The future of coal?
There exists a strongly held belief throughout the world that the burning of coal for energy generation is as good as dead, but even a rudimentary inspection of the global energy landscape shows that this projection is almost completely untenable. While renewables and nuclear, could feasibly provide over half of global energy demand in the very near future, the remainder cannot simply be written off, regardless of the increasingly negative profile of combustive processes.
Primarily, the industrialization of developing countries (think almost all of Africa, swathes of Asia and a smattering of South America) is resulting in large annual increases in energy requirements. We have known for many years that we would have limited options to meet this demand; either we solved the renewables scalability problem and let them have at it, or accept that the need for fossil fuels will continue to be strong. This scenario has been forecasted by many in recent history, but thoughts and prayers have once again distracted the mainstream media from encroaching reality.
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Larger companies engaged in South African coal, for instance, are certainly responding to the prevailing trend in public opinion and shopping for more media-friendly assets. South32 remains committed to its existing operations in South Africa, including aluminium and manganese, but its priorities have been ostensibly shifting towards base metals. Anglo American, however, sold off the last of its South African domestic coal assets in 2017; larger companies may be swiftly adopting cleantech, but others without the luxury of abundant choice remain willing to profit from dirty industry for as long as they feasibly can. And honestly, this shouldn’t surprise us.
In Pakistan, coal imports are expected to soar to around 40 million tonnes by 2025 because of a massive programme of coal-fired power plant building in conjunction with China as part of Beijing’s Belt and Road Initiative. This will see coal go from just under 10 percent of Pakistan’s current energy supply to around 30 percent by 2025, with around 6.6 GW of coal-fired power currently under construction. South Africa will likely command the lion’s share of this demand due to a combination of quality and freighting advantages over Australia, the US and South America.
The fact that renewable energy uptake has improved considerably, resulting in intense global demand for a variety of metals, has contributed to the false assumption that coal and gas will soon be obsolete. China’s 13th Five Year Plan (FYP), for example, aims to limit China’s coal consumption to a maximum of 58% of energy supply by 2020 (64% in 2015). The plan also vows to raise the proportion of renewable and non-fossil fuel consumption to 15% by 2020 and 30% by 2030. These are far more gradual increments than are commonly reported, and China’s activity dwarfs that of all others, dominating global economic trends.
Nuclear is often seen as a safety net in this regard; a quick solution to a critical emissions problem. The success of uranium investments over the past 70 years, however, has largely depended on luck. Uranium prices were buoyed by China’s 11th FYP, only to run straight into the financial crisis in 2008, and just as everyone was convinced it would recover along with other commodities, along came the Fukushima disaster of 2011. The industry is beginning to show signs of life: Japan recently authorised the relaunch of two large reactors, providing some hope that the market could stabilize, but again, this will be a slow journey.
The coal industry provides 81,000 direct jobs and an estimated 170,000 indirect jobs to the South African economy, paying employees US$1.89bn in 2016. Africa is expected to play host to a quarter of the world’s population by 2050, yet estimates currently suggest that it will account for less than 10% of global energy demand. This seems like more wishful thinking, and we foresee a case in which Africa industrializes much in the same way as India did over the last decade. As much as the world must continue to develop away from coal, we are lumped with it for at least the next half-century, and its decline will be extremely gradual.