Coal industry in the spotlight at UN Climate Conference in Warsaw

The ‘International Coal and Climate’ conference of the World Coal Association in Warsaw, Poland, held amid the United Nations Climate Conference, has attracted considerable criticism from some environmental groups, amongst them the World Wildlife Fund. Its head of delegation, Tasneem Essop, was quoted as saying “For the coal industry to come to Warsaw at a time when we are dealing with these serious issues and to say they have a future and try to pretend they can make a contribution, is a bit provocative.” While it is difficult to match this statement to reality, particularly given the role in emissions widely attributed to coal, further comments were slightly more conciliatory, acknowledging the role coal is sure to play in the developing world in the future. Still, the WWF’s scepticism was summed up by the further statement that “This whole concept of clean coal is a myth and it is being presented by the industry.” However, a more pragmatic attitude was taken by the UN’s chief climate negotiator, Christiana Figueres, who accepted an invitation to address the WCA conference. She told the conference that future investment in mines and power stations should only go ahead if it did not put at risk the goal of limiting global warming to two degrees, and that most of the world’s coal reserves would have to stay in the ground, saying “coal must change rapidly and dramatically for everyone’s sake.” For its part, the WCA released its ‘Warsaw Communiqué’ jointly with the Polish government, which outlined a three-step call to “urgent action to support and deploy technologies that help to meet the climate challenge.” They are: 1) the immediate use of high-efficiency low-emissions coal combustion technologies wherever it is economically and technically feasible at both new and existing plants; 2) for government support for efficiency implementation and research and development; 3) for development banks to finance high-efficiency low-emissions technology. It estimates that around 41% of worldwide electricity generation currently comes from coal firing, and that in 20 years’ time the share will be around 25%. If this estimate is even roughly correct, clean coal technology seems sure to be central to efforts to mitigate climate change.

Philippines, Canada, Japan, Australia make waves at UN Climate Conference

Notable incidents have abounded at the United Nations Climate Conference. One particularly poignant one has been the head of the Philippines delegation, Yeb Sano, holding a hunger strike and breaking down in tears when addressing the conference following the destruction wreaked on his country by Typhoon Haiyan. However, also notable were the fact that Canada pulled out of the Kyoto accord, that Japan announced that instead of reducing emissions by 25% by 2020 it would reduce them only by 3.8% (following the shutdown of its nuclear reactors after the Fukushima disaster), and that Australia did not send a government minister to the talks, contrary to its typical custom. In addition, developing countries were frustrated that developed countries refused to discuss a proposal to calculate emissions by country since the start of the Industrial Revolution.

Power industry considers coal for cheaper, lower emissions peak power

Reuters has carried an interesting review piece on the pursuit of cheap, low-emissions solutions for flexible power generation from fossil fuels. With renewable power generation being increasingly deployed, but still intermittent in production, with no commercially proven energy storage technologies available, there is a need for high-capacity plants that can function during hours of peak demand. Traditionally, open-cycle gas turbines have served this purpose, being able to reach full generation within 15 minutes, but they are relatively expensive and result in relatively high emissions. Coal-fired plants take several hours to reach full production, and frequent shutting down and starting up damages their equipment, hence such plants have not been considered for peak load generation, but the picture is beginning to change. In Germany, operators of coal-fired power plants have been running them on part load (between 20-60% of full capacity) during non-peak periods. From such part loads, rapid capacity change is possible – output can be ramped up relatively quickly during times of peak load. Nevertheless, more work on design for operational flexibility is required if coal plants are to serve as a solution for peak demand situations. However, with the current focus on design for carbon capture and storage, flexibility is generally not a high priority, according to the Reuters piece, and therefore coal-plants may not fill the need.

Myanmar’s Dawei industrial complex reorganised to spur development

Myanmar’s long-planned Dawei industrial complex has received something of a boost, with the sole contractor, the rather oddly named Italian Thai Development (ITD, the biggest development company in Thailand), having its role reduced to allow for a wider range of firms to participate. The 250 square km Dawei Special Economic Zone in the south-east of Myanmar is to include a port, a steel mill and two power plants (one gas-, one coal-fired), as well as other heavy industry, and would be connected to Bangkok and Thailand’s east via a highway, reducing the need for shipping through the Strait of Malacca. The multi-billion dollar development was originally agreed in the 1990s between ITD and the military junta then ruling Myanmar, but has foundered since, failing to attract investors. Now, as Myanmar opens up to foreign investment and development, and with Japanese firms leading other successful projects in the country, the government of Myanmar sees a way forward with Dawei by including other firms, particularly Japanese ones, in the project. ITD is still to be involved, but in a reduced capacity, perhaps as the main contractor for infrastructure. Other firms to participate in the project have not yet been chosen.

South Africa’s Eskom asks industrial customers to curb power consumption; warns of blackouts

South Africa’s major utility, the state-owned Eskom, has declared a power emergency, asking industrial customers to curb consumption by more than 10% to ease pressure on the grid as power demand reaches available generation capacity. It has also warned that it may implement a program of rolling blackouts similar to those imposed five years ago, which hampered mining operations and led to a weakening of the Rand. However, the anticipated window for the emergency is only two weeks, as maintenance is performed on some generation capacity. Nevertheless, it highlights the extremely slim reserve generation margin and the urgency of the need for additional generation capacity or improved consumption efficiencies. Eskom has been vocal in highlighting the need for additional generation capacity, but has been hampered by the government when seeking to increase electricity prices to fund investment. It is, however, expecting two large new coal-fired plants to come online in the second half of 2014, which should go some way to addressing the problem.

South Korean government moves to increase electricity prices

South Korea’s power sector is facing an early echo of South Africa’s problem. The government has for years forced electricity tariffs below generation costs in an effort to boost industry and ease cost of living pressures for residents, but side effects have included high consumption and huge losses for the state-owned utility, Korea Electric Power Corp. It has also meant underinvestment in generation capacity. Coinciding with this, a scandal involving faked safety certificates has meant that some nuclear power plants in the country have been shut down, meaning that spare generation capacity is limited. Now, however, the government has announced that electricity prices are to increase around 5% (following a 4% increase of January this year), and it is hoped that this will not only allow investment in new generation capacity but also curb consumption. The industry body Federation of Korean Industries has voiced concern that the rises will affect heavy industry such as steel making, but prices are still well below OECD averages.

PGE CEO resigns amid struggle for decision powers

The CEO of state-controlled Polish utility PGE, Krzysztof Kilian, has resigned following a disagreement with the Polish government over who gets to make investment decisions, according to Reuters. Mr Kilian believed that PGE were best placed to make such decisions, while the government believed it should have the power. Following his departure, shares in the company have fallen 4%, reflecting investor’s belief that Mr Kilian was in the right. PGE’s official statement attributed Mr Kilian’s resignation to the recent departure of two of his deputies, yet Reuters maintains the forcing issue was investment decision power. In particular, it is believed a central project was the 1.8 GW coal-fired Opole power plant extension (due to commence development in the next month), in which the Polish government intervened after PGE executives had decided against it because of projections it would not be profitable. Polish president Donald Tusk was quoted as saying “I think it is right that the (state-controlled) companies function in a structure with the state as a shareholder as this is necessary for Poland’s energy security,” a reference to Polish dependence on imports of Russian gas.