A Cup Half Full: Answering the Question “Why Coal and How Coal?”

U.S. coal exports are booming; domestic generation is easing; global metallurgical coal demand is strong; American natural gas and renewables are tough competitors; new coal plants continue to be built in large numbers particularly in Asia; opponents call for divestment from fossil fuels; recent policies represent potential opportunity.

Just another year in the dynamic coal industry, you might say.

Yet amid this mixed “elevator analysis” related to coal fundamentals, I would submit that we can make two statements with confidence. First: Coal remains an essential part of our global energy mix and a key ingredient in steelmaking. Second: The question is not “Should we use coal?”, but “How should we use coal?”… And the answer is: cleaner every day.

That’s as it should be. Society has both a growing need for energy and a desire to lower emissions. In fact, we recognize that we can only consider our job well done when we’ve expanded energy access, economic growth and environmental solutions.

First things first. Is it fair to say that coal remains essential? Consider the evidence:

The world uses some eight billion tons of coal each year – or right around one ton for every man, woman and child on the planet.
China’s coal use continues to grow (it is up more than 3 percent just in the first half of 2018) and that nation alone uses 10 million tons of coal every day.
Coal is a key ingredient in new steel production, with approximately one billion tons of metallurgical coal used each year.
Recent news reports remind the world that coal fuels about 37 percent of global electricity generation today – and did so about two decades ago – a similar slice of a much larger pie.
New coal plants continue to be built out in substantial amounts. In 2018, we expect some 56 GW of new coal-fueled generation to come online across 24 countries on five continents. That math translates to a new 500 MW coal-fueled generating unit coming online somewhere in the world every three to four days this year. On average, each GW of generation capacity would use three- to four million tons per year of coal at optimal capacity.

The longer-term generation picture is also bright. Yes, coal plants are retiring in meaningful numbers in places such as the U.S. and Europe – IHS Markit projects 125 GW of coal plant retirements globally by 2030. But the consulting firm also projects 439 GW of new coal-fueled generation during that time in Asia, dwarfing the retirements. As a result, the organization expects total global coal-fueled generating capacity to increase 15 percent by 2030, from 2017 levels. In addition, the World Coal Association recently noted more than 700 GW of coal-fueled plants in development or under construction around the world.

As we look to the U.S., we’ve seen a modest secular decline over the last few years. Coal accounted for 37 percent of the nation’s electricity capacity five years ago and in 2017, it totaled around 30 percent. This evolution was driven by the shale gas revolution, starting around 2013, along with heavily subsidized renewables and a regulatory regime that had been quite challenging. Third-party estimates show the pace of decline slowing, with coal’s share of electricity generation still around 27 to 28 percent by 2022.

Those points provide effective evidence for the “Why Coal” story – and the “How Coal” story is equally compelling. We know next-generation coal-fueled power plants must be efficient, flexible and clean, but what does that mean? The answer lies in the use of advanced coal technologies and two important acronyms.