Coal is Making a Come-back

A relentless increase in world demand for energy, large price increases for natural gas, growing concern about imported energy and security of supply, indecision about nuclear power are all factors which are contributing to the renaissance of coal. Despite the ‘dash for gas’ in the last two decades, coal remains the number two source of primary energy. In 1965 coal accounted for 38.4% of total final energy consumption, by 1999 this had been whittled down to 25.1% but today it has risen to 27.8%.

Production grew 14.3% in the 20 years between 1981 and 2000 but then by 27.1% in total between 2000 and 2005.

This renaissance is taking place in many countries, but by far the most important driver is escalating demand for coal in China, accompanied by growth in India and by continued strong demand in the USA. 79.5% of the growth in demand for coal in recent years has taken place in China.

A vitally important issue is the development of clean coal technology. Coal is the largest emitter of carbon dioxide, a major emitter of sulphur dioxide, nitrous oxide, mercury and particulate matter (polluting ash and dust). Billions of dollars are being invested in the development of technologies to clean emissions, to capture and store carbon and to generate electricity with reduced carbon emissions.

In the last 40 years the global coal market has changed radically. In 1965, the United States was overwhelmingly the largest producer and consumer of coal, accounting for 20% of consumption, followed by the United Kingdom and Germany. The US share increased slightly to 22% but the US has moved from first place into second pace after China. In 1965 China had an 11% share of the global coal market but this had grown to 36.9% by 2005.

It is very clear that coal will remain an essential contributor to the world’s primary energy supply for decades to come. Global coal reserves are vast and widely distributed near to the load centres. Consumption of coal will expand, although more slowly than that of other fuels. Predictions are for an annual increase of 3.5% in natural gas consumption, 2.7% for oil, 2.6% for renewables and 2.2% for coal.

The world’s oil will last for 41 years at current rates of extraction (R/P ratio), gas for 67 years but coal will last for 192 years. The R/P ratio of coal may expand by many multiples if underground coal gasification (UCG) technology is introduced, accessing deeper coal seams.

The IEA forecasts that in 2030 total energy supply will increase from 10.23 billion tonnes of oil equivalent (Btoe) to 16.3 Btoe, of which 35.4% will be contributed by oil, 25.8% by gas and 23.1% by coal. This prediction shows the shares of oil and gas expanding whereas coal’s share will decline. It is difficult to see how these shares can be maintained for oil and gas with their current R/P ratios, while total energy supply expands about 20% every ten years. For coal, however, this is eminently possible and using clean coal technology, it can be done while meeting environmental goals. It becomes even more feasible with UCG expanding coal reserves.

Electricity Deregulation in the UK

The United Kingdom opened the electricity market by stages, from 30% in 1990 to 100% by 1998.

The 1989 Electricity Act created a system of independent regulation, headed by the Director General of Electricity Supply (DGES) covering England, Scotland and Wales. The regulator’s principal roles are to ensure that competition develops smoothly and effectively and where competition is inappropriate, to protect customers. In 1999, the regulatory offices for electricity and gas (OFFER and OFGAS) were merged to form the Office of Gas and Electricity Markets (OFGEM). Northern Ireland has its own regulatory body, the Office for the regulation of Electricity and Gas (OFREG).

The process of electricity deregulation has followed different paths in England and Wales, Scotland and Northern Ireland.

The electrical industry in England and Wales has four principal components; generation, transmission, distribution and supply. Generation and supply are open to competition and price is not regulated. Transmission and distribution, which are natural monopolies, are subject to price regulation. The National Grid Company, the transmission network operator in England and Wales, has a central role in the industry. It has a statutory duty to develop and to maintain an efficient, coordinated and economic transmission system and to facilitate competition in supply and generation. Distribution remains a monopoly business and under the Utilities Act 2000 it has become a separately licensable activity. Nine distribution companies operate 12 authorised distribution areas.

The Scottish electricity industry had an integrated structure prior to privatisation, which remains after vesting. Two companies, Scottish Power and Scottish and Southern Energy, the latter formed as a result of a merger between Scottish Hydro Electric and Southern Electric, cover the full range of electricity provision from generation, transmission and distribution through to supply.

The industry in Northern Ireland differs from that in the rest of the UK in a number of important ways. It serves a comparatively small area and only 1.6 million people, with 690,000 customers and until March 1995, it had been isolated from other networks. It is now a privately owned company operating under its own regulator in Northern Ireland.

Leading Wind Power Markets

In order of size Germany had the largest installed wind capacity with 20,622 MW at the end of 2006. Second and third were Spain with 11,614 MW and the United States with 11,603 MW. India was fourth with 6,270 MW followed by Denmark with 3,136 MW and China with 2, 604 MW. China has made a very recent arrival in the top wind power ranking, having risen from only 764 MW in 2004 but could overtake Denmark by the end of 2007, with 3,500 MW anticipated, whilst Denmark is presently static.

The United States has experienced a renaissance in wind power in the last two years due to production tax credits guaranteed for a fixed period and is expected to reach 25,000 MW, the same level as Germany in 2010, while Spain will not be far behind with 20,000 MW. China has a government target of 5,000 MW by 2010 but on current performance is expected to exceed that. Danish wind power capacity will probably not grow much in the next four years.