/ 2 December 2011

Renewables to dethrone king coal

If you read the history of the development of all the great powers, it was steam then electricity generated by coal that fuelled industry and navies.

If you read the history of the development of all the great powers, it was steam and then electricity generated by coal that fuelled industries and navies in the 19th century. Whether it was in Britain in 1861 or the United States in 1904, it was predicted that coal deposits would, like Hitler’s Reich, last 1 000 years.

In 1972 the Club of Rome published its now infamous Limits to Growth report, in which it predicted that oil would last only 20 years and hence stifle growth. Because of this, predicting the decline of oil and other natural resources has fallen into disrepute. Resource economists have shied away from making any predictions about when any energy resource will come to an end for fear of being labelled “Club of Rome dinosaurs”.

The three great powers that once fuelled their industrialisation through coal have already run out of this commodity and 150 years later Britain has basically stopped mining coal. Germany, like Britain, also stimulated its industrialisation with coal and continues to mine some extremely deep, low-quality and marginal deposits, carrying some of the highest costs in the world.

Japan is now the world’s largest coal importer and could retain that position for many years, given its citizens’ reluctance to become even more reliant on nuclear power following the Fukushima disaster.

Economists, fearful for their next consultancy, have started to analyse what is “peak oil” and “peak coal”, meaning when coal and oil production will start to run out. Even the US, which has long been considered “the Saudi Arabia of coal”, is beginning to see the eventual demise of its coal industry.

Currently the world’s fastest-growing economies, China and India, are devouring imported coal for electricity, pushing coal prices higher after the initial shock of the global recession. The rapid growth in demand has benefited Australia, as the world’s largest coal exporter became the only Organisation for Economic Co-operation and Development country to avoid a recession ­following the 2008 financial crisis.

China, because of its massive coal reserves, used to be a major coal exporter in 2005, but is now the world’s second-largest importer.

Its academics predict that, given the rate at which it uses coal to feed its appetite for electricity, it will reach “peak coal” production as early as 2025. India is expected to become a major market for coal from Africa because it does not have the reserves to feed its development. India will almost certainly become heavily dependent on exports from Africa.

For South Africa, Botswana, Zimbabwe and Mozambique, which hold some of the region’s richest coal reserves, the surge in world demand for coal will continue for at least the next 20 to 30 years — power stations being built today will last to at least 2040. These countries have huge unexploited resources, which Asian companies will certainly be hoping to snap up to ensure a continuing supply to their power generators.

Botswana regularly suggests it has more than 200-billion tonnes of coal. This has not been proved and is speculative at this stage. But, based on known reserves, Botswana can export at least 40-million tonnes a year should a low-cost and effective railway to the coast be built. A larger volume may be possible with intensified exploration if there is a transport and logistical solution.

So when will coal peak globally? If resource economists are to be believed then “peak coal” will occur globally between 2030 and 2050. Some serious economists predict that 90% of global coal deposits will be exploited by 2070.

So where will humanity get its electricity? The only fuel sources that are large enough and able to fuel sustainably humanity’s rising desire for more people and more goods to keep them happy is solar energy and prices are starting to stack up. With about 16 000 delegates descending on Durban for the COP17 global ­climate change conference, German projections are that around 70% of global energy supply will, by the end of the century, come from solar power.

This change to solar will come in large measure because of the cost and absence of any obvious alternative and not because energy companies have become greenies, precipitating a surge in renewable energy technology throughout this decade.

Although coal will become more important globally in terms of fuel to generate electricity, rising from 41% now to 44% by 2030, it is expected to decline sharply thereafter.

Estimates from the International Energy Agency put the cost of solar power at more than twice that of coal, but the price is decreasing rapidly because of continuing technological changes and the effect of economies of scale. The US government predicts that by 2020 the price of power from solar sources will halve from $0.20 per kilowatt hour (kWh) to $0.10 per kWh.

However, coal prices are almost certainly set to rise in this period. Once that tipping point comes and renewables become cheaper than coal, countries such as Australia, which have “ridden the coal train to the coast” and increased their wealth by simply exporting coal to China and India, will no longer be able to do so.

This strategy of ­exporting coal to Asia has a window of at least two or three decades but as relative prices change what remains of ­thermal coal is likely to stay in the ground.

Professor Roman Grynberg of the Botswana Institute for Development Policy Analysis writes in his personal capacity

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