Importance of Coal
The progress of the industrial world and society in general has only been possible because of the use of energy. It is a fundamental factor which cannot be ignored. In earlier times the need for energy was comparatively reasonable and limited only to the likes of warming oneself with fire and cooking food. However that was no longer the case.
When the coal-fired generators were invented in the 1890’s, the electricity market boomed, it was a brand new way of providing light, heat and generating energy. In the beginning, electricity was quite expensive and only restricted to minute quarters. Even that electricity supplied was not of good quantity or quality. It was prone to constant breaks in the power supply. As time passed, technology developed. Electricity became something reliable and consistent. Of course with this new found reliance on electricity the importance of coal grew significantly. Despite of the thermal loss, which is the result of burning coal, and the pollution caused by burning this fossil fuel, households and many varieties of economic activity have become increasingly dependant on electricity. (Owen, pp 62)
Coal is mined in 50 countries over the world. It is the largest source of fuel for the generation of electricity and over a quarter of the world’s energy requirements are fulfilled by coal. Australia, Poland, South Africa and China use coal to produce over seventy five percent of their electricity, India uses coal to produce over sixty percent of its energy and the United States of America and Germany uses coal to produce over fifty percent of their energy.
Four factors could be attributed for the rise of coal as a successful energy source of power.
· Firstly, China has risen as a major industrial power and India is on the rise as a major industrial power. These are huge countries with even bigger populations. As their demand for energy continues to rise so does the use of coal as their major source of energy.
· As mentioned before coal is mined in over 50 countries but only 6 countries in the world are really plentiful in coal. These countries are: The United States which has 27.1 percent of world reserves, Russia which has over 17.3 percent of world reserves, China with about 12.6 percent of the world’s reserve, India with almost 10.2 percent world reserves, Australia which contains just under 8.6 percent world reserves and South Africa with approximately 5.4 percent world reserves. These countries are relatively politically stable when compared to the countries where oil is found. Investing in coal and depending on it as a source of energy is considerably risk free, at least politically speaking.
· Initially people were hesitant to use coal on such a large scale because of the environmental risks. As a fossil fuel the pollution it produces is extensive and does great damage to the environment. However as technology continues to develop, ways to purify coal so that it doesn’t effect the environment adversely have been invented.
· Finally, both oil and gas reserves are located in areas of high geopolitical risk. The plan to substitute these non-renewable energy sources with renewable energy sources is not going too well and at best it will take a couple of years to put into practice. The main reason for this is that the cost of renewable energy is too great. While it may be a suitable replacement of fossil fuels at the domestic stage, great difficulty is experienced in using them at the industrial and commercial stage. The fact that these renewable energy sources are being used cannot be ignored but at the moment it seems highly unlikely that they will take the place of fossil fuels. Some warrant that renewable energy sources should not be used on their own but combined with nuclear energy. The problem with nuclear energy is primarily political. There are issues of security and bringing nuclear power into play in military aspects. Such dilemmas hold the progress of nuclear power back. Thus, the difficulty of importing fossil fuel from politically unstable countries combined with the difficulty of using renewal energy sources and nuclear power for energy makes coal the perfect choice at the moment. The usage of coal will allow the major political powers to reduce their dependence on those countries which are at high geopolitical risk. In fact in his sixth State of the Union address, U.S. President George W. Bush reiterated his plea to increase his country’s energy independence and recognized “the serious challenge of global climate change”. “According to the Advanced Energy Initiative report, the United States of America contains over a quarter of the world’s coal reserves and the energy content of this reserve exceeds that of the world’s known recoverable oil”.
(http://energy.seekingalpha.com/article/26889)
The president’s appeal was focused on market-based solutions which revolved around the development of technological. The carbon based pollution released from burning fossil fuels was not mentioned. However, the American government is making the effort to take steps towards a clean environment when producing coal. The government of the United States of America is collaborating with coal producers and the result is “FutureGen”. It is a power plant which will produce zero emissions using Integrated Gasification joint Cycle [IGCC]. This technology claims to radically reduce sulfur dioxide [SO2], nitrogen oxide [NOx], mercury emissions as well as the greenhouse gases [CO2]. However this plant has not been built as yet. It is a proposal which is in the process of being accepted. (http://energy.seekingalpha.com/article/26889)
When this is looked at from an economic point of view, there a limited choices for making investments. While coal producers such as the Penn Virginia Resources are definitely benefiting from an increased use of coal, there aren’t many who are investing in “FutureGen”. Many prefer to invest in smaller companies which offer already proven technologies to reduce the emissions from coal plants. Investors also receive greater profits so its incentives are greater. One such company is Fuel Tech. this company offers technology which can reduce the nitrogen oxide produced in power plants using coal as a source of energy by about seventy percent. . (http://energy.seekingalpha.com/article/26889)
In the past three years the production, consumption and export of coal has increased drastically. It is reported that coal has progressed more than any other fossil fuel. For example, in West Virginia, the coal industry makes up $70 million of property taxes paid in West Virginia and the Coal Severance Tax contributes $214 million to West Virginia’s economy. (http://www.wvminesafety.org/wvcoalfacts.htm)
In the global coal market financial optimism prevails. Around 90 percent of the coal extracted and produced globally is used in the country of its origin. Not much is exported and this ties in with the global effort to be energy independent. The country in which this is occurring on a large scale is China, India, and Russia. Coal is extracted and used for production of electricity by establishments the government owns. The importance of coal in today’s market is highlighted by the multinational cooperation which control about ten percent of the global coal produced. Cooperation such as BHP Billiton, Rio Tinto and Xstrata are doing brilliantly and this has led to them capturing the interest of financial analysts and the specialized media, resulting in publicity and thus increase in the investments in coal and in particular such companies. (http://www.pinr.com/report.php?ac=view_report&report_id=523&language_id=1 )
When the current trends for coal are scrutinized it is said that the energy industry revitalization of coal as an important energy source is going to continue in the future. This of course will not only effect investments but political decisions too.
The production of coal is currently not only benefiting the wealthy industrialists and providing global energy security but it is also helping the economy grow. The amount paid to those working for the coal industry in West Virginia alone is nearly $2 billion annually and the Infrastructure Bond in West Virginia receives over $24 million from coal severance taxes. Coal is responsible for more than $3.5 billion annually in the gross state product in West Virginia. (http://www.wvminesafety.org/wvcoalfacts.htm )
The production of steel is heavily dependent on coal. 600 million tones of coal is used in steel blast furnaces as coke and over 600 million tones of coal is used for the electricity power these furnaces. Over seventy percent of the world’s steel is produced in this fashion. This might be because it is the singular fossil fuel which is not only relatively simple to transport but also effortless to store and easy to utilize. The production of black coal has doubled in the past quarter of a century. The current measurement is 3639 Mt. the five countries producing the highest quantity of this coal are:
· China with approximately 1171Mt.
· The United States of America with almost 899Mt
· India with over 310Mt
· Australia with around 259Mt and
· South Africa with a little under 225Mt.
As far as lignite production goes, it has topped 900Mt.Germany, Greece and North Korea are among the top three countries producing and consuming it.
(http://www.gc3.cqu.edu.au/modern-world/index.php)
The leaps and bounds of technology and economies of scale have vastly improved mining activity and as a result even the supply costs have fallen. As the management of coal and the mining technology improves in the six major countries which produce coal (The United States of America, Australia, India, Russia, South Africa and Poland) it acts a security blanket for the production and growth of the production of coal. Long-term contracts don’t really define the price of coal, the prices are defined by flexible pricing means. Factors such as world markets, currency exchange rates, cost of mining coal, cost of transporting coal, fluctuations of coal stock and the rivalry of oil and its fluctuating prices tend to determine the price of coal. Cost of mining and transportation have been stable and fallen thanks to the advancements in technology. To ensure global energy security oil is no longer a worthy opponent of coal in the market and the world market appears to be embracing coal with open arms so it position appears to be quite stable. There has also been a consolidation of major coal producers. While there have been a few inconsistencies, there has been nothing definitive so coal prices are expected to stay stable. Now many European countries are also subsidizing coal production and consumption. (http://www.rieti.go.jp/en/events/bbl/02020101.html?mode=print and http://hypertextbook.com/facts/2005/CarolineGeorges.shtml)
Many believed that by the time the 21st century rolled along, coal would be gotten rid of. However this only goes to show how wrong they were. It appears that coal is experiencing the same importance it received when it initially came into the picture. However, now there is a difference now. The coal produced now is much safer and less hazardous to the environment. Coal has managed to do so well because of the advances in technology to extract it, and use it in secure methods. Innovative schemes which technology has thought up are being used to transform coal into fuel via syngas (synthetic gas). Then there is an assortment of technologies which do not allow harmful emissions to escape into the environment. All this contributes to a booming coal market and attracts huge investments.
(http://www.pinr.com/report.php?ac=view_report&report_id=523&language_id=1 )
Works Citied
Birol, Faith. “Assessing Today’s Supplies to Fuel Tomorrow’s Growth: Implications of Global Energy Supply Outlook”. Research Institute of Economy, Trade and Industry. (2nd Feb. 2002) http://www.rieti.go.jp/en/events/bbl/02020101.html?mode=print
Accessed, March 5, 2007
Dwinnell, Tate. “Profiting from the Advanced Energy Initiative: Clean Coal, Nuclear Power & Uranium Miners”. Seeking Alpha: Energy Stocks. (13th of Feb. 2007) http://energy.seekingalpha.com/article/26889 Accessed, March 5, 2007
Georges, Caroline. “Price of Coal”. Hypertext Book. (2005). http://hypertextbook.com/facts/2005/CarolineGeorges.shtml Accessed, March 5, 2007
Owen, Anthony. Burning Up: Energy Usage and the Environment. Harvard International Review. 26.4 (2005) 62+
PINR. “Economic Brief: The new Role of coal in energy security”. Power and Internet News Report. 10th July 2006. http://www.pinr.com/report.php?ac=view_report&report_id=523&language_id=1 Accessed, March 5, 2007
Piskur, Michael. “U.S Energy policy begins to Shift”. Power and Internet News Report. (1st of Feb. 2007) http://www.pinr.com/report.php?ac=view_report&report_id=611&language_id=1
Accessed, March 5, 2007
West Virginia Office of Miners’ Health, Safety and Training. “West Virginia Coal Mining facts”. West Virginia Office of Miners’ Health, Safety and Training: An official West Virginia State Agency Web site. (12 of Feb. 2007)
.http://www.wvminesafety.org/wvcoalfacts.htm Accessed, March 5, 2007
