Role of Coal

Coal is and will remain an essential and critical component of economic development and a responsible energy mix is critical in developing countries to ensure economic prosperity.

According to the World Coal Association (“WCA”), “The world still needs coal – not only is coal the affordable choice for energy in many markets, but it remains the only viable choice for critical industries. Coal is critical to our world through its use in providing much-needed affordable electricity and also in building our societies through its use in steel and cement. 37% of the world’s electricity and over 70% of the world’s steel is produced using coal.”

Coal remains the world’s largest single source of electricity, with the WCA estimating that by 2040 coal will still account for 22% of the world’s electricity generation.

In an article from the Economics Observatory, penned by John Turner in August 2021, he concludes that “As the UK and other economies seek to decarbonise their energy, there are at least two lessons from the energy and industrial revolutions ushered in by coal. First, there needs to be a recognition that fossil fuels both transformed economies and improved people’s living standards. This implies that as emerging and developing economies seek to catch up with the developed world, fossil fuels will continue to play a central role unless there is a great leap forward in renewable technologies.

Second, the knock-on effects (what economists refer to as ‘externalities’) associated with the burning of coal placed a restraint on growth. Climate change will do the same. The British government acted late in the day to deal with coal pollution because of their adherence to laissez-faire ideology.

But, even a more pragmatic government would have struggled to prevent the poor and working classes from bearing the cost of regulation. As countries move away from fossil fuels, care needs to be taken that the costs of regulation are not disproportionately borne by the working classes and the poor.”

In Minergy’s opinion, coal will remain an essential component of the energy mix for years to come, not only for baseload electricity generation but, more importantly, for the prosperity that this baseload power creates, especially for developing nations. Notwithstanding the desire to switch to greener options in developing countries, it is in no way affordable.

We believe that the solution lies in considering clean coal technologies such as HELE which is a process of High Efficiency, Low Emissions. Despite the electricity still being produced by coal, a HELE plant will burn less coal, emit less carbon dioxide and release fewer pollutants, giving it a smaller environmental footprint. This coupled with carbon storage will support the coal narrative going forward.

Coal and renewables are not enemies, but Minergy is of the view that the use of coal has to be managed in a responsible manner by all parties, working towards a sustainable mix of coal and renewables. To opt only for renewables is irresponsible and has significant economic implications, especially for developing continents such as Africa and Asia. Any transition excluding coal cannot take place without detriment of economic development, especially for those living in energy poverty, simply because access to affordable energy is vital to stimulate economic growth and human prosperity. Furthermore, any energy transition impacts not just the mining and power generation industry, but also peripheral industries such as cement, breweries, hospital and any boiler operations, amongst others.

Minergy is committed to adopting the necessary technology and evaluating greening options, supporting the deployment of cleaner coal technologies. We believe that technology is key to cleaner coal to help meet environmental goals, but that coal will continue to be a critical component of economic development and the energy mix for the foreseeable future, particularly in Africa.

Current dynamics

The advent of the Ukraine-Russia war in late February 2022 introduced unprecedented dynamics not envisaged or seen before. The negative narrative surrounding coal has been abandoned, and coal has been embraced as the go-to energy source in the energy crisis arising from the war.

Locally, the soaring international coal price diverted coal from the previously flooded South African market (brought about by Transnet Freight Rail’s (“TFR”) inability to evacuate product) allowing for these volumes to be absorbed and sold into international markets, primarily in Europe. However, the high coal price is impacting affordability in countries such as India and Pakistan. As a result of this tightening supply, regional prices have also increased.

A press release from the in July 2022 states the following: “As soaring natural gas prices have made coal more competitive in many markets, international coal prices have risen in turn, hitting three all-time peaks between October 2021 and May 2022. Sanctions and bans on Russian coal following Russia’s invasion of Ukraine have disrupted markets, and issues in other major exporters have contributed to supply shortages. With other coal producers facing constraints in replacing Russian output, prices on coal futures markets indicate that tight market conditions are expected to continue well into next year and beyond.” “Several EU countries are extending the life of coal plants scheduled for closure, reopening closed plants or raising caps on their operating hours to reduce gas consumption.”

Germany is the most recent country to indicate that it will restart hard coal-fired power station operations, many of which were being phased out due to their impact on the climate. This is to ensure the independence of power supply. However the country has indicated that it will still phase out all coal-generated electricity by 2038, according to an article published on in August 2022.

Supply remains constrained as investment in coal has been flouted in favour of an unsustainable green narrative, as proven by the recent energy crisis.