WORLD COAL INSTITUTE

COAL: SECURE ENERGY

COAL: SECURE ENERGY

Coal: Secure Energy is the latest in a series of
reports by the World Coal Institute on the
contribution of coal to global sustainable
development. It develops the position set out
in The Role of Coal as an Energy Source [WCI,
2003] on coal’s role in maintaining global
energy security through the key messages:
The development and use of clean coal
technologies, including carbon capture and
storage, allows these energy security benefits
to be realised while meeting the environmental
goals our societies have set.
This report calls for policy support to:

>> Coal reserves are large and will be available
for the foreseeable future without raising
geopolitical or safety issues;
>> Indigenous coal resources enable economic
development and can be transformed to guard
against import dependence and price shocks;
>> Enable the clean and efficient use of coal;
>> Facilitate technology transfer to
developing economies;
>> Promote research, development
and demonstration;

>> Coal is readily available from a wide variety of
sources in a well-supplied worldwide market;
>> Coal is an affordable source of energy;
>> Coal does not need high pressure pipelines or
dedicated supply routes; routes do not need
to be protected at enormous expense;
>> Reduce investment uncertainty;
>> Address environmental concerns.
Copies of all WCI publications and further
information on the coal industry are available on
our website: www.worldcoal.org

>> Coal can be easily stored at power stations

and stocks can be drawn on in emergencies;

>> Coal-based power is well-established

and reliable;

>> Coal-based power is not dependent on the

weather and can be used to underpin
renewable energy, particularly wind power.
 Coal: Secure Energy 1

Contents

2 INTRODUCTION – WHY COAL?

4 SECTION 1 ENERGY DEMAND & SUPPLY

6 SECTION 2 ENERGY SECURITY

8 SECTION 3 COAL - PROVIDING SECURE ENERGY

19 SECTION 4 ACHIEVING ENERGY SECURITY

20 SECTION 5 POLICY MEASURES

21 ANNEX: ENERGY SECURITY DRIVERS

23 REFERENCES
2 World Coal Institute
INTRODUCTION
WHY COAL?
>> Energy, particularly electricity, is essential for
economic and social progress, enhancing people’s
quality of life and lifting many out of poverty. >>
The need for affordable, reliable and
dependable power to provide the essential
needs of lighting, heating, cooking, mobility
and communications – as well as driving
industrial growth – is without question.
Modern technologies, requiring high quality
power supplies, underpin today’s societies and
facilitate economic growth in many
underdeveloped countries.
Interruption of energy supplies can cause
major financial losses and create havoc in
Key Messages
Coal has long been and will remain one of
society’s most secure forms of energy,
offering many advantages.
>> Coal is abundant and widespread.
>> Major developed and developing
economies have large indigenous
coal reserves.
>> Coal is readily available from a wide
variety of sources in a well-supplied
worldwide market.
economic centres, as well as potential damage
to the health and wellbeing of the population.
As global demand for energy continues to rise
- especially in rapidly industrialising and
developing economies – energy security
concerns become ever more important. To
provide solid economic growth, and to
maintain levels of economic performance,
energy must be readily available, affordable
and able to provide a reliable source of power
without vulnerability to long-term or
short-term disruptions.
>> Coal is affordable.
>> Coal is safe to transport and store.
>> Coal can be stockpiled at mines, power
stations, or intermediate locations.
>> Coal-based electricity is well-established
and highly reliable.
>> Coal is not dependent on weather or rainfall.
>> Coal is addressing its environmental challenges.
 Coal: Secure Energy 3

Providing a secure supply of energy comprises
two distinct, yet related issues:
i) long-term security or resource availability; and
ii) short-term security – associated with
supply disruptions of the primary fuel or of the
electricity generated.
The forecast growth in energy demand means
that we will need many sources of energy in
future. A diverse mix of energy sources, each
with different advantages, provides security to
an energy system by allowing flexibility in
meeting each country’s needs.
Coal does face environmental challenges and
these too can have implications for energy
security and sustainable development.
However, the coal industry has a proven track
record of developing technology pathways
which have successfully addressed
environmental concerns at local and regional
scales. Ongoing research efforts into
improving the efficiency of coal-fired
electricity generation and technologies for
carbon capture and storage (CCS) offer routes
to reduce carbon dioxide (CO2) emissions now
and in the future, enabling the energy security
benefits of coal-fired power generation to
continue to be realised. 1

Coal has a unique role to play in meeting the

demand for a secure energy supply. Coal is INTRODUCTION END
well-established – globally it is the most
abundant and economical of fossil fuels - and
is a reliable, secure and affordable fuel for
both power generation and industrial
applications. The production and utilisation of
coal is based on well-proven and widely used
technologies. The use of coal is built on a vast
infrastructure and a strong base of expertise
worldwide. Most of the world’s largest energy-
using economies and many developing
economies have abundant indigenous
supplies of coal.

1
See the World Coal Institute report Clean Coal – Building a Future through Technology for a more detailed
account of the significant role of clean coal technologies in improving the environmental performance of
coal-fired power stations.
4 World Coal Institute

SECTION ONE

ENERGY DEMAND
& SUPPLY
>> Global economic growth, the primary driver of energy
demand, is conservatively forecast to average 3.2% per
annum between 2002 and 2030, with China, India and
other Asian countries expected to grow most quickly. >>

Population growth will continue, with the world’s
population expected to reach over 8 billion by
2030, from its current level of 6.4 billion.
As a result, and if governments continue with
their current policies, global energy demand is
projected to grow almost 60% by 2030 – to
16.5 billion tonnes of oil equivalent per year
[IEA, 2004a].
Fossil fuels will account for the bulk of this
increase and will continue to dominate the
total demand for energy for the foreseeable
future. While nuclear energy provides a
significant proportion of energy in some
economies, it can face serious public
opposition. Renewable energies are growing
fast, but make up only a small part of global
energy production – the International Energy
trade. Energy exports from non-OECD
countries are expected to grow by more than
80% between 2002 and 2030 [IEA, 2004a]. Oil
will continue to dominate international trade
and gas imports are expected to rapidly
increase. While this will enhance prosperity
and security in the exporting countries, it may
2
adversely affect energy security in importing
countries due to increased dependence on
imports from a limited, and potentially
unstable, supply.
In contrast, many countries enjoy sizeable
indigenous coal resources while others are able
to take advantage of a diverse, rapidly growing
and well-supplied international market.
SECTION ONE END

Agency (IEA) predict that by 2030 only 14% of

total energy demand will be met from
renewable sources.

Two-thirds of the increase in world primary

energy demand between 2002 and 2030 will
come from developing countries, predominantly
developing Asian economies. Demand in China
grew by almost 14% in 2003 alone [IEA, 2004a]
– and much of this was for coal.

Increasing demand and the shifting

geographical location of available reserves will
result in significant increases in oil and gas

2
Common energy unit – equal to the net heat content of 1 tonne of crude oil, or 107 kilocalories. 1 tonne of oil equivalent
is approximately 1.5 tonnes of hard coal.
 Coal: Secure Energy 5

Global Primary Energy Demand (Mtoe)

Source: IEA, 2004a

7000 ■ Oil
■ Natural Gas
6000
■ Coal
5000 ■ Other
■ Nuclear
4000
■ Hydro
3000 ■ New Renewables

2000

1000

0
71

02

10

20

30
19

20

20

20

20

Regional Shares in World Primary Energy Demand (2002) Regional Shares in World Primary Energy Demand (2030)

10% 9%

52% 10,200 Mtoe 48% 16, 625 Mtoe

38%
43%

■ OECD ■ Developing countries

■ Developing countries ■ OECD
■ Transition economies3 ■ Transition economies3
Source: IEA 2004a Source: IEA 2004a

3
Transition economies are defined by the International Energy Agency as Albania, Armenia, Azerbaijan, Belarus,
Bosnia-Herzegovina, Bulgaria, Croatia, Estonia, FR Yugoslavia, FYR Macedonia, Georgia, Kazakhstan, Latvia, Lithuania,
Moldova, Romania, Russia, Slovenia, Tajikistan, Turkmenistan, Ukraine & Uzbekistan. For statistical reasons, Cyprus,
Gibraltar and Malta are included in this group.
6 World Coal Institute

SECTION TWO

ENERGY SECURITY

>> Energy security has been defined as “the continuous

availability of energy in varied forms, in sufficient
quantities and at affordable prices” [UNDP, 2001]. >>

Variable Daily Urban Electricity Demand (UK) – Factor of Winter Maximum A key issue is resource availability – the actual
■ Winter physical amount of the resource, for example
■ Summer oil, gas, coal or uranium, present around the
Source: WPD, 2004
world. In the case of renewable energies, this
could be considered as the amount of time the
wind blows at the right speed, or the number of
1.0
‘sun hours’ at a particular location.
0.9
0.8
A different aspect of energy is the need for
0.7
system reliability – the continuous supply of
0.6
0.5
energy, particularly electricity, to meet
0.4
consumer demand at any given time.
0.3
0.2 There are many drivers governing the secure
0.1 supply of energy (see Annex p.21). Different
0 sources of energy meet different needs –
some are best suited to baseload generation,
0

0
0

0
:0

:0

:0

:0

:0

:0

:0

:0
:3

:3

:3

:3

:3

:3

:3

:3

:3
02

05

08

11

14

17

20

23
00

03

06

09

12

15

18

21

00

others to peaking, and others to meet

environmental considerations. A diverse mix is
one way to ensure security of supply. Coal has
particular attributes that make a positive
contribution to energy security as part of a
balanced energy mix.

SECTION TWO END


Electricity Systems – the Need for Flexibility
For most consumers, electricity is provided
by a grid or network, and is the product of a
system, not of a single source. To remain
secure and stable, the system needs to
operate within narrow technical limits and
requires a degree of flexibility and
controllability in generation.
System operation is complicated by the fact
that electricity cannot be stored directly in
the same way as commodities (e.g. coal
stockpiles at power stations) and demand
varies not only from year to year and
between seasons but hour to hour, even
minute to minute.
The minimum electricity requirement is
known as ‘baseload’. However, on a typical
winter morning, demand can increase by 50%
or more (‘peakload’ at maximum) over less
than two hours as people get up, turn on
lights, cook and use other electrical
equipment, and as offices and factories
start operations, with a similar drop in
demand in the evening.
Some of the variation is predictable, but
much depends on short-term factors – the
screening of a popular television programme,
Coal: Secure Energy 7
or a sudden change in the weather can
have a significant impact on demand for
electricity. In some countries, consumers
have “interruptible” supplies, which are
cut off at will by the electricity supplier,
but all people value electricity highly and
ideally want a continuous supply at
whatever level they need it.
In practice, therefore, electricity systems
have to match supply and demand by
producing sufficient supply, not only to
meet the overall level of demand, but also
to maintain the stability and security of
the system, minute by minute. They also
need to have enough generating capacity
available to operate, sometimes at short
notice, when required. Since demand varies
significantly and (to an extent)
unpredictably, some generation at least
has to be flexible, predictable and
controllable if the system as a whole is
to meet requirements.
Baseload generation will operate 24 hours
a day, 7 days a week, with additional plants
being brought on line to provide the
peakload power as and when required.
8 World Coal Institute

SECTION THREE

COAL – PROVIDING
SECURE ENERGY
>> Coal is a truly global industry – it is mined commercially
in over 50 countries and is used in over 70 [WEC, 2004b]. >>

Location of the World’s Main Fossil Fuel Reserves (Gigatonnes of coal equivalent 5) The world currently consumes over 5500
■ Coal million tonnes of coal for use in power
4

■ Oil generation, steel production, cement

■ Gas manufacture, as a chemical feedstock and as a
Source: Optima 2005 liquid fuel [IEA, 2005a].

Coal reserves are large and will be available for

the foreseeable future without raising
geopolitical or safety issues.
225 21 86
33 1
Central &
1 Former
Soviet Union There is no doubt that there are sizeable
Eastern Europe

97 7 8
worldwide reserves of coal – at current
Western &
258 16 11
North America
Southern Europe
2 179 110
Middle East
production and consumption rates, over 160
84 1
India
1 115 6
China
3
years’ worth is available [BP, 2005]. This is in
55 25 21 contrast to ‘conventional’ oil and gas, with
Africa
various forecasts indicating a depletion of
supplies as early as the middle of this century.
22 25 11
South America 94 6 17
Asia
& Oceania
Although renewable energies cannot be
considered by the same measure there are
issues of concern, particularly their reliability
and intermittency. Nuclear energy also faces
availability concerns, although these revolve
around political acceptability rather than
resource availability. Nuclear safety and
concerns over disposal of nuclear wastes are
clearly key issues.

Mined in over 50 countries around the world,

coal is in a unique position to support national
and regional energy security. Coal reserves are
spread even more widely and with new mining

4
4646 Mt of hard coal; 879 Mt of brown coal.
5
A common energy unit based on calorific value. The energy content of one tonne of coal equivalent (tce) is 7000 kcal,
which corresponds to 0.7 tonnes of oil equivalent (toe).
 Coal: Secure Energy 9

techniques or with different economic Future Availability of Fossil Fuels –

Reserves-to-Production Ratios (Years)
circumstances, further resources could be
■ ■ Coal
recovered and used in the future.
■ ■ Oil
■ ■ Natural Gas
Coal reserves are significantly more abundant Source: BP, 2005
and much more widely and evenly dispersed
than other fossil fuels. Oil and gas reserves are
350
tightly concentrated in the Middle East and the
Former Soviet Union. 300

250
Indigenous coal resources enable economic
development and can be transformed to guard 200
against import dependence and price shocks.
150

Many developing and developed countries are 100

able to use their indigenous coal resources to
50
provide the energy needed for economic
development. The largest coal producing 0
countries are not confined to one region – the
a

st

fic
d

ic

ic

si
l

Ea
or

ci
er

er

/A
W

Pa
Am

Am

e
pe

dl

top five producers are China, USA, India,

ia
ro

id
h

As
rt

ut

Eu

M
No

a/
So

Australia and South Africa. All of these use

ric
Af

their indigenous coal as the primary fuel for

electricity generation, and all except India have
a sizeable coal export market. Coal Liquefaction

Coal has furthered social development through
electrification programmes around the world.
South Africa and China have both achieved
extremely high levels of connection to
electricity supply, and have done so using their
indigenous coal reserves.
Coal can also be transformed to liquid and
gaseous fuels to guard against oil import
dependence and price shocks – South Africa
has a well-established coal-to-liquids industry,
and China is currently adopting this
technology. Coal gasification is a further
example where indigenous (or imported) fuels
can be transformed to address environmental
concerns while enhancing energy security.
The production of liquid fuels – gasoline and
diesel – from coal is not a new process. The
first patent was registered in 1913, with the
more common Fischer-Tropsch indirect
liquefaction process patented in 1925.
Historically it has been politics rather than
economics that have driven development
since then – for example during the Second
World War in Germany, and as a result of trade
embargoes on South Africa from the 1960s.
Today China is addressing its oil import
dependence by building a commercial scale
direct liquefaction plant in Inner Mongolia,
which will produce around 50,000 barrels a
day of finished gasoline and diesel fuel.
10 World Coal Institute
Main World Coal Trade Flows 2004
Coking
Steam
Source: IEA 2004
Coal is readily available from a wide variety of
sources in a well-supplied worldwide market.
Coal is also available via an international
market. The market for coal is well-supplied
and global. Coal can be transported to
demand centres quickly, safely and easily by
ship and rail.
A large number of suppliers are active in the
international coal market, ensuring competitive
behaviour and efficient functioning.
Around 16% of global hard coal production –
over 750 million tonnes – is traded
internationally [IEA, 2005a]. Steam coal, used
for electricity generation, makes up the bulk of
this international trade. Coal is regarded as a
safe and reliable fuel in countries with little or
no domestic production – such as Japan, the
world’s largest steam coal importer (97.1 Mt in
2004) where 28% of electricity is generated
using coal, and Denmark, where 46% of the
electricity produced in 2004 was generated
from coal [IEA, 2005b].
 Coal: Secure Energy 11

While oil enjoys a similar global market and Energy Prices (US$ per tonne of oil equivalent)
can also be transported quickly and easily, ■ Oil

its market is dominated by what is ■ Gas

effectively a single supplier – OPEC – and ■ Coal

Source: BP, 2005; BP, 2001; IEA, 2005c; MCR, 2005
is affected accordingly.

The gas market is far more regional.

Transportation of the fuel (limited by where 450
the pipelines run from and to) has constrained 400
the development of the market to date. This is
350
changing with the advent of liquefied natural
gas (LNG) transported by large, expensive 300

vessels but a truly global market will take 250

many years to develop. 200

150
Well-functioning global markets with a variety
100
of suppliers lessen the risks normally
associated with import dependence. In 50
contrast, the UK’s increasing dependency on
one fuel source from a specific region (by 2020
87

89

91

93

95

97

99

01

03

Ju 05
05
19

19

19

19

19

19

19

20

20

ch
ly
ar

around 80% of its electricity is forecast to be

M

dependent on imported gas from the Former

Soviet Union) weakens that nation’s long-term
energy security [POST, 2004].

Coal is an affordable source of energy.

Coal prices have historically been lower and Major Steam Coal
Exporters (Mt)
more stable than oil and gas prices, and
despite the growth of index and derivative Australia 106.7
Indonesia 90.3
based sales in recent years, this has typically
PR China 80.2
remained the case. Placing a cost on carbon South Africa 63.7
emissions more directly will, in certain Russia 51.4
circumstances, put pressure on this inter-fuel Colombia 51.2
cost relationship. However, coal is likely to Kazakhstan 22.0
USA 19.0
remain the most affordable fuel for power
Poland 16.6
generation in many developing and
Source: IEA, 2005a
industrialised countries for several decades.

In countries with energy intensive industries

the impact of fuel and electricity prices will be
compounded. High prices can lead to a loss of
 12 World Coal Institute
Oil – Trade Flows Worldwide (million tonnes): Concentration of Reserves
Oil
Source: BP 2005
competitive advantage and in prolonged
cases, loss of the industry altogether.
Countries with access to indigenous energy
supplies, or to affordable fuels from a well-
supplied world market, can avoid many of
these negative impacts – enabling further
economic development and growth.
Overall costs for coal power stations are
usually lower than for alternative power
generation, and coal will remain one of the key
choices for baseload electricity generation.
Coal does not need high pressure pipelines or
dedicated supply routes; routes do not need to
be protected at enormous expense.
Coal is a safe and stable product to transport,
and well-developed coal handling and
stockpile management procedures are
followed worldwide to ensure that supplies
are available as needed.
Established rail networks usually transport
indigenous coal supplies. The international
trade of coal is mostly seaborne, with a large

Gas – Trade Flows Worldwide (billion cubic metres): Regional Markets
Natural Gas
LNG
Source: BP 2005
fleet of dry bulk vessels available for
transport. Although there has been
competition for this carrying capacity in
recent years due to China’s rapid economic
growth and need for raw materials, new
vessels have been commissioned to meet
the demand.
There are potential risks to energy
infrastructure worldwide from terrorist
attack – be it industrial, religious or
politically motivated. Concerns have been
raised particularly since the 9/11 attacks in
Coal: Secure Energy 13
the United States and the more recent
attacks on infrastructure in Europe.
Where production and transportation are
concentrated, such as at pipelines, refineries,
LNG terminals, oil and gas fields, as well as
identifiable bottlenecks in the transport
system, the risks are clearly higher.
While coal is traded through infrastructure
systems that could in theory be targeted in a
terrorist attack (coal-handling facilities at
ports, coal bulk carriers, power station
stocks), the sheer number of facilities and
14 World Coal Institute
Indicative Costs of Electricity Generation (US$/MWh)
Investment
Operation & Maintenance
Fuel
Total
Source: NEA/IEA, 2005; * IEA, 2004b, cost breakdown not available
their geographical distribution makes it
unlikely that an attack would have any real
impact on the supply and functioning of the
coal or electricity market.
Contrast this to an attack on a major gas
pipeline from Russia to the EU – at the very
least the price shock would be significant, and
brownouts or blackouts probable.
7 8
Coal can be easily stored at power stations and
stocks can be drawn on in emergencies.
Unlike gaseous, liquid or intermittent
renewable sources, coal can be stockpiled at
the power station and stocks drawn on to
meet demand without depending on primary
supply. Thanks to the geographical diversity
of coal reserves, some power stations can be
located at mine-mouth and still be close to
demand centres, thereby also minimising
transmission and distribution losses.
Coal-based power is well-established and reliable.
Almost 40% of global electricity generation is
currently based on coal [IEA, 2005b]. The
generation technologies are well-established
and technical capacity and human expertise is
widespread. Ongoing research efforts around
the globe ensure that this capacity is
6
At 10% discount rate.
7
A decrease in voltage of the electricity supply for a period of time.
Can be extremely damaging to electronic devices such as computers.
8
A complete loss of power.
6
Coal Gas Wind Coal with CCS*
14 - 41 6 - 26 38 - 129 n/a
2 - 15 1-8 5 - 36 n/a
1 - 35 28 - 45 - n/a
26 - 69 41 - 64 46 - 144 41 - 52
continually being improved and expanded,
facilitating innovation in energy efficiency and
environmental performance.
Coal-based power is not dependent on the
weather and can be used to underpin renewable
energy, particularly wind power.
Renewable energy can reduce dependency on
finite energy sources and removes some of the
risk around import dependence. Hydropower
provides many countries with a substantial
amount of their electricity needs, and can
provide a secure supply – as long as there is
enough rainfall to keep reservoirs full.
However, when weather conditions deviate
from normal, severe problems such as the
blackouts experienced in Brazil (see page 16)
can occur.
Renewables can also cause challenges to those
who need to ensure a stable and reliable flow
of electricity through the grid. Wind power has
been the dominant option for integration to
existing energy networks. However, wind
power is expensive, and suffers from reliability
and intermittency problems. It is now generally
accepted by power industry engineers and
energy analysts that the level of wind power
capacity in a grid should not exceed around
10% without the grid operator incurring
 Coal: Secure Energy 15

Oil Trade Bottlenecks

Source: IEA 2004.

Bosphorus

3 20 36
Hormuz
Suez 15.3
3.8

5 4
0.4 3.3
11
Panama
Bab el-Mandab
Malacca

14 20

15.3 Oil flow, 2003 (mb/d) Share of World Oil Demand (%)
2003 2030

significant costs to deal with the intermittency
issues. Eltra, the transmission system operator
for western Denmark, reported additional
‘balancing’ costs of around €9 million as a
result of their wind power generation in 2003
[NEA/IEA, 2005].
Wind power therefore has to be balanced by
flexible generation elsewhere in the system. It
is no accident that the countries with the
highest penetrations of wind power also have
high proportions of coal-fired capacity in
their systems (see table on page 18, which
shows the top five wind generators). In all
these countries coal is the largest single
source of electricity and in most 50% or more
of their electric power comes from coal.
Other factors are also involved, of course, and
coal is not the only possible source of
flexibility. However, coal is one of the easiest
ways of providing the flexibility required.
These countries provide a clear illustration of
the complementarity of coal and wind and the
ability of a coal-based network to facilitate the
rapid introduction of wind power.
16 World Coal Institute
BLACKOUTS & SHORTFALLS
Blackouts and shortfalls – why do they happen?
BRAZIL (2001)
Brazil suffered severe disruption
during 2001 due to its over-reliance
on hydro. 80% of the total electric
power capacity is hydro, providing up to 90% of
total electricity production. Brazil has some of
the world’s largest dams, but reservoir capacity
is small, leading to immediate impacts from
changes in rainfall. In addition, the level of
interconnection is high, causing changes to
rapidly affect the whole grid. Droughts in 2001
combined with increased demand due to
economic growth highlighted the vulnerability of
the system, leading to a highly publicised
electricity shortfall.
Solution - Introducing coal.
According to reports [EIA, 2005], Brazil's
national development bank, Banco Nacional de
Desenvolvimento Economico e Social (BNDES), is
developing a plan to expand the country's coal
industry. BNDES hopes that the proposed
programme will make Brazil self-sufficient in coal
by 2010 and eventually a net exporter of coal.
CALIFORNIA (2000–2001)
A number of events combined over the period
2000-2001 to create one of the most
famous energy crises of the last few
years, causing a series of rolling
blackouts and power emergencies. A number of
studies have been published on the crisis,
considering problems around the flawed
transition to a liberalised electricity market,
financial difficulties of the major utilities, natural
gas shortages (and thus price increases),
droughts in the interconnected states to the
north and policy differences between federal and
state regulators.
Solution – Coal and wind together.
As a direct result of the crisis, plans are now in
place for the ‘Frontier Line’ programme. This is a
1300-mile transmission system providing
12,000 MW of electricity - 6000 MW from coal-
fired gasification (IGCC) plants and 6000 MW
from wind power [WPSC, 2005].
NE USA & SE CANADA (2003)
More recently in North America,
another major crisis in 2003 caused a
severe blackout affecting around 50
million people, and estimates of economic losses
resulting from the event total approximately
US$6 billion. The blackouts in this case are
attributed to transmission and distribution
problems – particularly ageing equipment and
bottlenecks in the grid – which in turn some say
are due to the effects of market liberalisation
and a lack of investment, plus jurisdictional
issues around the numerous stakeholders who
control, regulate or impact parts of the grid.
Solution – Coal and wind together.
The Midwest Independent Transmission System
Operator (MISO) is committed to using coal and
wind power to counter rising gas prices and
provide stability to the grid.
ITALY (2003)
Following a summer of rolling blackouts, Italy
suffered a nationwide blackout at the
end of September 2003, impacting
almost the whole population of 57
million people. With limited natural resources,
and following anti-nuclear sentiment in Italy in
the 1980s, much of the country’s electricity is
imported – and on this occasion trans-Alps
transmission lines from Switzerland were
knocked out.
 Coal: Secure Energy 17

Blackout in North America 2003 Solution – Fuel switching to coal.

Before The bulk of Italy’s own generation is from oil-
fired power stations. Due to the increasing cost
of oil and a need for new and diversified power
generation, many of these stations are being
converted to gas or coal-fired plants. ENEL,
Italy’s largest generator, aims to double its coal-
fired capacity to over 10,000 MW, or 50% of its
generating portfolio. The Italian government
has also eased regulations on building new
power plants and sought to encourage greater
investment in the electricity sector
[Argus, 2005].

NEW ZEALAND (1998-2003)

The problems affecting Auckland in
1998 made headline news worldwide.
The loss of electrical service to the
central business district for over one month
provides a chilling example of the impact of
After supply failures on a nation’s economic and social
welfare. Two further crises in 2001 and 2003
occurred as a result of an over-dependency on a
single energy source. New Zealand relies on
hydro for over 60% of its electricity, but like
Brazil suffered from small reservoir capacity,
increasing electricity demand due to economic
growth, and particularly dry conditions. Monthly
wholesale electricity prices spiked dramatically
as a result [IEA, 2005d].

Solution – Increasing coal’s share.

There has been a four-fold increase in coal-fired
electricity generation in New Zealand since
2000, with coal now making up almost 10% of
the generation profile [IEA, 2005b].

Photos courtesy of NOAA/DMSP, 2003

18 World Coal Institute

Fuel Shares of Electricity Generation (%)

Installed Wind Coal Solar/Wind Gas Hydro Nuclear Oil Others
Capacity 2003 (GW)
Germany 14.6 50.7 4.2 10.3 3.4 27.9 0.6 2.9
USA 6.4 50.5 0.4 17.5 6.6 19.7 3.3 2.0
Spain 6.2 28.9 5.6 20.1 11.4 22.9 8.6 2.5
Denmark 3.1 46.4 16.5 24.2 0.1 - 4.1 8.9
India 2.1 68.3 0.6 11.5 11.9 2.8 4.6 0.3

Sources: Installed wind capacity data – American Wind Energy Association; Fuel shares in electricity generation – IEA 2005. All fuel share data is 2004, except India (2003).
Discrepancies due to rounding.

Diversification Italian generators are also looking to diversify

As a result of these positive attributes, several into coal-fired power generation, specifically
countries are diversifying their energy mix to to address the issues raised by the recent
include more coal. blackout (see page16). Current plans by ENEL,
one of the country’s main energy companies,
Malaysia, for example, has developed energy include the conversion of several oil-fired
laws and strategies to diversify away from a plants to clean coal technologies.
predominance of first oil-fired and then gas-
fired power generation. Coal, as an affordable,
available and secure energy source, is seen SECTION THREE END

as a significant part of achieving a diverse

energy supply.

Currently over 10% of Malaysian electricity is

generated from coal, compared to zero 10
years ago, and the national goal is for 40% of
power generation to be coal-fired by 2010
[Energy Commission Malaysia, 2004].

SECTION FOUR
ACHIEVING ENERGY
SECURITY
>> Achieving energy security requires two major
investments - financial and political. >>
The IEA World Energy Investment Outlook
[IEA, 2003] forecasts a need for US$16
trillion of investment in energy systems
between now and 2030. Power generation,
transmission and distribution systems make
up $10 trillion of this, or 60% of total energy
investments. Over 50% of this investment is
required to simply maintain the present level
of supply. Global electricity investment in
transmission and distribution will be almost
as large as the total capital needed for the oil
and gas industries combined.
The question is whether this investment is
available – due to the sheer size of the funds
needed, and because of potential barriers to
investment. The investment capacity is there
on a global basis, but ensuring favourable
conditions for these funds to be drawn is
another matter.
Investment in the energy sector continues to
shift to private sector sources, which require
more immediate and substantial returns on
their investments, with little regard for ‘social
dividends’. In many countries, economic and
political barriers remain which will impede the
flow of funds from the private sector – India
may need up to US$665 billion for energy
investments between now and 2030, but this is
unlikely without major reforms to the
electricity sector. Indeed, developing countries
overall will find access to private funds
difficult and - with little recourse to public
Coal: Secure Energy 19
sector finances - will struggle to meet the
projected demand. Africa is a region likely to
face particularly difficult challenges.
Public resistance to individual energy sources
and technologies and the need to meet
environmental concerns may also prove barriers
to investment overall.
Political recognition of the need for energy
security is also vital. Energy security policies
need not be at odds with other policies,
including environmental objectives. Indeed
there are synergies by addressing energy
security and environmental agendas together,
rather than in isolation. A number of examples
are given within this paper of countries that are
choosing to use coal to address their energy
security concerns. Coal faces environmental
challenges, but through the development and
use of clean coal technologies these challenges
can be, and are being, addressed.
The use of a wide range of clean coal
technologies enables economies to provide
an affordable, reliable and environmentally
acceptable supply of electricity as part of a
diverse energy mix – reducing energy
poverty, providing the means for economic
and social development, and enhancing
industrial competitiveness.
SECTION FOUR END
20 World Coal Institute

SECTION FIVE

POLICY MEASURES

>> Existing policies and mechanisms (such as those of the

Kyoto Protocol) may not provide the necessary
incentives to address energy security issues, and
further action should be considered. >>

To meet energy security concerns and
environmental objectives, a number of
measures may be taken that will allow coal to
fulfil its vital role in our energy future.
>> Policy support for clean and efficient use of
coal in power generation can encourage the
take-up of existing advanced technologies for
low emissions coal-fired electricity production
– providing secure and clean energy. New
incentives and mechanisms may be necessary
to fully achieve this objective.
>> Policy support for technology transfer to
developing countries, through mechanisms
such as the Clean Development Mechanism,
bilateral and multilateral funds such as the
Global Environment Facility and the Prototype
>> Policy support to reduce investment
uncertainty, through good governance,
transparency and long-term planning can
facilitate the immense amounts of investment
needed in the energy sector to meet growing
demand, particularly in developing countries.
>> Policy support can address environmental
concerns in a non-discriminatory manner –
while recognising the benefits that a diverse
and secure energy mix can bring. Clear, long-
term environmental policies provide certainty,
allowing investments to be made in advanced
coal technologies that bring enhanced
environmental performance.
SECTION FIVE END

Carbon Fund.

>> Policy support for research, development and

demonstration into new technologies such as
carbon capture and storage can provide a very
significant opportunity for the major
reductions in emissions that are required by
our modern societies.

ANNEX
ENERGY SECURITY
DRIVERS
>> There are many drivers governing the secure supply
of energy. >>
>> Prices – the provision of affordable energy to
the consumer is dependent on the cost of
generation, transmission and distribution. The
impact of oil shocks on national economies –
such as seen in the 1970s – is well-
documented. The interruption of supply
networks can negatively impact prices and
create economic difficulties for countries
exposed by over-reliance on one energy
source. Sustained price rises and short-term
spikes in oil, gas or electricity can trigger
inflation and recession and this is driving
concerns about recent forecasts of oil prices
rising to US $100 a barrel.
>> Levels of investment required – to meet the
forecast growth in energy demand, the
International Energy Agency has predicted a
need for US$16 trillion in investment. The
availability of that investment – particularly
problematic in many developing countries, and
especially in Africa – will be a significant
factor over coming years. Policy incentives
above and beyond those in place (e.g. Kyoto
mechanism) will be required to ensure a
secure energy mix.
>> Ease of transport – energy must be readily
available, and thus the ease and safety with
which fuels and electricity can be transported
is a key driver for energy security. Oil and gas
can be transported through pipelines and
tankers or LNG vessels. Coal can be readily
transported via ship or rail. Transmission and
Coal: Secure Energy 21
distribution networks must be capable of
carrying electricity to the consumer and able
to handle the load demands placed upon them.
>> Concentration of suppliers – the reliance on
imported fuels from a limited number of
suppliers may increase the risk of adverse
market influence. Where suppliers are
particularly from politically unstable
countries, there may also be an increased risk
of supply disruption.
>> Availability of infrastructure and expertise –
to achieve a diverse energy mix, countries
must have access to different energy sources,
requiring both infrastructure and expertise,
whether in generation technologies, fuel
handling, access to delivery systems such as
pipelines, ports or electricity interconnections
and transmission lines.
>> Diversification of generation capacity –
avoiding over-reliance on one energy source
is a fundamental of energy security, reducing
exposure to supply disruptions. A well-
balanced energy system, comprising various
power generation technologies, and with
suitable capacity, allows the advantages of
each to be maximised, allows prices to remain
reasonably stable and ensures a continuing
supply to the consumer.
22 World Coal Institute

>> International trade & availability of foreign >> Political threats – recent world events have
direct investment – while reducing import highlighted the vulnerability of energy supply
dependence may be seen as a key aspect of systems to political interests and even
energy security, the availability of a variety of terrorist attacks – motivated by economic,
fuels in a well-functioning and geographically religious or other concerns.
diverse market can be equally important. In
developing nations, the availability of foreign >> Industrial safety – incidents at mines, oil and
direct investment to develop energy resources gas platforms and refineries, whether caused
either for domestic use or for export earnings by human error, weather or geological
is important. conditions - may disrupt supply chains and
impact fuel availability.
>> Interconnection of energy systems – the
interconnection of energy systems,
particularly electricity, must also be ANNEX END
considered in terms of security. A limited
market or connection increases the risk of
supply disruption by reducing the options
available to meet demand. The liberalisation of
electricity markets must also be considered –
while reducing costs and increasing efficiency
in the short term, liberalisation may create
situations where overall capacity is reduced,
increasing the risks of supply shortage.

>> Fuel substitution – diversification in the uses

of fuels may also be important for energy
security. Fuel transformation – such as coal to
gas, gas to liquids and coal liquefaction – can
meet demand even when conventional supplies
may be affected.

REFERENCES
>> Argus, 2005 - Coal Daily International 05R-107
June 2005, Argus Media Ltd, London
>> BP, 2001 - Statistical Review of World Energy
BP, London
>> BP, 2005 - Putting Energy in the Spotlight -
Statistical Review of World Energy
BP, London
>> EIA, 2005 - Country Analysis Brief: Brazil
Energy Information Administration
Washington DC
>> Energy Commission Malaysia, 2004 -
Presentation to WCI workshop
May 2004, Beijing
>> IEA, 2003 - World Energy Investment Outlook
2003 Insights
OECD/IEA, Paris
>> IEA, 2004a - World Energy Outlook 2004
OECD/IEA, Paris
>> IEA, 2004b - Prospects for CO2 Capture and
Storage
OECD/IEA, Paris
>> IEA, 2005a - Coal Information 2005
OECD/IEA, Paris
>> IEA, 2005b - Electricity Information 2005
OECD/IEA, Paris
>> IEA, 2005c - Oil Market Report
August 2005, OECD/IEA, Paris
>> IEA, 2005d - Saving Electricity in a Hurry
OECD/IEA, Paris
>> MCR, 2005 - McCloskey’s Coal Reports
107, 116,
The McCloskey Group Ltd, Petersfield
Coal: Secure Energy 23
>> NEA/IEA, 2005 - Projected Costs of
Electricity Generation 2005 Update
OECD/IEA, Paris
>> Optima 2005 - Coal – Issues and Options in
A Carbon Constrained World, Roger Wicks,
Optima, Volume 51, Number 1
February 2005, Anglo American, London.
>> POST, 2004 - The Future of UK Gas Supplies
UK Parliamentary Office of Science &
Technology, London
>> UNDP, 2001 - World Energy Assessment:
Energy & the Challenge of Sustainability
UNDP/UNDESA/ WEC, New York
>> WEC, 2003 - Drivers of the Energy Scene
World Energy Council, London
>> WEC, 2004a - Energy Market Reform: Lessons
Learned & Next Steps
World Energy Council, London
>> WEC, 2004b - Survey of Energy Resources
World Energy Council, London
>> WCI, 2003 - The Role of Coal as an
Energy Source
World Coal Institute, London
>> WCI, 2004 - Clean Coal – Building a Future
through Technology
World Coal Institute, London
>> WPD, 2004 - Long Term Development
Statement
Western Power Distribution (South West)
plc, Bristol
>> WPSC, 2005 - The Frontier Line – A
Transmission Project for the American West
Wyoming Public Service Commission, Cheyenne
24 World Coal Institute
WORLD COAL INSTITUTE
>> The World Coal Institute is the only organisation working
on a global basis on behalf of the coal industry.>>
The World Coal Institute promotes:
>> Coal as a strategic resource, essential for a
modern quality of life, a key contributor to
sustainable development and an essential
element in enhanced energy security.
and represents:
>> A progressive industry, committed to
technological innovation and improved
environmental outcomes within the context
of a balanced and responsible energy mix.
The World Coal Institute is a non-profit,
non-governmental association, funded by coal
enterprises and stakeholders and operated by
a London-based Secretariat.
The objectives of the World Coal Institute
are to:
>> Provide a voice for coal in international
policy discussions on energy and
the environment;
>> Promote the role of clean coal technologies
in improving the environmental performance
of coal;
>> Highlight the valuable role affordable and
abundant coal resources play in a world ever
more concerned with energy security;
>> Improve understanding of the importance
of coal as the single largest source of fuel
for electricity generation, and its vital role
in other industries – including steel
production, cement manufacturing,
chemicals and liquid fuels;
>> Form strategic partnerships and alliances to
coordinate actions and maximise resources
to improve the perception of coal worldwide;
>> Ensure decision-makers and opinion formers
are fully informed of the contribution of coal
to social and economic development;
>> Address misconceptions about coal through
the production and dissemination of
information resources.
The World Coal Institute has strong contacts
and relationships with important international
agencies, including the International Energy
Agency and the World Bank, and has accredited
consultative status with the United Nations.
Membership is open to coal enterprises
worldwide, with member companies
represented at Chief Executive level.
For more information on the activities of the
World Coal Institute, please visit our website:
www.worldcoal.org
 For enquiries on how to become a member of
the WCI, please contact the Secretariat:

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First published in the UK in October 2005

Copyright © 2005 World Coal Institute

26 World Coal Institute

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