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Death of coal greatly exaggerated?

It seems that no matter what news you read or watch, the narrative about the future of coal involves some version of it being dead or dying.

'Terminal decline' is another term used to convey the idea that, very soon, coal will disappear. The flip side of the narrative is the implication that wind and solar, along with battery storage, will replace them.

But is this the case?

Will we see a reduction in coal demand by 2040? Is it realistic to believe that coal will be replaced by wind and solar?

We think not.

A recent article by economist Tilak Doshi in Forbes highlights why the coal industry will remain essential to human flourishing well into the future and how well-intentioned green energy programs disadvantage the poorest among us.

From his opening paragraph, Doshi doesn't pull any punches:

The reigning narrative of impending global environmental catastrophe dominates the airwaves and print media. Short of a drastic reduction in the use of fossil fuels, it is asserted, we are fast approaching the “end of days”. The demonization of fossils fuels in general, and coal in particular, has been wrought under pressure from special interests groups and organized lobbies of the climate-industrial complex where aspects of economic reality are caricatured or presented out of context. Complex trade-offs in energy policy are spun into tales of spurious simplicity, leading to misleading conclusions. Nowhere is this more apparent than in the debate over the role of coal-fueled power generation in Asia.

He then goes on to outline the two key ways the activists try to justify their opposition to new coal power plants:

  1. Renewable energy programs carry “co-benefits” for public health in developing countries
  2. Renewable energy, such as solar and wind power, is an effective substitute for centralised grid electricity generated by fossil fuels.

The claim that renewable energy programs help the poor is egregiously misleading

Doshi highlights:

  • Modern coal plants are a success story
  • Pollutants emitted have fallen dramatically with technological improvements over the past several decades
  • A new coal plant reduces NOX by 83%, SO2 by 98% and particulate matter (PM) by 99.8% compared to a plant without pollution control features
  • The real killer is 'indoor air pollution' caused by burning wood or dung for cooking and heating, resulting in ~4 million premature deaths a year
  • The solution is to provide affordable electricity (via coal and natural gas) and cleaner-burning fuels, like LPG
  • Coal power underpins public health improvements via a cleaner water supply and the refrigeration of food and vaccines, all of which require reliable, affordable electricity

Intermittent renewable energy can't replace dispatchable power plants

Wind and solar power are claimed to be competitive and able to replace coal- and gas-fired power.

What you're not told is that rigorous economic analyses of the hidden costs of unreliable, weather-dependent solar and wind power have countered such claims as an exercise in magical thinking and are actually two to three times more expensive than existing coal or gas-fuelled power, when delivered on a firm (reliable) basis.

For example, mainstream news media promote this wishful thinking, parroting the headlines of the activists and holding up China and India as examples of 'climate action'. Yet, they omit the fact that China has announced or is constructing almost 200 GW of coal power capacity, equivalent to over eight times Australia's entire coal power plant capacity of 22.7 GW. India is adding 95GW.

Various forecasts predict that wind and solar will continue to increase market share. This is a given, considering the tremendous ongoing subsidies. But let's turn our attention to the misleading claim by wind and solar advocates that coal is in terminal decline.

Like many claims, there is a sliver of truth. The rate of coal demand growth is declining, but absolute coal demand is expected to increase.

That's right, coal demand will grow more slowly, but it will still grow.

This exposes the activists' claim.

Of particular interest is the way Doshi's article touches on the problem with the way the media communicates the role of coal in the future.

This is a point worth diving into.

The media and, indeed, various industry groups 'massage' the narrative through the misleading presentation of data (in addition to externalising the intermittency cost of wind and solar) in many ways.

For example, the IEA publish their World Energy Outlook each year.

For the most part, it's authoritative and comprehensive. The IEA claims they are the 'gold standard' of energy analysis. The 2018 edition does, however, deploy a degree of 'greenwashing'.

If the IEA's reports are the gold standard, they're trying to pass off 9-carat gold as 24-carat. You get information, but not all the information, and definitely not unbiased information.

Let's take the super simple question of whether coal is in terminal decline. Surely, we could quickly establish the trend in absolute coal demand from the overview sections within the WEO2018 report. Yet, you can't tell at a glance if coal is in terminal decline.

The first layer of greenwashing is to hide or remove the 'current policy scenario' from many of the accessible charts, focusing instead on energy policy scenarios that arguably represent an unrealistic change in the total primary energy demand and the subsequent energy generation mix.

I say unrealistic because as of April 2019, only Morocco is '1.5°C Paris Agreement Compatible'.

Only India, Costa Rica, and Ethiopia meet the '2°C Compatible' rating.

The website Climate Action Tracker keeps tabs on this very issue.

This calls into question the basis for hiding current policy scenarios in favour of scenarios we aren't currently on track to meet.

Hence, the ploy of presenting aspirational scenarios while omitting current policy scenarios obfuscates the reality.

The next layer of 'greenwashing' comes in the form of how the chosen data is presented.

If we want to know if coal is in terminal decline, we need to know how much we consume now and expect to consume in 2040.

A simple snapshot of this basic metric is not presented in the IEA's WEO 2018.

Instead, we get charts like this:

chart showing changes in global primary energy by source
Source: IEA World Energy Outlook 2018

The above chart shows that in 2017, coal accounted for 27% of primary energy production. In 2040, under the New Policy Scenario (NPS) and the Sustainable Development Scenario (SDS), coal accounts for 22% and 12%, respectively.

This makes it look like coal production is declining from 27% to 22% and possibly 12%, but we don't actually know because the report doesn't show what total primary energy demand (TPED) is in 2017 or what it might be in 2040 under the NPS or SDS.

We need to search for that information separately.

So, after taking the time to dig, I found the underlying data tables for the WEO Report 2018. Let's present the 'shares of global primary energy' in absolute terms, adding in the missing Current Policy Scenario and see how the terminal decline of coal is projected to play out.

Source: IEA WEO 2018 Data

It doesn't. There is no terminal decline. Not even under the extreme SDS scenario.

The above chart shows absolute values. Under the current policy scenario, coal demand decreases from 27% to 25% of total primary energy demand (TPED). However, because absolute TPED increases, it's actually an absolute increase of 45% for the current policy scenario and 35% for the new policy scenario.

That's right. Meeting the Paris Agreement commitments (which we're not on track to do) via the new policy scenario means an increase of 35% in coal demand.

This one simple analysis immediately debunks the 'terminal decline of coal' narrative.

However, for context, we need to consider another factor: population. This allows us to derive a per-capita position. By 2040, we're projected to have around 9.15 billion people, which is a 21% increase from 2017's 7.55 billion.

Notice how the sustainable development scenario in 2040 is comparable in absolute total primary energy demand to that of 2017. Essentially, that policy seeks to redistribute the same amount of energy we used in 2017 among 21% more people.

Bottom line: As a society, we need to reduce our total energy demand to meet these targets.

What does this actually mean?

In 2017 the world averaged 1.85 tonnes of oil equivalent (TOE) per capita across all energy sources.

Total Primary Energy Demand Per Capita - IEA WEO 2018 Data

To meet the 2040 SDS target, we need to reduce our demand to 1.5 TOE per capita.

For reference, the current TPED per capita is:

  • USA - 6.9 TOE
  • Australia - 5.7 TOE
  • China - 2.3 TOE
  • India - 0.6 TOE

Energy use is inextricably linked to our standard of living.

Like most endeavours, it's not impossible; just a matter of cost-benefit analysis and opportunity cost.

When the goal is to reduce the TPED, there are only three ways to achieve this outcome:

  1. Demand-side: Innovation - make energy-consuming activities and machines more efficient so that we achieve the same or higher standard of living but with a lower energy requirement
  2. Supply-side: Price - make energy scarce and therefore more expensive. Those in emerging nations will experience an increase in their standard of living and those in developed nations will experience a decrease
  3. Consumption - those above 1.5 TOE need to reduce their standard of living, allowing those below 1.5 TOE to increase theirs

It would seem the sustainable development scenario is less about replacing coal with wind and solar for CO2 'reasons', and more about reducing total demand and consumption for 'sustainable' and 'equality' reasons.

This is not necessarily a bad thing if your goal is to rein in and redistribute consumption in a resource-constrained world that is hurtling toward a population of 9 billion.

But it seems like a tough sell to anyone consuming more energy than 1.5 TOE per year.

For Australians, this means a reduction of almost 75%.

This is where the importance of innovation comes in. If we're to do the same, or more, with less, we need to continue to innovate.

As technology advances, truly big breakthroughs become less frequent, and innovation becomes, for the most part, a tale of incremental improvements that push the frontiers of physics.

Here at ECT, we are playing a role in that incremental transition to the more efficient use of resources.

Our Coldry process allows those who need to use coal to do so in a way that has a lower environmental footprint and higher value outcome.

Our Matmor/Hydromor technology reduces the environmental footprint of one of the most energy-intensive industry sectors of all; iron and steelmaking.

COHgen, our hydrogen production technology, may just help us transition to a hydrogen-based economy without breaking the bank.

The report of coal's terminal decline is greatly exaggerated. While the activists seem determined to eliminate the very power source that can provide the affordable, reliable energy needed to lift billions' standard of living, it's clear that the goal is actually to limit access to energy.

The good news is that companies like ECT strive to innovate and deliver pragmatic, economically sustainable solutions that reduce energy and emissions while supporting human flourishing.