Sunday, November 21, 2010

Future Coal Supplies - more, not less!

There has been a growing trend toward predicting an imminent peak to the production of coal. Just this last week Nature carried an article that précised Richard Heinberg’s recent book on Coal production, which I reviewed when it first came out. And while that was based, in turn, on David Rutledge’s application of Hubbert Linearization to coal production, (discussed here ) that underlying theme had also been picked up in an article in Energy by Tad Patzek. This latter paper had just come out when, at the beginning of last month, I gave a paper at the ASPO-USA meeting explaining why the approach was wrong. I did that with Kjell Aleklett sitting in the front row of the audience; his graduate student Mikael Höök had just presented a dissertation along the same lines.

Why am I so obdurate that this is wrong, in the face of such heavyweight opinion? Well let me run through the bones of my argument to explain why.

The most extreme of the positions on the imminent coal peak is that of Tad Patzek and Greg Croft. (Energy, Volume 35, Issue 8, August 2010, Pages 3109-3122) In that paper the authors had inserted a predictive graph on coal energy production rate, as follows:

From Patzek and Croft

As you may note, this suggests that we are right at that cusp of peak production and it is all downhill from here. With the major sources of energy for the planet currently coming from coal and oil, and with the recent comments both from the IEA and the Joint Services Command about the peaking of oil, that would transfer a lot of the load to natural gas, which is the third major source, according to the IEA. (And it should be noted that P&C did include the following from the IEA in their presentation.

IEA predictions of future energy supply sources (after P&G)

Gregor Macdonald at Seeking Alpha has recently highlighted the increasing world consumption of coal, which is rising much more rapidly than that of oil, which has almost stabilized. Much of that demand is coming from China, India and the growing economies of Asia.

Gregor MacDonald:

Much of the argument however for peak in production begins with the decline in the production of British coal. Famously, before the first World War, Winston Churchill converted the British Navy from the use of coal to that of oil, despite the UK having, at that time, no known indigenous oil supply yet having plenty of coal. It was a decision followed by Navies around the world. Britain still had the coal, - there were other reasons for the change.

Following the Second World War Britain had to rely on coal as a domestic and industrial fuel, and, in 1947 it nationalized the mining industry. As a part of that process it carried out a detailed physical inventory of the coal reserves of the country. That inventory has been published, and can be summarized in this table:

(From Trueman)
In the post-war years British coal production peaked at about 220 million tons a year in 1955.

British coal levels (Source Open University )

Current demand, as you may note, is just over 50 million tons a year – which might suggest that the UK has about 900 years worth of coal available.

But that is apparently not the case. If you look at a couple of data points, the World Coal Outlook, and then the BP estimate of reserves for 2005, there is nowhere near that amount of coal in the reserve:

The story is told in the difference between the resource and the reserve. At the present time folk would have you believe that the UK has very little coal left (4.5 years according to the BP report, from 2005, which suggests that the country is only staving off running out, since it is using about a quarter of that a year, by relying on imports).

So where did the coal go? Did some evil Voldemort-type character sneak into the country over night and magic it away? No! As the World Coal study shows, the coal is still there. It is just that, at the present time, the coal is not economically mineable and so it is not considered a reserve. It is, however, physically, still there, and thus, is still shown in the first column as a resource. And as the price of oil rises and the price of alternate fuels rises, so more of that resource will become a reserve. As a single example there has been talk of putting a new underground mine in at Canonbie in Scotland as part of a long-term plan to supply the Longannet power station.
It is thought that deep seams run for miles underneath the Canonbie area and could yield 400 million tonnes of coal, enough to keep the Longannet power station going for the next 80 years.
You may note that the 400 million ton figure is twice the volume that BP considered the totality of the British Reserve in 2005.

The predictions of the imminent death of the Coal Industry are likely thus to be somewhat premature.

Now let me close by addressing two other points. One of the technical advances that moved so much of the British reserve into the resource column instead was that it became, with the advent of larger mining equipment, much cheaper and simpler to mine coal from the surface deposits of places such as Wyoming or Queensland, than it did to mine it from underground. When the basic technology is not much more complex than using larger and larger shovels to dig the coal out of the ground there is, as yet, no need for the more complex technologies that might, at greater expense, make more of the coal a reserve, rather than a resource. The world has more than enough coal, and coal producers that its price is largely kept down by competition. (Technology was the second part of my ASPO paper, though I will forego going down that part of the argument in this post).

Consider, for example, that until recently Botswana found that it was cheaper to buy the power that it needed from South Africa, rather than expand its own coal-fired power system. Then South Africa decided it needed that power itself and so Botswana was thrown back on its own resources. It is expanding its sole coal mine and installing additional power stations to raise generation from 120 MW to 820 MW. In the process they have established that the coal deposits in the country may well be up to 200 billion tons of coal. However, since there is not that much demand, as yet, and Botswana is a land-locked country only 17 billion tons are currently counted as a reserve. However there was a strong Chinese presence during my visit there, and the situation may therefore change.

I won’t comment much on the growth of coal in China, which is moving toward consuming about half the world’s production, Euan Mearns has just covered that in a much better way than I might. But I would add some thoughts to his post.

Firstly the Chinese have been building a lot of coal-fired power stations, and are unlikely to have built any of them without an assured supply of coal for each. Secondly this is not the only market for coal in China. I was in Qinghai province, over by Tibet. The province gets most of its power from hydro, but uses coal to power the brickworks that are ubiquitous in the region, as dwellings are being converted from mud-brick to fired brick.

China has a domestic problem to keep the many regions happy with the central government, and this is causing them to put in massive amounts of infrastructure to allow access to all regions of the country. It is at a scale much greater than that I have seen anywhere else, even in remote regions, such as some of those I travelled. Rail and truck transport of coal is not the only way it can be shipped. Coal pipelines are an alternate way of doing it, but oddly, whenever the technology reaches a point of serious discussion freight costs seem to reduce, at least temporarily. I do not see, therefore, that over the longer term, coal supply to the various power plants being as great an issue as others foresee.

My overall conclusion is, therefore, that there is plenty of coal. The price is kept down by its international availability, and because it is so ubiquitous I anticipate that as oil becomes more expensive, so the nations of the world will, increasingly move to using this as an available reserve.


  1. Hi Dave, a couple of points on this post:

    Firstly, I think it is important not to loose focus with studies like the one by Patzek. The important question today is knowing if the sky high forecasts by the IPCC are serious or not, for if they are not Coal won't be able to replace Oil. Jean Laherrère has been using a Coal ultimate of 700 Gtoe, which is about 15% above BP's estimate and 40% over the World Coal estimate. Even with these number we get a peak in the first half of this century. A Coal peak after 2050 requires reserves figures several times those by BP or World Coal.

    And secondly, the argument that reserves are lower because of low coal prices is really not that congruent any more. Coal prices have ridden a much crazier roller coaster that Oil; just between 2007 and 2008, prices tripled... Coal is presently being market at prices around 90 €/ton in Europe as in China. In the former, Germany is spending 2 billion €/year on subsidies to this industry, which inflates the actual price by further 40 €/ton. Looking ahead, expected exports from Australia and sub-Saharan Africa are far from matching the increased demand from Asia; the world Coal market will only get tighter in the coming decade. So we better see production ramping up in Europe or we might as well forget about Coal as a main energy source.

  2. Coal is different from oil in that it is largely used in power stations, rather than by small-scale consumers. Thus when a mine is established, or a power plant, there is a coming together of both groups to ensure a long-term supply, which justifies the investment in the large facilities at both ends of that supply chain. In consequence, because of those agreements, the actual price of coal is quite often significantly below the spot market price that is usually quoted, since it was agreed some years ago and on long-term delivery contracts.

    It is also, in my opinion, unwise to use the EU as an argument at the moment, given the hostility of their regulations to the use of coal (see the mess the UK is going to get into in following them) and the uncertainties that have caused power companies not only there but also in the US to cancel or postpone orders for new stations. It will only be when it becomes more evident that there is no other easy alternative that the coal market will strengthen and develop.

    My example of Botswana (200 billion tons) was meant to exemplify that the current surveys do not include such resources, I could equally well have cited Mozambique, which is now bidding against Australia and Indonesia to supply China. One project alone there is for 5 billion tons which is targeted to a steel maker in China.

  3. Ok Dave, let me through more wood into this fire.

    The information I have from my contacts here in the National Grid is that spot prices directly impact electricity prices. In 2008 things got really ugly because the government, already running an electricity deficit, was nonetheless unwilling to rice prices. Utilities made the first half of that year loosing money, selling electricity cheaper than the coal the were burning. As with most info on coal this never came out in the press, so you'll have to take my word for it :). While it is true that power stations may be built with the supply from a certain mine in mind, the actually daily usage can't be forecast before hand, hence spot comes into play. Note that while in the US utilities burn coal mined by their neighbour, here we burn coal that comes mostly from the southern hemisphere (some years ago New Zealand was the largest supplier of Portugal).

    As for higher prices moving resources back into reserves, this argument has been beaten close to death at TOD. Certainly I understand that Coal differs in many ways from Oil, but EROEI issues are about the same: can these lower EROEI resources sustain high extraction rates? It's the “size of the tap / size of the tank” issue. In some sense I read CERA's arguments against Peak Oil in your logic for Coal.

    We can continue locked around these arguments for long. So Dave what I'd ask from you is a XXI century assessment for coal: producing a world ultimate and an extraction profile. And I fully acknowledge this ain't no simple task, the Hubbert Method is not useful and hard data for coal is shrouded by the industry. But if anyone is up to that task is you.

  4. King Coal ruled through the 18th, 19th, and half the 20th Century. It was as late as the 1960s that oil replaced coal as the largest source of energy for human life. And on current trends, HO is undoubtedly right -- Coal will reclaim its crown.

    In the long run, economics rule. Under normal situations, humans will always pursue efficiency and select the most effective source of power, which today is fossil fuels or nuclear (or, in very limited niches, hydro-power or geothermal). But for the last few decades, we have been in an unsustainable situation, where politicians have forced people to behave inefficiently -- shutting down low cost, effective power sources like coal & nuclear and instead promoting high cost, unreliable sources like wind & solar. This is only possible with subsidies, and subsidies are unsustainable.

    Now that we are in the early phases of "Peak Government" with governments across the West running out of money, the subsidies will inevitably be cut. Normal economic forces will come into play, and coal use will go up. Thankfully, as HO points out, the planet has adequate resources to support higher use.

  5. Very nice article. And nice comment from Kinuachdrach.

    The coal is certainly out there. An enormous quantity of coal, plus enormous quantities of a broad range of other hydrocarbons. (not to mention uranium and thorium)

    If we can get past the carbon hysteria and dieoff faddism that has consumed so much of the ruling classes and intelligentsia of the western world, perhaps we can learn how to utilise this abundance of energy resources wisely.

    We have to face a stark fact: The political left in the west has settled on a carbon hysteric dieoff and energy starvation approach to the next several decades. The only way to escape their suicidal clutches is to put them far away from any seat of power.

    They would then turn to eco-terror as a tool, but that is more easily managed than to have them terrorising society's future from seats of government and inter-government.

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