Companies are planning to increase production of solid fuel.
The International Energy Agency (IEA) forecasts that the share of coal within the global fuel and energy balance (EB) will decrease from the current 35-40% to 25% by 2040. Representatives of the Russian coal mining industry are taking this prediction with some sceptitism as the IEA’s thesis goes against the energy policies of many countries. The future of the coal industry was discussed by experts at a roundtable event during the Russian Energy Week.
In the near future, according to Vladimir Tuzov, SUEK Chief Strategy Officer, an increase in the share of coal generation in EB is possible in China, Malaysia, Vietnam, Taiwan, Indonesia, and India, the latter having pledged to reduce its carbon emissions by a third by the end of the century as part of its commitment to the Paris Agreement on Climate Change, yet coal-fired power plants are actively being built. "Coal is the cheapest fuel for power generation," Tuzov stressed, "it’s hard to conceive that the world will suddenly stop using it."
According to projections by SDS-Ugol, at current extraction rates, coal reserves in Russia will last for 500 years. When considering that China's reserves will last for 34 years, and that Indonesia and India have 65 and 83 years of reserves, respectively, there are potentially huge opportunities for the Russian coal industry in terms of mining and exports, which are both expected to increase this year. A poll conducted by Ernst & Young revealed that 44% of Russian companies are planning to increase production. As well, 88% of respondents plan on increasing exports of solid fuels to the Asia Pacific region, especially to China, which in addition to using coal for power generation, intends to accelerate the production of coal-based synthetic.
But according to Anatoly Yanovsky, Deputy Minister of Energy of the Russian Federation, the Russian industry still has its share of challenges. One of these is the shift to the global decarbonisation of the economy. As part of the Paris Agreement, Russia committed to reduce carbon emissions by a third by 2030. However, this can be achieved by making coal power generation more efficient and environmentally friendly, without reducing its consumption. Such technologies already exist. Additionally, increasing forest area can actively raise carbon dioxide absorption.
The Deputy Minister identified the other issues as transportation distances, infrastructure restrictions - such as the underdevelopment of seaports and railways, and the volatility of global coal prices, which can lead to lower revenues and even the closure of individual mining companies.
According to Gennady Alekseev, General Director of SDS-Ugol, the industry needs to work on its image. Too many associate burning coal with dirt, smell and black smoke stacks, with Russia as the world's main polluter. However, Alekseev also provided the following data sets: in 2016, Russia produced 385 million tonnes of coal (of which 165 million tonnes were exported), while European countries mined a combined 536 million tonnes plus imports. In Russia, coal consumption per square kilometre was 14 tonnes, in the EU - 136 tonnes – as such, we can smoke and smoke some more before catching up to the Old World!
Let us not forget, the expert went on to add, coal is the only cargo that, when shipped by sea, is not even insured. The reason is simple, coal is non-toxic and non-explosive - if the ship sinks, there will be no environmental impact since coal is a natural sorbent. The only drawback is dust formation during transhipment operations, but modern technologies allow to both stop dust formation and eliminate harmful emissions during combustion. It is no wonder that modern coal-fired CHP plants, such as the 4 GW capacity Neurath power plant in Germany (North Rhine-Westphalia), no longer have these notorious smoke stacks, it completely utilises both steam and carbon dioxide.
Nevertheless, Gennady Alekseev is certain that the industry’s poor image globally is detrimental to investments in its development. According to the Chairman of the Non-Commercial Partnership for Mining Industry Development Assistance, Georgy Krasniansky, the growth of capital investments in mining and technology development is also hindered by the attractiveness of natural gas prices. If gas prices [in Russia] are regulated by the state, the price of coal is determined by the market. The coal to gas ratio for a tonne of conventional fuel is estimated at between 1 to 1.6, which for the coal industry is similar to a flat line on an electrocardiogram. At a ratio of 1 to 2, the demand for coal in the country would grow by 20 million tonnes, and at 1 to 3, we would see an unprecedented increase in consumption. Although, of course, the need to raise gas prices is questionable...
At the same time, the expert suggested the following to increase mining efficiency: each mine should have a mini-power plant to supply the domestic market, not with hopper cars of coal, but with electricity. According to Sergey Stepanov, CEO of Raspadskaya, the use of coal bed methane can help increase profits.
In general, experts agree that the Russian coal industry has enormous prospects for many decades to come. If, of course, it can solve its equally large problems.