What makes coal economically important

What was going on during this time? According to the U. Just as soaring oil prices led to a surge in coal production and employment in the s, a sudden and sustained drop in natural gas prices has had the opposite impact on coal over the last 10 years.

During the global financial crisis , commodities in general took a hit as global demand dried up. Prices never fully recovered. These lower price levels are due to a surge in natural gas supply.

Just as coal producers benefited from productivity gains in the s and s, natural gas producers have been taking advantage of technological advances that have dramatically increased productivity over the last decade. The availability of plentiful and cheap natural gas has had a dramatic impact on electricity generation in the U. As shown in the chart below, in coal powered At the same time, natural gas has overtaken all other energy sources, now making up Alternative energy sources such as wind and solar are also becoming more affordable and now represent 8.

Geography is also a factor when looking at relative fuel costs. While the national average share of electricity generated with coal has fallen, that share varies greatly by state. Power plants were purposely built near the coal mines in these states and coal remains the most economical fuel for these plants. But for power plants further away, coal needs to be transported by rail, and this makes coal the more expensive fuel source, pushing these states to shift to natural gas and alternative energy sources.

As coal becomes less competitive to burn, less of it is transported via railroads. The U. While global demand for thermal coal is strong, coal destined for steel production is the most profitable for producers.

Strong demand from Asian countries for met coal has helped to support higher global prices, encouraging U. According to the EIA, the three biggest U. Examining the recent performance and developments at these companies highlights the industry trends and future of the coal industry.

The coal industry asserts that continued investment in coal is needed to grow developing economies and combat poverty. The logic runs that coal is necessary to provide the energy required for industrialisation, the process of structural change from an agrarian society to one based primarily on manufacturing. Historically, industrialisation has enabled some countries to rapidly increase economic productivity , employment and income levels. The consumption of coal and other fossil fuels for industrialisation, however, is a major cause of global warming.

A shift away from coal is necessary for climate protection. The argument that further expansion in coal energy is needed to combat poverty is based on tenuous assumptions about the relationships between energy, industrialisation and poverty. The following FAQs show why. The logic that coal is needed to combat poverty is based on two premises. The first is that coal provides poor households with electricity. The limitations of coal-fired power as a solution to energy poverty are explored in a previous set of FAQs.

Both these premises warrant further scrutiny. It is true that energy is needed for economic growth. Most economic production — be it agriculture, extractive industries, manufacturing or services — requires an affordable and reliable energy supply.

It is a leap, however, to assume that coal should be the energy source of choice for expanded production in any sector.

The amount and type of energy required depends on the form of economic activity it serves. As discussed in the following question, there are alternatives to coal for power generation that are less polluting and, in many cases, cost-competitive. It is also true that economic growth is needed to fight poverty. Increased economic production can create jobs that enable poor people to work their way out of poverty.

It can also generate increased public revenue for spending on pro-poor services such as education, health care, employment programmes and cash transfers. However, the relationship between economic growth and poverty is complex. While there have been no instances of sustained poverty reduction without economic growth, the figure below indicates that some countries have done a better job at reducing poverty with moderate growth, while others have seen rapid growth with little effect on poverty.

The most energy-intensive models of growth generally do not lead to the most poverty reduction. Figure: Comparison of India and Bangladesh. Four-fifths of coal produced globally is used for centralised electricity-generation, an enabling factor in many — but not all — types of economic production. Coal-generated electricity is relatively cheap, but it is also highly polluting.

Power sector planning is rarely driven by the relative costs of different energy sources alone. Nevertheless, there are numerous substitutes for coal power that are increasingly cost-competitive and less damaging to local environments and human health see figure below. There is an affordable energy alternative to coal in most places, though which option is most attractive varies by location. As wind and solar technologies continue to scale, their costs are projected to keep falling.

Meanwhile, the cost of coal power has slightly increased , and will increase further as governments introduce more stringent pollution norms. The shift away from coal is likely to accelerate as renewables gain a greater share of the electricity mix. Once a wind or solar project is built, the marginal cost of generating electricity is near zero , allowing them to outcompete coal power in electricity markets.

With renewable energy meeting a greater share of demand, coal plants are increasingly left dormant on windy or sunny days — a factor that has diminished the business case for investment in new coal capacity. Developing renewable energy instead of coal would more likely boost economic growth than hinder it.

Production of fossil fuels would decline, but be offset by increased production in the manufacturing, construction, basic metals, silicon and service sectors. The cost of generating electricity varies by place, source and technology. This figure shows the global range of electricity costs across different technologies in US dollars per kilowatt-hour. In specific cases, electricity has been generated from large and small hydro, onshore wind, biomass, geothermal, solar PV and offshore wind at a cost competitive level to coal.

In contrast to coal for power generation , there are few opportunities to completely substitute coking coal in the process of turning iron ore into steel using blast furnaces.

However, according to new research , the quantity of coking coal can be reduced through the integration of other fuels — natural gas, charcoal and biomass.

It is also possible to reduce the need for primary steelmaking. Scrap steel can be recycled in furnaces that use three-quarters less energy. Rather than coking coal, these furnaces use electricity, which can be generated by alternative energy sources.

Steel can be utilised more efficiently too. From auto manufacturing to construction, alternative materials to steel could also be used.

Heat for cement making also currently relies heavily on coal, but can be produced by alternative energy sources like natural gas and biomass, despite coal industry claims. The bigger challenge for cement is limiting pollution from chemical reactions during production, not energy. Like steel, new alternative materials offer promising opportunities to replace cement altogether, along with the energy it consumes.

The potential supply of renewable energy using existing technologies is many times greater than current energy consumption. Global resource maps clearly show that both developed and developing countries are endowed with substantial renewable resources. Renewables already dominate many electricity grids. In , over 50 countries produced more than half their electricity from renewables. Most existing renewable capacity is hydro, because this was the first form to be competitive with fossil fuels.

However, a number of countries have installed significant shares of non-hydro renewables, including Guatemala, Kenya and Denmark. This small share, however, is a poor indicator of current trends. Power stations are long-lived assets, and our current electricity mix is a hangover from the fossil-fuelled power plants installed decades ago.

These early coal mining activities made a significant contribution to the progress of European settlement in Australia. With the progressive spread of settlement to other locations in Australia lead to further discoveries and mining of black coal including the discovery of coal near Ipswich in , at Cape Paterson in Victoria in and Irwin River in Western Australia in Knowledge of the existence of brown coal in Victoria dates back to The Yallourn North open-cut began production in Since the late s about 9, million tonnes of black coal and about 2, million tonnes of brown coal have been mined and the Australian coal industry provides significant employment, capital investment and domestic and export income to the national economy.