... believes projects must be environmentally sound and socially responsible. ... is the nation’s second largest export earner. ... spends over $20 billion each year on goods, services and the community in Australia. ... earned $38.6 billion of export revenue in 2012-13. ... is investing in cutting-edge technologies to reduce greenhouse gas emissions from coal mining and use. ... accounts for three quarters of Australia’s grid electricity generation. ... has almost halved its greenhouse gas emissions intensity since 1990. ... employs around 50,000 people directly and more than 135,000 indirectly.

Coal: bringing power to the people

Coal is the world’s fuel of choice for electricity generation because it is affordable and reliable. Coal accounts for 41 per cent of global electricity generation, followed by gas (22 per cent), hydro (16 per cent) and nuclear (12 per cent).1 Further, coal is expected to remain the primary source of electricity for the foreseeable future.2

Modern energy for all

Access to electricity is fundamental to industrial activities and the jobs and prosperity they create. Electrification also means that fewer people must rely on wood, crop residues and animal waste as their main cooking and heating fuels.

This in turn encourages social and economic development by:

  • increasing life expectancy by reducing exposure to noxious fumes from indoor biomass stoves;
  • freeing up hours for farming and education that would otherwise be spent gathering fuel;
  • reallocating crop residues and dung from household use to more productive employment as fertiliser; and
  • enabling refrigeration and the local storage of vital medicines. 3

The International Energy Agency (IEA) estimates that 1.3 billion people, or 18 per cent of the world’s population, did not have access to electricity in 2011 (Table 1). Sub-Saharan Africa and developing Asia account for 97 per cent of this total. Sub-Saharan Africa has the highest share of the population without access to electricity (68 per cent), followed by developing Asia (17 per cent). India alone has 306 million people without access to electricity, while the figures for Nigeria, Indonesia and Pakistan are 84 million, 66 million and 55 million, respectively.4

Table 1: Number of people without access to modern energy services by region, 2011 and 2030, International Energy Agency’s core scenario 5 Source: International Energy Agency

The IEA also reports that 2.6 billion people, or 38 per cent of the world’s population, did not have access to clean cooking facilities in 2011. Again, the vast majority of those reliant on traditional biomass are located in sub-Saharan Africa and developing Asia. In sub-Saharan Africa, 68 per cent of the population does not have access to clean cooking facilities; in developing Asia, the figure is 51 per cent. India is the country with the most people reliant on traditional biomass (818 million), while China is ranked second (446 million).6

In the IEA’s core scenario, an additional 289 million people worldwide will gain access to electricity in 2030 (net of population growth). China and Brazil are expected to achieve universal access within the next few years, while India is expected to achieve access for 90 per cent of its population in 2030 (i.e., 159 million more people). In contrast, population growth in sub-Saharan Africa is expected to offset electrification efforts, with 46 million more people being without access in 2030.7

The story is similar for improving global access to clean cooking facilities. The IEA projects that the number of people reliant on traditional biomass will decline by 118 million people in 2030. As with access to electricity, regional differences are expected to persist, with the situation improving in developing Asia ( with 287 million more people obtaining access to clean cooking facilities in 2030) but deteriorating in sub-Saharan Africa (with 184 million more people dependent on wood, crop residues and animal waste for cooking and heating).8

While the goal of achieving modern energy for all is far from being achieved, coal will be an integral part of the solution.

Demand for electricity will continue to drive world coal consumption

The IEA expects global energy demand to increase by one-third by 2035, with developing economies contributing 90 per cent of this growth. Demand for electricity will increase by two-thirds, more than other form of final energy. Coal continues to be the largest source of electricity generation, growing steadily at around 1.2 per cent per year. Indeed, nearly three-quarters of the increase in world coal demand comes from the power sector.9

Progressive electrification is narrowing the gap in demand between oil and coal (Chart 1).10 While the IEA’s core scenario still has oil as the world’s largest primary energy source in 2035, Wood Mackenzie predicts that coal will overtake oil later this decade.11

Chart 1: World primary energy demand by fuel, 1980 to 2035, International Energy Agency’s core scenario12 Source: International Energy Agency

While coal remains a highly competitive source of electricity generation in developed economies, in developing countries it leads other fuels by a wide margin.

According to the IEA, “China’s economic success has been fuelled primarily by coal, which provides over two-thirds of China’s primary energy demand. The country now uses nearly twice as much coal as all OECD countries combined.”13 China is not just the world’s largest consumer of coal; it is also the world’s largest producer and importer of coal (having overtaken Japan as the leading coal importer in 2012). The IEA expects that China’s growth in coal demand to 2020 will exceed that of the rest of the world put together.14

The IEA notes that coal is the “backbone” of China’s electricity system, fuelling nearly 80 per cent of national generation. Further, China’s coal-fired generation to 2035 is expected exceed 5,500 TWh, which is more than current generation from all fuel sources in the USA and Japan combined. And while China’s rate of growth in thermal coal demand will slow, coal will continue to dominate its energy mix. The depletion of mature mines in northern China, combined with long transport distances, will make some domestic coal relatively expensive.15 Therefore, in the IEA’s projections to 2035, “China continues to import substantial amounts of coal, remaining a strong force in global coal markets”.16 China’s net imports of coal peak before 2020 but stay above or around 2012 levels for the remainder of the outlook.17

Like China, India’s economic development is inducing a surge in demand for coal. India has doubled its coal use between 2000 and 2011 and the IEA expects its coal demand to double again by 2035, overtaking the USA as the second largest coal consumer soon after 2020.18

India has large reserves of coal (mostly low quality thermal coal) and its coal output increased by more than two-thirds between 2000 and 2009. However, coal production has remained steady since then, owing to the inaccessibility of many coal deposits, infrastructure constraints, and a lack of advanced technology and competition in the Indian coal mining industry. Consequently, India’s dependence on coal imports has risen significantly, and the IEA projects that India’s imports will more than triple by 2035, overtaking those of Japan and the EU before 2020, and those of China soon after, to make India the world’s largest coal importer.19

Both China and India have relatively low rates of electricity consumption per capita (Chart 2).

Chart 2: Electricity consumption per capita for selected economies (MWh)20 Source: HDR Salva

This suggests there is considerable future demand growth for electricity and thermal coal in these large economies (Chart 3).21

Chart 3: Coal-fired electricity generation by region, 1990 to 2035, International Energy Agency’s core scenario22 Source: International Energy Agency

The ten economies belonging to the Association of Southeast Asian Nations (ASEAN) are embarking on the same process of coal-fired electrification as China and India. The IEA projects that demand for electricity in ASEAN will double between 2011 and 2035 and that coal use will triple in the same period. Demand for coal in ASEAN is set to grow at 4.8 per cent a year – the fastest growth rate of any major coal consuming region or country – and ASEAN’s coal consumption will exceed that of the EU by 2030. The IEA expects Australia and Indonesia to be the biggest beneficiaries of increasing international trade in coal.23

Coal remains important to developed economies, especially Australia

Even though developing countries are driving world demand for coal, it remains an essential fuel in developed economies. The USA is the world’s second largest consumer of coal and coal accounts for 40 per cent of US electricity generation.24 Coal is also enjoying a resurgence in Western Europe. Between 2011 and 2012, coal-fired electricity generation increased 65 per cent in Spain, 35 per cent in Great Britain and 8 per cent in Germany.25

Thus, the IEA concludes that: “It is currently difficult to envisage a future in which coal is not used to meet growing power demand – not only in non-OECD regions, but also in many OECD countries.”26

Wood Mackenzie agrees that coal demand will be sustained in developed economies:

If you take China and India out of the equation, what is more surprising [than developing countries’ preference for coal] is that under current regulations, coal demand in the rest of the world will remain at current levels. Even though natural gas and renewables make up the bulk of incremental power capacity in Europe, the US and other parts of Asia; coal demand will be sustained because of its price competitiveness." 27

Australia is no exception to this trend. Black and brown coal comprise Australia’s principal energy source, providing 34 per cent of its primary energy28 and 75 per cent of its grid electricity. Black coal provides 90 per cent of grid electricity in NSW and 77 per cent in Queensland, while brown coal (lignite) generates 93 per cent of electricity in Victoria (Chart 4).29

Chart 4: Percentage share of grid electricity generation by fuel, Australia and selected States, 2011-1230

The baseload power provided by coal typically operates at a 75 to 90 per cent annual capacity factor, compared to peaking plant that operates at annual capacity factors of between 1 and 10 per cent.31 So even though black and brown coal account for 57 per cent of registered generation capacity in Australia, this baseload plant supplies 75 per cent of output. There is no other fuel – fossil or renewable – that can perform this vital competitive role in Australia’s power generation mix.

The abundance of coal in Australia, and its proximity to populated areas, means that Australian electricity prices have historically been among the lowest in the world. Coal-fired electricity is also the cornerstone of competitively priced, reliable and efficient electricity generation that underpins energy-intensive industries, an employer of around one million Australians.

1 International Energy Agency, World Economic Outlook 2013, Paris, 13 November 2013, p. 175.
2 ibid., p. 174.
3 International Energy Agency, World Energy Outlook 2002, Paris, p. 366f.
4 International Energy Agency, World Economic Outlook 2013, Paris, 13 November 2013, p. 88f.
5 ibid., p. 91.
6 ibid., p. 89.
7 ibid., p. 91f.
8 ibid., p. 91f.
9 International Energy Agency, World Energy Outlook 2013, pp. 57, 62, 65, 141, 171, 174.
10 ibid., pp. 62, 141.
11 Wood Mackenzie, Wood Mackenzie Says Carbon Policies Unlikely to Prevent A Coal-Fuelled World, press release, 14 October 2013. NB that the IEA’s alternative “Current Policies Scenario” has coal overtaking oil as the main source of world energy consumption by 2035, but not by 2020.
12 International Energy Agency, World Energy Outlook 2013, p. 63.
13 ibid., p. 156.
14 ibid., pp. 62, 146.
15 ibid., pp. 146, 156, 182.
16 ibid., pp. 61, 146, 156.
17 ibid., p. 151.
18 International Energy Agency, World Energy Outlook 2013, p. 163.
19 ibid., pp. 151 and 163f.
20 Mark Gresswell, The Resurgence of Coal: Facts and Drivers, Presentation to Singapore International Energy Week, Singapore, 31 October 2013, Slide 14.
21 Cf. International Energy Agency, World Economic Outlook 2013, pp. 158, 163, 182.
22 ibid., p. 182.
23 International Energy Agency, World Economic Outlook 2013, pp. 151, 166.
24 ibid., p. 159.
25 International Energy Agency, Tracking Clean Energy Progress 2013: IEA input to the Clean Energy Ministerial, Paris, 17 April 2013, p. 48.
26 ibid., p. 49.
27 Wood Mackenzie, Wood Mackenzie Says Carbon Policies Unlikely to Prevent A Coal-Fuelled World, press release, 14 October 2013.
28 Australian Bureau of Resources and Energy Economics, 2013 Australian energy update 2013, July 2013, p. 5.
29 Energy Supply Association of Australia (esaa), Electricity Gas Australia 2013, Table 2.6, p. 20f. NB that figures from this source exclude generation for own use by private generators.
30 ibid., p. 20f.
31 AGL Energy Ltd., Submission to the NSW Parliament’s Public Accounts Committee Inquiry into the Economics of Energy Generation, 2012, p. 2.