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9 August 2019

India and China want to dig all their own coal

How the coal industry curls up and dies, the manner of its bankruptcy and its death throes, will have quite a bearing on the fate of renewables over the coming few years. One issue is that as coal has less demand, it becomes cheaper, as a basic rule of supply and demand – another effect is that everyone tries to dig out the very last bit of coal reserves, to establish “energy security” at home.

Now there is evidence that both China and India are doing this, opening up their own reserves, and burning them up on the current generation of coal plants, because they know there will be no more once these are closed. The knock on effect on places like Indonesia and Australia, which all want to export their coal, is that the coal looks for new homes.

Last week we saw one Australian business attempting to turn coal into hydrogen to export to hydrogen hungry Japan. Such moves, if they allow the survival of coal mines, will continue to slow renewables growth. That experiment is being done at an old power station in the coal-rich Latrobe Valley.

India now plans to cut coal imports by around a third over the next five years, says Bloomberg, and is pushing its domestic output up, with coal imports expected to fall below 150 million tonnes by 2024, from 235 million tonnes last year. But this is not about using less coal, oh no, it’s about raising coal output to 880 million tonnes by 2024. Bloomberg does refer to there being “record additions” of renewables as well, which should slow coal demand.

This comes straight from the top, and Prime Minister Narendra Modi who is targeting the Indian economy to reach $5 trillion by 2024, almost double what it is today. But he wants to do that by reducing energy imports. Of course we would say that increasing renewables always increases energy security, and decreases imports.

There are imports India may not be able to do without, such as the coking coal needed by steelmakers, because these is a shortage in India. Meanwhile Coal India and Singareni Collieries will need to extract some 1.2 billion tonnes to cope with the rise in usage by 2024 from about 970 million tonnes now.

India is not a managed economy like China, and there are difficulties in going down this route, such as poor train rolling stock and difficulties buying more land with coal deposits on it and environmental approvals usually require some form of bribe. But the real issue is that Coal India will simply miss its targets because it is too powerful and has little competition. The right thing to do is to spin out parts of Coal India and set economic rewards for whomever yields the most coal and this may yet happen. Selling these into public ownership would also provide much needed government funding. But that the same time who is going to buy into a business that is likely to be dead on arrival.

Earlier in the month China said that its coal output had risen during June to a record high 333 million tonnes, something far easier to do in a controlled economy,

China’s energy administration have called on miners to step up production and have given new coal mining approvals in complete contradiction to its low emissions promises. But more local coal may not mean more electricity from coal, it may simply mean less imports. And remember China makes all of the coking coal that its steelmakers need already.

China said as early as this April that coal imports would fall by 10 to 12 million tonnes in 2019.

All of which will lead to more and more experiments about what you can make out of coal in an attempt to find a new value for it.