The Beginning Of The End For Coal?

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By Paul Homewood

This year’s BP Energy Review came out while I was away last week.

The general message seems to be little change. These are Spencer Dale’s highlights:

It has been pretty clear for a few years now, indeed arguably since 2008, that both the economic and energy growth rates seen in the early 21st C have long gone.

I’ll be doing some more analysis bit by bit, but one of the items that has attracted most attention has been the slight drop of 1.4% in coal consumption.

This has led to comments such as this from PEI:

The fortunes of coal appear to have taken a decisive break from the past,” said Spencer Dale, BP’s chief economist, explaining its decline was due to a number of “structural, long-term factors”.

While this may be true of the EU, was for the US, it rather seems a lot of wishful thinking from BP, as a proper analysis shows.

Globally, as we’ve already seen with energy growth, the big rises in coal consumption petered out a few years ago, but the drops since then have been tiny in comparison to the totals.

When we look at the breakdown, outside of the US, EU and China, consumption is still rising. Whether the US returns to coal in a big way remains doubtful while gas is so cheap, but this cannot be guaranteed long term.

But the most interesting figure is China’s. It is believed that coal power output increased last year.

However, China has quite naturally been replacing old inefficient and polluting power plants with new modern ones.

This will of course lead to the use of less coal per KWh. While we may continue to see flatlining or small reductions in China’s coal usage, this is a million miles away from Spencer Dale’s assertion.

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One other factor in the muted demand for coal has been the standstill in steel production last year, both globally and in China.

Steel production is, of course, a major user of coal, both directly as part of the ironmaking process, and also as a supplier of power. Year on year, output has barely risen at all.

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It is also a given that construction output in China has slowed down, which again has a major impact on coal demand.

In summary, there is little evidence to support Dale’s statement that the fortunes of coal appear to have taken a decisive break from the past.

Despite political pressures, particularly in Europe, and competition from shale gas, all of the data points to coal remaining a crucial element in the global energy mix for many years to come.