This New Decade: Era of Coal 2.0?

The energy source of choice in the developing world remains coal. And, as I have argued, unless the developed world undertakes energy transition now, it too will be forced back into coal as the decade progresses. Today comes an intriguing story from Bloomberg, that the massive and iconic Richard’s Bay Coal Terminal in South Africa may have, for the first time, shipped more coal to India than Europe:

Exports to India from Richards Bay Coal Terminal in South Africa may have exceeded shipments to Europe for the first time in 2009, Raymond Chirwa, the terminal’s chief executive officer, said in an interview today. Exports to the two destinations for the first ten months of the year were similar, he said, adding that the terminal is now calculating shipments by destination for the last two months of 2009.

It’s worth taking a look at the countries that are the top consumers of coal, which I call the Coal 7: China, USA, India, Japan, Russia, South Africa, and Germany. I like to use the BP Statistical Review for global energy data which helpfully translates all units of energy measurement –in addition to barrels, tonnes, and bcf–into mtoe or million tonnes oil equivalent. This unit, mtoe, allows us to see that China, for example, is using 3.75 times as much coal energy as oil energy. (1406.3 mtoe of coal vs 375.7 mt of oil). Compare that to India, whose consumption of coal energy is only 1.58 times its use of oil energy. (213.5 mtoe of coal vs. 135 mt of oil).

India has a stronger automobile and vehicle legacy than China. But, given there’s truly not enough oil in the world for either India or China to replicate North American driving habits, I would tip India to direct a lot of its growth toward electrified transport instead. And that will be powered by coal.

While both India and China were steadily growing consumers of coal in 1990’s, consumption ramped pretty hard in both countries in the recent decade. Here is the latest available data for India (click to enlarge):

China is a younger user of oil, with lots more to come. But on a proportional basis, unlike India which I see as moving much more heavily into coal in the years ahead as its oil demand growth slows, I see China maintaining a coal to oil energy relationship not very far from its current 3.75 ratio.

Could India possibly be heading to a coal energy vs oil energy ratio like China’s, at 3.75? It seems quite likely. Not that the developing world needs extra help in building coal fired power generation, but the world bank is helping speed up the process. As for climate change legislation, one reality that’s shared by all leaders whether in the developing or the developed world, is that the optimal approach politically to carbon reduction is to 1) enter into weak agreements, and then 2) not adhere. That’s exactly what I expect in the next decade, as the Era of Coal 2.0 unfolds.

Charts: via www.gregor.us using data from BP Statistical Review.