Germany’s industrial might. Deep coal mining came to an end in 2018.
This also explains why the Ruhr region is so heavily populated to this very day, because industry wanted access to coal. In Germany, coal production has a lot to do with regional politics. The Ruhr region and Saxony / Brandenburg suffered from structural problems in the economy and have a hard time to adapt and create new jobs to replace the old ones. Saxony’s economic prospects are much brighter compared to the Ruhr region. Saxony has found new industries to replace old ones in electronics and mechanical engineering.
Germany is not exactly blessed with natural resources besides coal and potash, but it is one of the world’s leading producers of mining technology. It is unlikely that Germany will ever again become a major coal producer as almost all commercially-viable coal reserves have been exploited. In the Ruhr region, bituminous coal could still be excavated. High population density and high OPEX, CAPEX led to the end of deep coal mining in West Germany. The juice is not worth the squeeze. In most cases, it doesn’t make economic sense to excavate coal in the Ruhr region and it is cheaper to import coal from other countries.
Lignite (brown coal or soft coal) is excavated by open pit mining in East Germany. There has been strong resistance by the local population against energy companies claiming land. In national politics, the renewable energy industry has gained more influence. The coal industry had the upper hand in the past, but renewable energy producers and consumers make their voice heard.
Germany has the most volatile electricity market in all of Europe, quite possibly the whole world. Different energy sources compete for their share in Europe’s largest electricity market. This includes renewable energy (offshore wind and onshore wind, solar, geothermal etc.), as well as coal, natural gas and nuclear energy. Nuclear power plants and coal fired power plants have not been phased out yet. Germany’s electricity market needs nuclear power to provide base load electricity.
In Germany and other EU countries, the future of coal mining hangs in the balance. There are a lot of geopolitical considerations that come into play. Russian gas supplies could become an alternative to coal mining, but opposition by some EU member states is significant.
Summary and Forecast of Global Coal Demand for Electricity Generation
- Outside of the European Union, coal has great potential. Global coal consumption is likely to increase. A CO2 tax would force coal out of the European electricity market. In other parts of the world, such as East Asia, coal consumption is still growing.
- The United States has the largest coal reserves of any country on earth. The U.S. will likely continue using coal.
- Russian coal reserves could be much higher than current estimates show. Russia could export more coal to China, which would lead to a significant shift in global coal trade.
- The future of coal depends on natural gas prices. China has been the key player in the market driving coal prices. Coal prices worldwide correlate with Chinese coal consumption and Chinese energy demand.
- We don’t know for sure how big coal reserves are in countries like Indonesia and Kazakhstan. Peak coal could happen in between 2020 to 2030. Incoming data from these regions could push out peak coal by another 5 to 10 years or so. Peak coal could happen after 2030. So there is a large gap between peak oil and peak coal of 10 – 20 years. CTL technology may be used to satiate the world’s energy demand.
David Stanway D. and Pullin R. (2018), China’s major coal province to cut 23 million tonnes of capacity in 2018, viewed 21 07 2019, https://www.reuters.com/article/us-china-coal-shanxi/chinas-major-coal-province-to-cut-23-million-tonnes-of-capacity-in-2018-idUSKBN1F8025.
Dillinger, J. (2019), World Atlas: The Top 10 Coal Producers Worldwide, viewed 21 07 2019, https://www.worldatlas.com/articles/the-top-10-coal-producers-worldwide.html.
Stephanie Roker (2019), Wyoming Governor pledges to advocate for coal exports, World Coal, viewed 22 07 2019, https://www.worldcoal.com/coal/16012019/wyoming-governor-pledges-to-advocate-for-coal-exports/.
TriMedia Environmental & Engineering Services (2017), When is a power plant past its prime?, viewed 22 07 2019, https://trimediaee.com/blog/environmental/power-plant-past-prime/.
World Nuclear Association, Heat Values of Various Fuels, viewed 21 07 2019, https://www.world-nuclear.org/information-library/facts-and-figures/heat-values-of-various-fuels.aspx.
Wyoming Mining Association (2019), Coal, viewed 21 07 2019, https://www.wyomingmining.org/minerals/coal/.