Newly appointed chief of the World Coal Association (WCA) Benjamin Sporton has been touring the Asia-Pacific region to spruik the benefits of low-emission coal technology.
Sporton was the recipient of the 2014 Global Excellence Award in the Coal Sector from the Energy & Environment Foundation of India for his work at WCA in promoting energy access and cleaner coal technologies.
He has been involved with policy roles in the UK and Australia, and was involved with worker compensation legislative reforms in South Australia, as well as consultation on the London Congestion Charge.
Australian Mining spoke with Sporton this morning about the current market for coal, future demand, and the push towards carbon capture and storage.
Where do you see the state of the global coal industry, and what is Australia’s position in that situation? Will we see some stability?
I think we will. Obviously at the moment it’s a tough time across all commodity markets and coal is no different to that, so I think it’s going to take a little while for that to work through in a couple of years. But when I look at the story for both thermal and met coal I think it’s a very strong story.
The reasons for that are basically look at what’s happening throughout Asia. There’s a very high demand for energy, a growing demand for energy throughout pretty much all of Asia, and the fact that big Asian countries, particularly like China and India, are still urbanising. China is only 50 per cent urbanised today; India, about a third is urbanised. So for them to continue growing their urbanised and industrialised economies it’s going to take both a lot of energy and a lot of met coal for steel and cement, so I think that gives me confidence about a strong future for coal in the world, and Australia being a very large supplier of both thermal and met coal into the world market, I think that bodes well for Australia in the longer term as well.
Australia’s primary export market for coal is China, but there’s a few pundits who seem to think that demand is falling with their decreasing demand for steel production: Is that a bit of a furphy?
That’s probably driven mostly by the economic cycle, and the fact that China is going through a bit of a rough patch at the moment, but I think the longer term story on China is still one of growth.
We hear a lot of stories at the moment about demand for coal in China decreasing when I really think demand growth is decreasing. We’re not going to see the kind of skyrocketing demand from China that we have done in the past, but China is probably going to turn into more of a ‘steady as she goes’ growth pattern and that will mean there will be continued demand for thermal coal in China. In fact our work looking at the International Energy Agency says on thermal coal’s side electricity generation from coal is going to be 45 per cent higher in 2040 than it is today. I think that they’ll still need continued growth in terms of steel, which means that we will certainly see continued demand for metallurgical coal.
The IEEFA has repeated quotes from the Indian energy minister Piyush Goyal, who said that India wanted to stop imports of coal by 2017. Is there much stock in this?
I think that what’s happening in India is that they have a huge demand for energy. There 300 million people have no access to electricity at all. We’ve looked at the numbers in terms of planned coal plant construction in India, and they have 292 gigawatts of coal plants planned for construction there. I think it’s going to be a very big challenge for them to meet the demand for coal from all of those plants purely from the domestic market. And that’s why companies like Adani are looking at projects here in Australia and potentially elsewhere to supply their coal. So I think it’s good for India that they are planning on ramping up their own domestic coal production. It’s important for them, but I still think that they’re going to have to be looking to the international market because they have so much coal electricity planned and under construction right now that I think it’s going to be a real challenge to be able to meet that purely domestically. So they will be looking for imports well into the future I expect.
Longer term for the future of thermal coal: Do you think coal companies ought to diversify their interests and hedge their bets by investing in renewables as part of their business as well?
Look I think going forward coal is still going to play a huge role in the world’s energy mix. If you look at the International Energy Agency’s new policy scenario, which is their baseline scenario, it’s not until almost 2040 that renewables just begin to overtake coal in the energy mix, and coal is still a very close second in the energy mix in 2040. And that’s coal as a single source of fuel as opposed to all renewables combined, so coal isn’t going away in the world’s energy mix. I spoke about the numbers in India in terms of coal plants planned, but also as I mentioned electricity generation from coal in China is going to be a smaller part of the mix in China than it is now, but it is still going to grow in absolute terms by 45 per cent. The International Energy Agency also says that throughout South East Asia demand for coal is going to grow by 4.8 per cent a year, year-on-year through to 2035. I think the demand for coal in 2040 globally will be about 33 per cent bigger than it is now. So coal is most absolutely not going anywhere, I don’t think we can wish away coal, so I think those companies involved in the coal industry, once we get through the difficulties and the commodity cycle today will have a strong future, because there is very strong demand for coal internationally. I don’t see that changing fundamentally in the longer term. All projections through to 2040 give good cause for positivity.
We also looked at new power plant construction anticipated through to about 2040: There should be about 1.8 billion tonnes of additional coal needed every year in terms of coal demand through to 2040. That’s a huge amount of coal that’s needed in the world, and it’s good to stay in that.
BHP recently partnered up with Canadian energy producer SaskPower to look at more efficient power production and carbon capture at the Boundary Dam facility. What can Australia be doing to catch up on this?
I think Australia needs to be investing more in carbon capture and storage. The Saskpower project is a big coal-fired power station in Saskatchewan in Canada. It’s operating a CCS plant, and it’s capturing close to 100 per cent on the CO2 and storing that underground. It’s very exciting; it’s essentially the future of electricity from coal. Next year in the US two more coal-fired CCS power plants are coming on line, and later in the year the UK will be making a decision around a plant there for coal and CCS. So I think it would be great for the Australian government to invest more in research and development on CCS. I know here in Australia the coal industry has developed the Coal21 fund which has been investing money in CCS research and development projects which is exciting and really positive, but I think we need more support for CCS from government to help leverage the support from the private sector. Internationally something like two trillion dollars has been put into investment for renewables, but only about one per cent of that has actually been invested in the development of carbon capture and storage projects. So I think we need to have more public support for CCS. We need to treat CCS low emissions coal the same as other forms of low emission energy, give it policy parity so that that will give industry the confidence to invest more in CCS development.
Victoria has a particularly notorious power plant, Hazelwood, and a few others that have been operating for a long time. Obviously the climate is a bit difficult investment-wise, but should these companies be refurbishing these plants and bringing them up to speed in the next market upswing.
Upgrading is always an option. I’ve seen good examples of upgrading lower efficiency, older power stations to make them good quality, higher performing power stations. You can do that upgrade for quite a low cost of avoided CO2 effectively, so sometimes the avoided CO2 from doing an upgrade to a power station is a lower CO2 avoided cost than investing in renewables, so that can be a good pathway to go down.
