18 March 2015, Lagos – World demand for coal over the next five years is expected to increase exponentially breaking the 9-billion-tonne level by 2019, the International Energy Agency, IEA, said in its report.
This is coming in the wake of the federal government’s partnership with One Nation Energy Platform Limited, to develop the coal sector, through the coal to power generation initiative aimed at generating 500 megawatts through coal.
Also, the federal government and a Chinese firm, HTG-Pacific Energy Consortium, recently signed a Memorandum of Understanding,MoU, for the development of 1,000MW of coal electricity.
At the ceremony, President Goodluck Jonathan, said, “Coal resources present an excellent opportunity for us to diversify our energy sources, to the extent that 30 per cent of our electricity generation should come from coal, using environmentally friendly clean technology.
“Nigeria is endowed with abundant coal reserves of the required quality necessary for power generation. And so there is no reason why we should not exploit that sector.”
With regard to the Report, IEA Executive Director, Ms Maria van der Hoeven, said,”We have heard many pledges and policies aimed at mitigating climate change, but over the next five years they will mostly fail to arrest the growth in coal demand.
“Although the contribution that coal makes to energy security and access to energy is undeniable, I must emphasise once again that coal use in its current form is simply unsustainable. For this to change, we need to radically accelerate deployment of carbon capture and sequestration.”
The Executive Director also called for more investment in high-efficiency coal-fired power plants, especially in emerging economies. “New plants are being built, in an arc running from South Africa to Southeast Asia, but too many of these are based on decades-old technology,” she said. “Regrettably, they will be burning coal inefficiently for many years to come.”
Global coal demand growth has been slowing in recent years, and the report sees that trend continuing. Coal demand will grow at an average rate of 2.1 percent per year through 2019, the report said. This compares to the 2013 report’s forecast of 2.3 percent for the five years through 2018 and the actual growth rate of 3.3 percent per year between 2010 and 2013.
As has been the case for more than a decade, the fate of the global coal market will be determined by China. The world’s biggest coal user, producer and importer has embarked on a campaign to diversify its energy supply and reduce its energy intensity, and the resulting increase in gas, nuclear and renewables will be staggering.
However, the IEA report shows that despite these efforts, and under normal macroeconomic circumstances, Chinese coal consumption will not peak during the five-year outlook period.
The report’s forecasts come with considerable uncertainties, especially regarding the prospect of new policies affecting coal. Authorities in China as well as in key markets like Indonesia, Korea, Germany and India, have announced policy changes that could sharply affect coal market fundamentals.
The possibility of these policy changes becoming reality is compounding uncertainty resulting from the current economic climate.
The issue of low prices also remains a hot topic among coal market participants. Last year’s report emphasised that many coal producers were running at losses, largely driven by take-or-pay infrastructure contracts or financial liabilities. Coal prices have declined even more since last year, but several factors have helped producers withstand further economic pain.
“Our analysis shows that the price floor provided by production costs has decreased significantly, not only because producers reduced costs by gaining economies of scale, better management and budget discipline, but also due to external factors,” said Keisuke Sadamori, Director for Energy Markets and Security.
“Depreciation of local currencies in the main exporting countries has been significant and low oil prices also help, as oil represents a significant share of coal costs, especially in open-pit operations,” he added.