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Medium-Term Coal Market Report 2013 Was Prepared by the Gas, Coal and Power Division (GCP) of the International Energy Agency (IEA), Headed by László Varró COAL Medium-Term Market Report 2013 Market Trends and Projections to 2018 Please note that this PDF is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at http://www.iea.org/ termsandconditionsuseandcopyright/ © OECD/IEA,2013 © OECD/IEA, 2013 © OECD/IEA, COAL Medium-Term Market Report 2013 Market Trends and Projections to 2018 © OECD/IEA,2013 INTERNATIONAL ENERGY AGENCY The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 28 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives: n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countries: Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Japan Korea (Republic of) Luxembourg Netherlands New Zealand Norway Poland Portugal Slovak Republic © OECD/IEA, 2013 Spain International Energy Agency Sweden 9 rue de la Fédération Switzerland 75739 Paris Cedex 15, France Turkey www.iea.org United Kingdom Please note that this publication United States is subject to specific restrictions © OECD/IEA, 2013 © OECD/IEA, that limit its use and distribution. The European Commission The terms and conditions are available online at also participates in http://www.iea.org/termsandconditionsuseandcopyright/ the work of the IEA. 40Years_Page02_2013_20x27_Q.indd 1 03/10/2013 09:47:39 FOREWORD FOREWORD There is no denying the controversial reality of coal and its dominance in power generation worldwide. No fuel draws the same ire, particularly for its polluting qualities both locally and in terms of greenhouse gas emissions. And yet no fuel is as responsible for powering the economic growth that has pulled billions out of poverty in the past decades. As we look towards the long term we must ask what role coal has to play in the energy mix that we want to achieve – because there will be a role. But without mitigating the polluting effects of coal, pursuing business as usual will have enormous and tragic consequences. Coal is abundant and geopolitically secure, and coal-fired plants are easily integrated into existing power systems. Modern plants are also flexible, providing affordable, base-load power while backing up variable renewable generation. If coal-fired plants are well-designed and well-operated, emissions of local pollutants can be minimised. The ability to switch relatively quickly between coal and gas also reinforces gas security. With advantages like these, it is easy to see why coal demand continues to grow at a relentless rate: in this report, we project the use of coal to rise by 2.3% per year on average until 2018. The bulk of this increase will come from China, as has been the case for the last decade. But it is important to emphasise that coal in its current form is simply unsustainable. Coal-fired heat and power generation is the biggest single source of carbon dioxide (CO2) emissions resulting from fuel combustion today. More than three-fifths of the rise in global CO2 emissions since 2000 is due to the burning of coal to produce electricity and heat. And we should not overlook the health problems tied to local pollution produced by coal combustion. There are solutions to both the issues of local pollution and CO2 emissions. Underground coal gasification is a form of clean coal technology that mainly addresses the former. Some major countries have recently announced policies to encourage the construction and use of highly efficient coal-fired power plants and to promote carbon capture and storage (CCS). We welcome these efforts as part of the broader push to reduce the environmental impact of coal. Yet if nothing more than those emissions-reduction policy commitments and pledges announced to date are implemented, we project that the long-term increase in global temperatures will reach 4 degrees Celsius (°C). This would exceed the globally agreed target of limiting the long-term rise in temperatures to 2°C and would lead to a devastating and costly change in climate, the first signs of which we are already seeing today. Radical action is needed to curb greenhouse gas emissions, yet that radical action is disappointingly absent. Progress on CCS is effectively stalled, and a meaningful carbon price is missing. Moreover, even though we’ve known how to build efficient, super-critical coal-fired power plants since the 1960s, most of the coal plants built since then – and a large proportion of the ones being developed today – are of the inefficient, sub-critical kind. If these sub-critical plants under development in India and in ASEAN states (including Indonesia) were completed with the latest technology, it would save as much CO2 as will be saved by all the wind turbines in Europe. MEDIUM-TERM COAL MARKET REPORT 2013 3 © OECD/IEA,2013 FOREWORD When it comes to a sustainable energy profile, we are simply off track – and coal in its current form is the prime culprit. Yet with coal set to remain an integral part of our energy mix for decades to come, the challenge is to make it cleaner. This report is produced under my authority as executive director of the IEA. Maria van der Hoeven Executive Director International Energy Agency EDIUM ERM OAL ARKET EPORT 4 M -T C M R 2013 2013 © OECD/IEA, ACKNOWLEDGEMENTS ACKNOWLEDGEMENTS The Medium-Term Coal Market Report 2013 was prepared by the Gas, Coal and Power Division (GCP) of the International Energy Agency (IEA), headed by László Varró. The report was managed and co- ordinated by Carlos Fernández Alvarez. Harald Hecking, Timo Panke and Carlos Fernández Alvarez are the authors. Keisuke Sadamori, Director of the IEA Energy Markets and Security (EMS) Directorate, provided expert guidance and advice. We are grateful for the data provided by the IEA Energy Data Centre (EDC). Julian Smith’s assistance in aggregating and making the data user-friendly was invaluable. Many colleagues from the IEA provided us with important advice and input: Anne-Sophie Corbeau, Ian Cronshaw, Keith Burnard, Pawel Olejarnik, Johannes Trüby, Rodrigo Pinto Scholtbach, Michael Waldron, Dagmar Graczyk, Kevin Tu and Florian Kitt. Romy de Courtay edited the report. The IEA Communication and Information Office (CIO) also provided editorial and production guidance. Rebecca Gaghen, Greg Frost, Phillip Cornell, Muriel Custodio, Cheryl Haines, Angela Gosmann, Astrid Dumond and Bertrand Sadin made this publication possible. Dennis Volk authored the Box “Water in China: Growing needs, bigger issue”. Thijs van Hittersum authored the Box “Does coal price follow oil and gas prices?”. Our gratitude goes to the Institute of Energy Economics (EWI) at the University of Cologne for sharing its breadth of coal expertise and coal market models. Essential inputs were obtained at the joint CIAB/IEA workshops held 25-26 April on energy modelling and supply costs with Wood MacKenzie, represented by Ricardo Monte Alto, Andy Roberts, Jeff Watkins and Stephen O’Rourke. The IEA would like to thank the Coal Industry Advisory Board (CIAB) for their support. A special thanks goes to the many CIAB associates and analysts who provided the IEA with timely data, information and advice. Fernando Zancan from the Brazilian Coal Association, Mick Buffier, from Glencore, Alex Zapantis from Rio Tinto plc, Maggi Rademacher from E.On Kraftwerke GmbH, Hans-Wilhelm Schiffer from RWE AG, Roland Luebke from the German Coal Association, Lu Bin from Shenhua Group Corporation Ltd., Gatut Adisoma from the Indonesian Mining Coal Association, Masato Uchiyama from J-Power, Sergey Tverdokhleb from the Siberian Coal Energy Company (SUEK), Gina Downes from Eskom, Peter Schmitz, Julian Beere and Nikki Fisher from Anglo Operations Ltd., Gueorgui Pirinski from BHP Billiton Ltd., Rick Axthelm from Alpha Natural Resources Inc., Cartan Sumner and Jacob Williams from Peabody Energy Co. Inc., and J. Gordon Stephens from Joy Global Inc., as well as Brian Heath, Executive Co-ordinator of the CIAB. Comments and questions are welcome. Please address to: Carlos Fernández Alvarez ([email protected]) MEDIUM-TERM COAL MARKET REPORT 2013 5 © OECD/IEA,2013 TABLE OF CONTENTS TABLE OF CONTENTS Foreword ....................................................................................................................................
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