Senior Coal Analyst, International Energy Agency
Carlos Fernández Alvarez [00:00:04] To explain this. We need to look at Asia because it’s all in Asia is all happening in Asia. China is now all consuming almost 10,000 throughout our almost and the world say 30. So it’s almost one third of the world’s electricity, you know. So if you grow there, you need more Covid.
Jason Bordoff [00:00:25] Coal demand reached a new all time high in 2022. That was the headline of the International Energy Agency’s annual coal market update released in July of this year. In fact, 2022 was the third year in a row that global coal consumption has increased. This growth occurs against the backdrop of an ever worsening climate crisis driven by energy sector emissions, of which coal accounts for 40%. And it’s why the IEA’s own executive director, Fatih Birol, called for an end to new coal power plants. In an op ed recently. But despite calls impact on the climate, it remains a vital source of energy for much of the world, particularly in Asia. What is the outlook for coal in the years to come? What will it take to move away from the fuel? And what would phasing it out mean for emerging and developing economies? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Today on the show, Carlos Fernandez Alvarez. Carlos is a senior coal analyst at the IEA, where he was until recently, the acting head of the Gas, Coal and Power Markets division. He was the lead author of this year’s Coal Market Update and has contributed to many other IEA reports, including the organization’s flagship production, the World Energy Outlook, which was just released. Carlos has 25 years of experience in the energy sector, serving as an energy consultant and energy advisor for the Spanish government and later the director of the Spanish Coal Agency. Carlos joined me to discuss the findings of this year’s coal market update. We talked about how coal consumption grew last year. The regions and industries driving that growth and why, despite its impact on climate and the environment. Coal is so hard for the world to quit. I hope you enjoy. Carlos Fernandez Alvarez, thank you so much for joining us from the IEA on Columbia Energy Exchange. It’s wonderful to see you again.
Carlos Fernández Alvarez [00:02:44] Thank you for having me. It’s a pleasure to be here.
Jason Bordoff [00:02:48] So I wanted to have you on because I recall headlines year after year, middle of the say, the last decade or so that coal was in demise. Coal was a dying fuel. And I think the headlines we’ve seen this year, last year and the most recent analysis from the IEA show that coal is much more resilient than many people thought. And maybe the fear that particularly for those concerned deeply about climate change. Many people hoped. Just give us a sense of that. Is that right? And if so, why that is? And what do you you just came out with a coal market update, what your view is of where coal stands in the global energy picture today and what the outlook is.
Carlos Fernández Alvarez [00:03:33] So I think you you have made that the the the right point. So we see a narrative that is a bit of contradictory because we are seeing now we are reading about the collapse, the immediate collapse of coal demand in the world. And on the other hand, there is also the narrative probably is because of the you know, in this time of the cliques and and so on, we need the things, the clear messages and things that, you know, stand the I say out. So we also read about the coal reticence and coal, whatever. And however you made the numbers. A coal is the most stable. Fuel demand is the one that white is the most stable of fuel in the last decade. Source I said the the fall, the big drop in 2020 because of the Covid that going out. I also going to blame why people did not and done properly what happened and then the rebound in 2021 after this let’s say drop apart from this. Gold has been moving in a very narrow range. Up, down, up, down, up, up. And as I said, very, very stable. So if you take a level a listen to the son F 13 and the plus -3%, you are almost there all the time. And it’s very curious because actually coal is not flat, let’s say, in almost anywhere. So we have a regions where structurally coal is declining a lot. In the case of us, almost a lot in Europe, we have places where coal is growing a lot. In India, not that much these days in China, but some somehow in in Philippines, Vietnam, Indonesia. And as a result of everything, I mean, we can say also the same thing about the falling in places like Canada, Australia. So you put all together and the result is we don’t see this so many times announced the collapse of coal never happened.
Jason Bordoff [00:05:53] So just to clarify what you just said, you said coal has been the most one of the most stable fuels. But but that does reflect a lot of increases and decreases in different parts of the world. So that everywhere has stayed steady. We’ve seen some parts of the world decline substantially, some parts increase substantially over the last ten, 15 years, 20 years. And you’re saying on for the world as a whole, that has led to kind of a plateau in coal use because it’s roughly evened out. Is that correct?
Carlos Fernández Alvarez [00:06:23] Yeah. Yeah. I mean, the main thing that happened this century is the big growth in the first decade. So in that decade, the coal demand, global call demand grew more than the 60 years before. So this is something really irrelevant. The main reason was China, of course, as we will know a after that decade in which in order to put this in context, 45%, almost half of the primary demand increase in the world was covered by coal. So the first decade of this century has been extraordinary. But then once said China, this growth in China, let’s say, but not the two digit growth. Yeah. What do we have? Is this a stabilization of of coal demand and this, you know, with last and gas crisis and so on, we reached the all time all time high consumption and globally. Now.
Jason Bordoff [00:07:26] Thanks for clarifying that, Carlos. So just help me and our listeners understand a little better how that plays out in different regions around the world where we’ve seen the declines. What has driven that? Has that been policy for? Focused. Has that been a rapid decline in cost of renewables? Has it been cheap shale gas in the United States? What’s driven it and where has it happened? And then it’s also here about where demand for coal is rising the most and why. What’s driving that.
Carlos Fernández Alvarez [00:07:52] To begin with? Europe, that is the base, the best case in which, you know, in many countries coal has just disappear in the power sector. So basically in Europe, we have a I mean, this is basically policy because I mean, consider that now we have almost a utopia, €100 per tonne of CO2. This is a big burden for for coal or power producers.
Jason Bordoff [00:08:19] And is that the carbon price?
Carlos Fernández Alvarez [00:08:21] The CO2? Yeah. Yeah. And this is, you know, so for me there was an before and a tipping point, let’s say in Europe that was one day. And this established mechanism of CO2 removal allows us to to push prices up because, you know, a before this same mechanism is in place, you could, you know, you could do better on the low CO2 basis or whatever, but that ensures a real high price of CO2. And I think, you know, even the you know, if anyone understood I mean, there has been also important pressure from the air pollution regulation. So since the last planned combustion directive in in 2000 and then the Industrial emission directive isn’t so. And also because the if you are in Italy, then in the US, you know better. You have your theory that you need to put some money to retrofit your your plant in order to comply with certain environmental standards. And you don’t know if next year will be a, you know, time then again and you need to put more money and so on. I mean, this is a big disincentive. So basically in Europe, let’s say, that has to be the policy. I will say that CO2 is is is the main one. But. There was a very we have time enough because these details usually I don’t I don’t mention because it’s very detailed, but I think it is worth it. You know, in Europe, however, just before a let’s say, Fukushima and this crisis, there was a final investment decision for for a few a let’s say, a new way for coal plants, including Netherlands and Germany especially. And, you know, so this these plants are very new and this both some some, you know, let’s say a lot of work. But anyway, you know, the decision is is made. And then, you know, even last year in this incredible circumstances with the nuclear fleet in in France almost half of then closed with a very low hydro production with the crisis in the in the gas and coal power generation increase only they feel you know because this has been complemented with a lot of renewables. And indeed the renewables for for coal. I mean, you can make a call flexible, but you know, all this. Plus we are going to back to this same question. You are not going to invest in these plans to make them flexible. You know, when you need to pay €100 per tonne of CO2. So let’s say that the you know, this is and then you have a Germany and Poland that needs to, you know, let’s say, adapt their calendar to their new energy, come in and so on, so forth. But let’s say that outside the Germany of Poland is the destiny of coal is decided in your in us, us. You know the problem much better than me. It’s a combination of this a regulatory push because this is also very important I mean that there are three you can say that the these campaigns that really affected say as well you know Bloomberg Sierra Club, all these things, is pushing a lot of pressure. And with the price of gas in us that is much cheaper than Europe again is say I mean a coal has a very difficult future and then a places like Canada or Australia basically share part. But of these you have a expansion of of renewables in in Australia. So basically this is really disrupting a coal generation in a fleet. Queensland, New South Wales, Victoria was basically coal, but with this renewables, so sun and so on, it is difficult to, to adopt a kind of had this combination of a cheap gas and a hydro event. So, so yeah, this is then you have countries where you don’t see this trend so clear because of the circumstances. So Japan, Korea, for example, you see that the the trend is declining, the trend is declining. But the first of all, still new plants has been I mean, in Japan until now, in Korea, there still are building to dig out of new coal plants that are very more than there are quite clean, let’s say, in terms of air pollution. They are very efficient and they are renewables, land, land problems, and so are not, you know, expanding at the same pace than in other places. So you see that there a coal even if there is a declining profile, but this much slower than in Europe on U.S.. So basically what we see that the with a very few exceptions that we can mention Turkey maybe, but with very few special exception in OECD countries, coal is in a structural decline in the power sector. And if we that is basically 70% of of the use and if we go to the industry, there’s no much industrial output growth in all these countries as well. I mean, it still is their main use, their salmon and others and there’s no growth of this industrial output and little by little they are being replace alternative fuels for cement and electrical furnace forested with more crowded. So so basically this is say, well this plane the structural decline in noisy big countries.
Jason Bordoff [00:14:29] And just remind people listening you know what coal is used for. We often talk about coal and then renewables can replace coal. Of course, that is true to create electricity, not necessarily directly for industrial uses. So just to help everyone remember there’s and there’s thermal coal, there’s metallurgical coal. What is coal used for? What percentages in different sectors, whereas which sectors are growing, which are shrinking? And how is that different by region?
Carlos Fernández Alvarez [00:14:54] Exactly. Yeah. You said probably I should have a study like this, say two thirds. Basically a big number, two thirds of of coal is used for power generation. Mostly you say boy, whereas coal is massive. I mean there are a few IGCC dancers on Don’t think as if I go, but let’s say that there is majority support, whereas coal so basically is burned and produces steam to to generate electricity. This is two thirds and then the other third, a steam is the main use. So basically it’s more than half of this third. So let’s say between 15 and 20%. Also depending, we mean the balance in mass energy or whatever. But this is therefore still a legacy. And so far for our for the people who are listening to produce, say, let’s say steel from iron ore so we can use, let’s say iron ore or scrap, so to produce the steel with iron ore. Still does nothing because these are great large scale. There’s nothing that can compete, no technology, few that can compete with the blast furnaces in which we use a Coke that is a byproduct produced from coking coal in a Coke, ovens or basically heating pyrolysis heating without the oxygen to produce this coke that is used in the blast furnaces. And it’s as I said, there’s no there’s no replacement, you know, competitive replacement for this technology. Still today, there are there are options, you know, like reduction with gas and using a scrubber. Electric furnaces aren’t there. Now a hydrogen is still considered and there are a few other technologies also using gold and so on. But let’s say that this is something where a nice, very heart of it and then in the cement sector to produce cement, that is the third largest use and you don’t really need the coal, you only need the cheap energy. But the coal is very cheap, you know, especially if you don’t consider CO2 and so on. So basically cement producers, either coal or coal. But this is another big use in Europe, for example, there are still a lot of coal for cement production for clinker not but they they are and from tires to to waste is a to replace because as I said, you only need a lot of energy in a very short moment so you do not need to use gold. And then there is a sector that is very controversial, that is the what the Chinese call a coal conversion. So a, you know, the chemistry before oil, but the oil is more versatile and is better than the coal to produce plastics and so on. But actually you can produce from a coal because you have the elements, you have the carbon in the in the coal, and you put the hydrogen from, from, you know, you guys, you fight with that with the steam or whatever. You have a carbon in the hydrogen so you can produce or olefins methane or whatever. So in China, this industry is is growing both coal to liquids. So let’s say production of gasoline and diesel from coal, a coal to methane. So synthetic methane from coal gasification and coal to chemicals that is whole. They they, they refer to these that is produced a olefins, let’s say, plastics from coal. And this is a I mean.
Jason Bordoff [00:18:37] What what drives that growth? High oil prices.
Carlos Fernández Alvarez [00:18:41] I mean one thing is the energy security because a China and gas and oil imports are growing and I mean oil imports. I think I am talking by by car about 18 over 70% in gas. So so high is not the high, but is high. What else? Coal is a domestic fuel. So basically energy security. And of course, when you have a, let’s say, higher in a oil and gas prices because you can also apply these to to ammonia and fertilizers when you have high oil prices, this is an incentive to to for four to use coal you know through these saying gas ification is very specific on China. So there are very few I mean South Africa, of course, because they used this in their apartheid times, but is now they are moving too little, a little too slowly, but they are moving to gas into their countries like India or Indonesia. The has have announced plans for this, but they didn’t do this. They go for a I would say China. And as I said, the energy security is a you say that’s motivation. You know, and indeed their oil, gas, coal relative prices make go one 1 trillion more not profitable number here.
Jason Bordoff [00:20:10] What drove the decline? We’ve seen coal use for electricity decline substantially in the US in the last 10 or 15 years. What is the IEA analysis show drove that was that about natural gas becoming much cheaper because of the shale revolution? Was that about cheaper renewables? Was it about something else?
Carlos Fernández Alvarez [00:20:28] I see. I will say three main main drivers. So I will say that they without cheap gas, without the shale revolution, everything will be different. You my in my in my opinion, everything would be the salt. So with this base that the cheap gas allows you to do many things a I mean the renewable expansion in in us. So so I mean, everyone talks about China, but I mean little by little every year you you see how radio is expanding and is expanding more than electricity growth. So this is let’s say a is ringing in this base for for the thermal generation in, as I said, A let’s say that this regulatory in this policy combined with the with the, let’s say, public opposition is on. It’s also important. It’s also important because as I explained in the case of Europe and when you don’t have because everything you know, when you don’t have a clear perspective about the future of one plant, you don’t invest in, you know, retrofit and so on. And I mean, these are industrial facilities that you need to invest, you know, maintenance and so on. So basically, let’s say that the coal in the US is living a perfect storm and is something that the people do not appreciate because I mean, some coal in the US is very competitive. I mean, Powder River Basin is one of the most competitive coal in the world. And but there has this, this, this where there’s a competition from foreign renewable expansion, cheap gas and this a regulatory public opposition that is is very hard to to confront.
Jason Bordoff [00:22:15] Help people understand why why coal is so resilient. So, as you said, two thirds in the power sector, it seems like every day you see another headline that renewables are breaking one record after another and coming down in cost every year. The capital going into the investment, as the IEA tells us, going into clean energy is breaking record after record solar batteries. All these things have come down 80, 90% in cost over the last ten years. So why hasn’t coal for electricity fallen more quickly?
Carlos Fernández Alvarez [00:22:47] It Well, to spend this, we need to look at Asia because it’s all in Asia is all happening in Asia. A so in China ten years ago with their with their my former boss and their good friend Laszlo around that there you also know a we made the rule a very simple rule of thumb the same that the three but if if electricity demand in China grows more than 3% coal power generation increases because you know the addition you know they say they sell one they call the policy ABC anything but coal. You know, that means they to increase nuclear, to increase hydro, to increase their gas, to increase their way into this resolving. We see how this is growing no different sweet but however everything added if electricity demand grows more. We did this rule three. I mean, is not there. You know anything really like this was something like a number that is more or less and is still working.
Jason Bordoff [00:23:51] And and that’s just because those zero carbon alternatives can’t grow that quickly. You can grow them. But at a certain point you need other things too, because of scale and supply chains. Is that is that the way to think about it?
Carlos Fernández Alvarez [00:24:03] I mean, they are hardiness of hydro. I mean, you can do either all the hydro you want because, I mean, you need a place and you need to do the hydro and nuclear. I mean, they still buy the approvals after Fukushima then and they are building I would be it but I mean solar they are adding a solar like like anyone else in the world, say with wind. And however you know I mean the thing that they in China is now all consuming almost 10,000 that will tower almost a and the what is they 30 so it’s almost one third of of of their electricity you know so if you grow there you need more more coal. India is almost the same but with less alternative because India the nuclear is is much lower than that in China. So hydro is not growing like in China. So India basically is a pre a plus plus coal, you know, some wind in some in some areas. So when you have I mean, you see this year how electricity demand is growing in India and coal power generation is increasing. I mean, I took a year yesterday, I took a numbers in October, 30% year on year growth, equal generation India because, you know, you have electricity generation growth and you don’t catch up as sun when the electricity demand growth slowed down. And then, you know if the spongy on the continues. Yeah. Will be but then you have the problem that in other places you can have the same problem because now in Indonesia we are we are you know, Indonesia now is the fifth largest consumer, you know, just became the fifth largest consumer of coal in the world. The same thing, you know, the 270 or 80 million people. Then they need a lot of electricity. And even if they they install renewables. So basically, we need to expand, let’s say, or accelerate these alternatives if we we really want to see a this call them on in power peaking.
Jason Bordoff [00:26:29] And help me understand China. You know you see statistics like that is approving a new coal power project every two weeks. You said earlier in the conversation it’s coal is growing quickly, not so much in China anymore. So what is happening in China right now with coal?
Carlos Fernández Alvarez [00:26:48] I mean, this is quite complex, but yeah, let’s let’s go for the approval. So basically the approvals we because one thing is that coal consumption so called power generation, okay they’re through all the year, you know, And then another one is the the capacity adequacy. So if you if you analyze the the peak demand in China is still growing. Still growing. So China needs first to in order to comply with their peak in emissions, this is still a lot of a wind and so on. And they are doing and this is, let’s say, removing coal generation, coal consumption, CO2 emissions and so on, so forth. But at the same time as the peak demand is growing, they need more for dispatchable capacity. So this is the main reason in my analysis for the approvals that is actually the approval is is almost said rather than one every two weeks to every week.
Jason Bordoff [00:27:50] But anyway but your but your point I mean this is what you hear. I was just in China a few weeks ago. And what you hear from Chinese officials is we’re building a lot of coal plants. But the reason we are building those is to provide resilience because we have a lot of renewable energy. We’re reducing emissions, not increasing emissions in the power sector. But when you have a lot of intermittent solar and wind, you need to back it up. We’re backing it up with coal, so we’re building coal plants, but many of them will run at very low capacity factors. And it’s hard to always understand from the data exactly whether that’s true or whether that’s just something government officials are saying. But, you know, we expect this is going to blow through our climate and carbon goals. So you think there’s a lot of truth to it? It sounds.
Carlos Fernández Alvarez [00:28:36] Like. Yeah. I mean, yeah, in accordance with our analysis, yeah. There’s a lot of truth. And you have a since December 2020 there May 20th, 21, then September 20th, 21, and then even this year you have had the events in China with a very, very tight electricity capacity generation and day. And as I said, the peak is growing still. I mean, if you made some calculations that the just whatever a I mean, it is logical that they will continue to to grow. So what you have said makes a lot of sense. Then there is the question that day, because yes, I mean, I think we will all agree that those plans have no going to run 7000 hours. But one thing is and I mean, you know, in China, they build the coal plants really, really cheap so they can build their plants. The coal plants are the $700 per kilowatt or even or even less, whereas, you know, this is one half or one third of coal plants as well. But even if they are cheap, even if they don’t run, I mean, there is some lock in effect. You know, when you build the Or like last year they approved for accordance with them. I listed more than 100 gigawatt. I mean, yeah, they are not going to run 7000 hours but they I mean, they need to run, they need to recover the cost. And so yeah, you say, I mean it’s complex because this to say electricity or energy is, is a complex thing. It was this simple. But all the problems will be sorted out. Yeah but they’re the things are very complex and you need to deal with many issues. And for example, in China this adequacy is very important. Yeah. Because say what you don’t want is blackouts. I mean, this is a very high social political cost in any country in the world, and any government tries to avoid it.
Jason Bordoff [00:30:45] I want to ask you about what the consequences of blackouts in energy security have been, particularly with the European energy crisis. But but just quickly say say another few words about India, because it sounds like they’re building new building new coal plants, but also using a lot more coal. So that is where a lot of the growth is coming from.
Carlos Fernández Alvarez [00:31:04] I mean, India, same thing. You know, if you if you if I mean, the suspension is a bit more limited than in China because hydro and nuclear are not responding, have not responded and are not this like in China but they some and they are growing more than in China younger population also much lower standards because if you see per capita electricity consumption in India is is like four times less than than China. So there are more potential, you know, and you have this cold. So and like 3 or 4 years ago, I remember there was a lot of noise around. A bear that very bullish.
Jason Bordoff [00:31:49] Terry’s research institute in India. Yeah.
Carlos Fernández Alvarez [00:31:53] So they published this paper saying maybe in India after the 50 gigawatt or so that are under construction, we don’t need more coal plants anymore. I mean, was this a promising thing? And what I mean and some assumptions be expansion, boom blood. It could, they says. But I mean the last a plan that the CIA has published, it looks for an increase of around 50 gigawatt from now to 3152. So basically it’s a recognition that, again, you have a two issues to combine. One is the power generation and the other is the capacity adequacy. And in order to match that, then. Yeah. India, despite the incredible acceleration of a P a need to more coal plants and I mean economies is is doing well in India and yet we see electricity demand growth very very fast this year and and with this coal power generation. Hmm.
Jason Bordoff [00:33:05] Now you mentioned earlier when I asked why coal would be increasing in certain places, even though alternatives may also be cheap, energy security is much more top of mind for many, many parts of the world now, particularly after the energy crisis prompted by Russia’s invasion and cutting off of much of its gas exports to Europe. So there’s a there’s you often hear that Europe turn back to coal in response. I’m not sure the data you presented supports that. But what actually happened in terms of coal for Europe’s response to the energy crisis?
Carlos Fernández Alvarez [00:33:41] Yeah, I think this is a as we started this this conversation, this is another narrative that is not supported by data, you know, so but at the same time. BS, I mean, if you read the UK, they don’t basically they don’t use any, any coal, they don’t burn any coal anymore, you know. However, any time they’re off, you know, I mean, you know, the coal plants are coal to, you know, to be ready, let’s say, in case they are needed. You have a 20 news, you know, a coal plant. I mean, this is nothing, you know, I mean, in France, same thing. You know, in France, they this is basically a nuclear nuclear power base generation with some gas and some those aren’t higher than a thousand renewables wind, solar and you know, extend extension of of the life of a, you know, a 600 megawatt coal power plant that is just freely available. But they and they’re still not are not they have not burnt any coal. And you have a 2020 news in the papers you know so yeah I mean and so there was this narrative that the coal as well but I mean this is a narrative that not to put a they’ll increase a serious of coal. I mean it was after Fukushima because of their gas prices went up that this is more than one decade ago. And then we have a big increase in 2021. That is what I mentioned because the Covid and so basically what water for for the the people who are listen. So basically we have a thermal, let’s say, space that is a rescue on a space that coal and gas compete in this margin not because you have, let’s say some point a nuclear hydro I mean, and solar that are must run or this bad first or however you want to call and you have this space. So when do you have like in the Covid, this drop of collapse of electricity demand, you have a for coal, you have a double effect. First, this a gap is reduced a lot because you have a 10%, a 10% decline in electricity. This gap decline to the five. So so first you have a big peaking, a decline of this thermal space, the gas and coal and and you have this decline in gas that is a fuel that is not easy to store and the gas price comes down, goes down a lot. So they’re making gas more rapidly than coal. So this is why during the Covid, a coal collapse, because this is collapse, you know, was the largest drop since the Second World War. But many people, again, you know, sold the narrative that this is the collapse and so on. But it because there the analysis not what they were not properly done. You know so in 2021 when gas prices. Went up and the thermal space expanded because the electricity less they return a call, less bandwidth. But I mean in Europe but this was a one off 2021 event. In the US, a quarter billion is an increase in 2021 for this double effect. You know, I.
Jason Bordoff [00:37:05] Think last if I remember the numbers right from the the report last year, European Union coal demand increased 1% just under 1%.
Carlos Fernández Alvarez [00:37:14] Yeah. I mean because in in non power a decline because of the industry problems. So in a non power in the in electricity the kind of a sorry increase a bit you know. Yeah. But then with the decline in the non power basically was flat. Yeah. Was less than 1%. Yeah. So yeah. But yeah. Their narrative was so then that they you know like all these returning euro big so on. But the only problem is that the data do not support this about the narrative you know or this because you know the Germany say you know removing wind turbines to expand lignite. Well I mean the picture is really impressive. So all but I mean, this is something anecdotal and it’s not really reflexive. I was funny, you know, to see that. I mean, funny or or tragic, however you want to consider, but see what I mean to see the wind removal for project. But I mean this not significant you know you want to buy into right. So yeah, let’s say that the data do not support the narrative of this call come back to you.
Jason Bordoff [00:38:18] It’s good to do analysis with with the data not not just headlines I think is what you’re saying the talk about how how the European energy crisis affected coal outside of Europe. So is it is it the case that gas prices went up substantially? Europe pulled a lot of LNG supply in because it had to replace lost Russian gas? Coal prices elsewhere went up, but you saw coal increase in other parts of the world that got priced out of the LNG market in Asia or Southeast Asia, Pakistan, Bangladesh, emerging market countries. Did did. What happened? Did the European energy crisis contribute to other countries pivoting back toward coal?
Carlos Fernández Alvarez [00:39:05] So there is this short term effect that we have data and we can talk on this and then it will explain secondary effect that we don’t know. So first is clear, and you have described perfectly main examples a China and India, even if a China India had a cold base day a countries but there are some some gas with those prices of gas and gas say power generation decline in both China and India. So this is more coal because coal is what their feel say or the gaps. And then other countries like Bangladesh, for example, they don’t have the almost that they have building power plants now, but they have one one small plant running on domestic coal. And just, you know, they have just commissioned a couple of air plans. They are running on imported coal. So it’s not that you have they are, you know, the potential of of, you know, switching to coal big time is on. But what I said about this secondary effect that we don’t we haven’t seen yet but they I mean there’s something psychological on on, you know, a I can’t have or if I cannot have LNG, you know, because when when this comes all goes to Europe, can I trust for the future in LNG? So as I said that we didn’t see that the, you know, the the countries basically this will apply to Southeast Asia. We didn’t see that the countries has really moved far in South Asia. So let’s say Pakistan, Bangladesh and in Southeast Asia we don’t see this happening. But the I mean, we are, of course, watching very carefully in case that these happen, because this will be really a I mean, something with the consequences, because we are talking of countries where the growth of electricity is going to be quite heavy in the future. So we are talking about the Pakistan with more than 200 million people, one that is under debate, the Philippines, more than 100, Vietnam, 100, Indonesia, 280. I mean, a lot of people there, a lot of So the that region is very important. So, as I said, is something that we are monitoring in and and now we have seen in Indonesia quite the increase. But this more about the smelters, you know, nickel and so on rather than you know it changes to say in the policies. So whatever.
Jason Bordoff [00:41:45] Can I ask what you what you think is needed to to start to change this outlook? I’ve often heard your your boss, Fatih Birol, say and a lot of people are talking about no new coal plants. But but even if we run the existing fleet of coal plants around the world to the end of their normal economic life, we blow through the kind of climate goals that we need to see like 1.5 degrees. So we not only need to not build new plants, but retire existing plants early. How is that going to happen? Who’s going to pay for that? And then at the same time, you often hear people say there are a lot of low income people around the world that need a lot more energy, and that is also true. I took part with my research associate, Lily Lee, in a Wall Street Journal debate on the question of can developing economies have high economic growth without coal? I said yes. And Dr. Rahul Taneja from from Brookings said no. So I’m wondering what you think the answer to that question is. Is there a trade off or is it a false choice? And how do we make sure that we’re meeting the increasing energy needs of many, many billions of people around the world who use very little energy? How do we do that without coal? To get hopefully more on track for our climate goals?
Carlos Fernández Alvarez [00:43:03] Well, we have people have many alternative. I mean, the power sector, A, because the only thing we can discuss about the steel in and so on. But in the power sector, fortunately we have many alternatives that are that are possible. You know, so you have a hydro, you have a nuclear, you have a gas, you have a whole biogas. It’s a bit tricky. But anyway, you have a solar, you have a wind. So I think a better integration, we need a bit of innovation, storage, historic technologies. And we have, you know, this portfolio. But it is true that, for example, if you don’t consider nuclear power, I mean, the the the task is more difficult, you know. So this is this is the thing. So, you know, but the in the electricity sector, fortunately, there are there are many, many options. So the thing is, you know, and of course there that is efficiency.
Jason Bordoff [00:44:07] And what’s needed to to make those things happen. We have these just energy transition partnerships and Indonesia and South Africa. Is that a model that you think is working and can be scaled? We need more concessional finance from our World Bank reform. What do you think is effective from a policy standpoint? What’s going to what’s going to cause bring this about bringing about peak coal and not just a plateau, but a decline and and retiring existing plants too.
Carlos Fernández Alvarez [00:44:34] I mean, this this let’s figure got our new instruments know that the Asian Development Bank is suitable on a good plan in Indonesia. I mean let’s let’s see how you know how the south how the result because of course this is not simple but they I think their focus should be because I mean if you are in a in a in a country where you need electricity, listing of South Africa is is counterintuitive, you know, to to to offer, let’s say, money, grants, loans, whatever to to to close down what you have, you know, is look, say let’s say more a better story to tell to offer a new electricity. So there are many, many aspect of course, you know, technology, finance and so on. But I think, you know, important is to to provide this. I mean, you have a I mean South Africa now I mentioned they had they have a goal to create a renewable resources, you know, so why not, you know, to, to to work. I mean in parallel you of course you can you can work in order to retire a goal to to try to to to decrease the impact on their communities. Fair enough. But, you know, why don’t we try to to, you know, to push renewables in places where you have a very a very big game, a potential and where a you know expansion because there we need will I mean people always say that, you know there’s no sun at night that’s all but the first renewable has been improve in every country in the world that is is very I mean for the for the again, it is very simple to absorb. So you don’t need you know then in in and you know the developed countries will money to you know we will we learn how to manage the variability so on. But you know now in South Africa you don’t need to you know you’re going to start now deploying there when it will be time, you know, and so far, I mean, you will not have this problem, you know, So I think this is something that the. Yeah, it’s important, you know, to to to, to accelerate, you know, these expansion of, of renewals, you know. Nope. Yeah. Why not, you know. Yeah.
Jason Bordoff [00:46:53] Let me ask you about the role of technology. You’ve talked about substitutes like renewables, technology that might reduce the emissions. And maybe I’ll ask you about to Japan, for example, is trying to blend ammonia with coal to make it less emissions intensive. Is that promising or a distraction? And then, of course, carbon capture. How big a role will that play in dealing with the emissions from coal?
Carlos Fernández Alvarez [00:47:16] I mean, the more and more if you if you follow starting by the end, you follow the the our our content scenarios, you see that the more and more we have the lesser carbon capture in the street. I mean you still have a some sectors like steel is on where a or cement because the cement part of the emissions are the process you know to to reduce the the the the the raw materials into clinker. So it doesn’t matter which fuel you use, you’ll meet a lot of CO2 anyway. So don’t get me wrong. A carbon capture, a story, a story. It has a role. But we cannot, you know, say that. Okay. No, we’re, you know, continue building cord blood and so on. And eventually we will retrofit with carbon capture. Historic. This is not the what the IEA is, is a is a you know, a launching is not what we are saying. We say, okay, you have a cement plant, okay, we need the CCS because I mean, you mean any way for them because of the process. But now you can you know, you can push for other technologies is better, you know, than than say, okay, we will we will eventually retrofit. So so this is one thing and then about ammonia and so on is this same thing. I mean, we need to see we have these technologies really, you know, because I mean, we didn’t way I mean, when I’m working on these for the more than three decades in the energy and I mean I couldn’t imagine I can tell you I couldn’t imagine 15 years ago or 20 years ago when we started this 25 years ago, to be honest with you, when they started the discussion on on solar and wind in Spain, bug in Spain, I couldn’t imagine that the solar will be as cheap as it is. I couldn’t imagine. I mean, look, again, I can tell you honestly. So so let’s see. Let’s see how, you know, those technologies evolve because that, yeah, we need to invent something, you know, I mean we to develop something you.
Jason Bordoff [00:49:30] Last, last topic I just wanted to ask and I don’t know how much this has been the focus of some of your analysis and work, but the one of the challenges, I think you tell me if you disagree with moving away from coal, here are the economic and sometimes political implications of the disruptions caused by that dislocated communities. When we think about what a just transition means, having a transition for coal dependent communities, the workers that have been in the coal sector for a really long time, how big a challenge is that? And have you seen promising models in different parts of the world for how to make sure that we have a transition that does think about communities that might be harmed in the process?
Carlos Fernández Alvarez [00:50:16] I mean, this is a very, very good question, but of course, it’s for discussion itself, you know, for ours. It’s a very interesting question. I mean, let’s say the good news, the good news is that the coal sector is not as labor intensive as it used to be. So, for example, in in in China, A. Our estimate is that around 3 million jobs in the in the coal mining has been recycled, disappear, removed because of technology, better technology. You know, if you see the employment of a coal sector in the US. So it is very interesting because you see that production is increasing and employment is declining. I mean only only increases in the 70s because they included the people working in the offices. But otherwise, no matter the training, the yeah, they did the methodology. So if you see the increases because it is so so this is very interesting because technology has made the coal less labor intensive. So part of the problem of the coal sector, that was, you know, this concentration that they make it in a cultural, almost religious, you know what the mind you know, the mine was, you know, a coal mine was said, you know, they they did their soul of the of the town and so on. So this is now is not as, let’s say, intensive as it was in the past. But the city, I mean, in many places say tragically we are thinking but malanga in in South Africa or gallivant and is gallivanting in north then in Indonesia. I mean you see in USA how they called countries in West Virginia and Kentucky. I mean, it is really difficult. It has a lot of things that it has done. And there are a lot of as I said, this is a discussion for for I mean, independent discussion, a lot of very good examples also about examples of how you don’t need to use your money. But there are a lot of good examples in all across because if you look at history, most of the countries or many countries has gone through this process, you know, the heavy coal mines and close I mean, if you go to Europe, almost say at France, you know, Spain, England, Belgium, Netherlands, I mean Germany, although most of the countries has gone through this process. So there will be examples and many lessons to learn. But this I mean, that’s a very, very good point because, I mean, go to Sashi and and try to convince people that they’re, you know, a coal they need to abandon coal, you know, when when you have such a dependency.
Jason Bordoff [00:53:08] Thank you so much for your time. Carlos Fernandez Alvarez, thanks for your analysis at the air. Thanks for being so generous with your time this morning. Thanks for. Data, not just headlines to help us understand what is happening. A really fascinating conversation. We didn’t get nearly everything we could talk about, but hopefully we’ll have you on again soon. Really appreciate your time this morning.
Carlos Fernández Alvarez [00:53:28] Thank you for having me.
Jason Bordoff [00:53:33] Thank you again, Carlos. And thank you for listening to this week’s episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by me, Jason Bordoff and by Billy Loveless. The show is produced by Aaron Hardwick from Latitude Studios. Additional support from Lily Li, Caroline Pitman, Daniel Prop, Natalie Volk and Kyu Li. Roy Campanella engineered the show. For more information about the podcast or the Center on Global Energy Policy, please visit us online at Energy Policy, columbia.edu or follow us on social media at Columbia U. Energy. And please, if you feel inclined, give us a rating on Apple Podcasts. It really does help us out. Thanks again for listening. We’ll see you next week.
“Coal demand reached a new all-time high in 2022.” That was the headline of the International Energy Agency’s annual coal market update, released in July of this year. In fact, 2022 was the third year in a row that global coal consumption has increased.
This growth occurs against the backdrop of an ever-worsening climate crisis driven by energy sector emissions, of which coal accounts for 40%, and it’s why the IEA’s own executive director Fatih Birol called for an end to new coal power plant construction in a recent op-ed. But despite coal’s impact on the climate, it remains a vital source of energy for much of the world, particularly in Asia.
What is the outlook for coal in the years to come? What will it take to move away from the fuel? And what would phasing it out mean for emerging and developing economies?
This week host Jason Bordoff talks with Carlos Fernández Alvarez about the findings of this year’s Coal Market Update.
Carlos is a senior coal analyst at the International Energy Agency, and recently served as the acting head of the Gas, Coal, and Power Markets division. He was the lead author on this year’s Coal Market Update and has contributed to many other IEA reports, including the organization’s flagship publication, the World Energy Outlook. Carlos has 25 years of experience in the energy sector, serving as an energy consultant, an energy advisor for the Spanish Government, and later as the director of the Spanish Coal Agency.
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