Gas demand for power generation has been driving the increase in worldwide gas consumption in the past two decades, but recent high oil and gas prices have triggered a revival in coal-fired power projects. David Knott discovers that the coal-fired power revival is most prominent in two key markets eyed by Middle Eastern producers for expansion of gas exports.
Chinas economic boom is the main driver of expanding coal demand, according to the Coal Industry Advisory Board (CIAB), with growth also being apparent in other developing countries such as India, Indonesia and South Africa, as well as in developing economies in particular the US. Although growing demand is leading to a tighter market, investment in production and exporting capacity has been made in response to increased demand rather than in anticipation of such increases, so there has been a time lag in bringing new capacity to market: Nevertheless, international coal markets remain fundamentally competitive, thereby continuing to contribute to world energy security. A recent CIAB report said prices for coal had been boosted by demand for iron and steel because of booming worldwide economic growth. However, although prices remain high by historical standards, coal is still far lower-cost than competing fossil energy sources.
Geoff Morrison, Program Manager at the IEA Clean Coal Centre, told MEES that China and India, the main target markets for Middle Eastern gas producers, were building many coal-fired power plants, with construction occurring at a higher rate than in other countries as their electric power requirements escalated. India is building mainly conventional sub-critical plants, with an efficiency of about 35%, because of limitations of the locally available coal, which is low-grade high-ash-content fuel. China is planning to build high-pressure super-critical units, which are around 45% efficient and which have emissions removal capability in line with tightening government requirements. He added that, unlike the global oil and gas industries, the coal industry had relatively few concerns about supply capacity at the moment.
Not only is there growing coal production and vast reserves available, but also the coal producing regions are widely spread around the globe, with much of the consumption being in major producing countries. China and India, for example, are major coal users but import only small amounts of the fuel. The US has stopped exporting coal in response to growing domestic demand. Besides China and India, the US is also seeing a revival in plans for building coal-fired power capacity. Mr Morrison said coal-fired plants already provided more than 50% of the countrys electric power, and the new spate of plants either planned or under construction represented the first new coal-fired capacity in the US for many years.
China Driving Coal Demand
BP Chief Economist Peter Davies, at the launch of the BP Statistical Review of World Energy 2006 recently (MEES , 26 June), said that coal had been the fastest growing fuel since 1995: This, however, is only true as a result of China. China consumes 39% of the worlds coal, almost all of which is domestically produced. In 2005 China alone represented 76.8% of the growth in world coal consumption. Chinese consumption grew by 14.4% in 2004 and 10.9% in 2005. In 2005 China installed 76gw of electric power generating capacity, of which 83% was coal-fired: Coal growth outside China has been modest. It grew by 1.8% in 2005, just slightly faster than the 10-year average of 1.5%. The US and India share the role of the biggest volume increases. In the US the growth was fuel switching at the margin in the face of high gas prices. In India it was GDP-driven, partly imported and despite increased gas availability. Prof Davies argued that coal consumption was rising rapidly throughout Asia alongside imported gas: Russian consumption continues to rise and helps release gas for export. EU coal consumption fell, but this was concentrated in Germany, where subsidies continue to fall. Elsewhere in Europe the UK, France and Spain consumption grew, incentivized by lower coal prices. International coal is now relatively cheap, with prices having risen less and having turned down before gas. The cost of carbon has yet to critically impact fuel choice. Fuel choice for future power generation investment is a critical issue, but the economic answer is not yet clear.
New Coal-Fired Power Capacity
Power plant contractors are reporting a boom in coal-fired station orders, which is expected to continue in the medium term. In 2005 coal-fired plants comprised some 30-40% of new orders disclosed by the leading international contractors, with gas-fired plants accounting for 20-30%. Annual power plant capacity additions have averaged 120gw/year in recent years, but some companies now predict that the capacity increase rate could increase to 150gw/year. There is now some 1,200gw of power capacity on the order books, not all of which is expected to materialize. Some analysts foresee coal-fired capacity dominating for the next decade, taking up around 40% of the new capacity, while predictions for the contribution of gas-fired plants range from 25% to 50%. While there is considerable uncertainty about the outcome of the coal-fired vs gas-fired competition, continuing high oil and gas prices can only make coal-fired power economics more attractive.
IEA Energy Analyst Hideshi Emoto told a CIAB workshop last November that the World Energy Outlook 2005 reference scenario (MEES , 14 November 2005) predicted that global energy demand would grow at an annual average rate of 1.6% to 2030, with coal consumption predicted to grow at an annual rate of 1.4% from 5.2 trillion tons in 2003 to 7.3 trillion tons in 2030. However, he warned, a key message drawn from WEO 2005 includes the critical position of Middle East/North African oil and gas resources in meeting the forecast growth in world energy demand. Underinvestment here would drive up energy prices, depress global GDP growth and eventually harm the producer nations themselves. With major importing countries looking to reduce their reliance on oil and gas, there is a need for dialog between producers and consumers to find mutually beneficial outcomes. Amidst concerns about energy supply and demand security, coal can make a positive contribution, but environmental issues remain.
Emissions Reduction Cooperation
Mr Morrison said emissions were the main issue for the coal industry, given the aim to achieve zero emissions in power generation. He explained that manufacturers could now deliver coal-fired generating sets which removed the bulk of sulfur, nitrous oxides and particulates. The major development under way is the introduction of carbon dioxide removal technology which is viable, but has not so far been implemented on a utility-wide scale. As with the oil and gas industry, the main option for disposing of the recovered CO2 is seen as sequestration in geological structures, including disused coal mines.
CIAB sees the demonstration of the ability to generate electric power from coal with reduced emissions as a key to future energy market and environmental security: Although developed countries are responsible for the vast bulk of historical CO2 emissions, developing countries will be the main source of growth in greenhouse gas emissions from energy use over the coming decades It is in the best interests of the OECD countries to assist developing countries in using coal sustainably. The IEA Clean Coal Centre reckons that all the existing coal-fired power technologies could be adapted to capture 80-90% of the CO2 they produce. CO2 capture systems are being demonstrated on flue gas at up to 50mw scale equivalent, and work is under way to scale up the technology: Recent performance estimates show net generation efficiencies of 35-36% to be possible, and continuing developments will improve on this.
Zhiyong Jin, First Secretary for Science and Technology at the Chinese Embassy in London, told the CIAB workshop that China expected electric power consumption to grow by 6% a year to reach 3,045 TWh in 2010 and to expand further by 4% a year to 4,500 TWh in 2020. He said China was collaborating with Mitsui-Babcock to optimize coal-fired plant technology, and planned to develop one hundred 600mw supercritical units. China and Mitsui-Babcock signed a 15-year technology transfer agreement in 2004. The first plant to result from this cooperation was brought on-line in 2005, a 600mw supercritical plant said to be capable of reducing emissions by 20% compared with a conventional unit. Mitsui-Babcock sees the collaboration as a lever for further Chinese power contracts. Not only is the company pursuing new clean coal projects, but it also sees opportunities for replacing equipment at aging power stations.
