There are many unpleasant four-letter words. Not so long ago, coal was one of them. Now with concerns over growing dependency on Russian gas combined with escalating gas prices, coal is no longer the dirty word it seemed to be during the years following the dash for gas.

A recent survey carried out by PricewaterhouseCoopers of 116 senior executives from leading utilities in 43 countries revealed that security of supply was the main concern – as it has been for the last two years. The survey called “The Big Leap: Utilities Global Survey 2006” also revealed that coal now ranks alongside gas as the fuel expected to make the biggest contribution to meeting demand growth in the next five years.

While security of supply in Europe has been a major factor in the return of ‘King coal’, price has also played a part. Milton Cateline, chief executive of the World Coal Institute noted: “The data appears to show that while gas prices have risen alarmingly, coal prices peaked at the end of 2004 and have probably declined in real terms since then.”

The major equipment manufacturers are also echoing this prediction of a global shift back towards coal. Alstom recently announced that it was planning to capitalise on what it sees as an expanding coal fired power plant market. It predicts that coal fired power stations will account for 35-40 per cent of the world market for power stations of all types in the next five years. It also estimates that 600 GW of new generating capacity will be ordered worldwide in the next five years with 50 per cent of the orders for coal plant likely to come from China. Further, Alstom said that it expected that steam turbines for coal fired plant would account for half of all its new orders over the next five years.

In Europe it is harder to predict which countries will redress the coal to gas balance with a move to coal. Certainly countries like Germany that have indigenous coal will do so, as will those that are concerned about security of supply through fuel diversity. Those planning to substantially increase their installed base of renewables may also opt for additional coal fired generation to bolster their baseload capacity.

One issue, certainly in Europe, that may impact the uptake of coal is the ‘cost of polluting’ and the Emission Trading Scheme (ETS). At the end of April (28th), emissions trade prices suffered a heavy fall. CO2 emission futures for December 2006 delivery fell to a record low of €14 per tonne on the European Climate Exchange. This was a fall of 55 per cent, from a record high of €31 per tonne reached in the previous week.

The Big Leap report noted that uncertainties around the second phase of the ETS had not caused companies to postpone investment decisions. It said that the ETS had in fact spurred more investment in renewables and put greater focus on clean coal. Catelin concurred: “I’m not sure that the Emission Trading Scheme does actually impact on plans for coal plant. It’s too early to say. The ETS has been in place for a year and it does not seem to have had any impact on plans to build new coal plant. But what it does do, is create uncertainty for generators wanting to build something new, for example a coal plant with carbon capture. The ETS in Europe is short term and intuitively, you would think that this could make investors doubt the wisdom of installing carbon capture systems. For the investment required, investors need long term policies. It will be tragic if governments don’t recognize this since carbon capture and storage could be the most important tool in combating man-made CO2 emissions from the next decade onwards.”

RWE hinted at the need for long term stable policies in a recent announcement of plans to build a “CO2-free” coal fired plant. The company said: “Apart from successful technical feasibility, this integrated project requires the necessary political framework conditions and authorizations…”

With the large sums of capital at stake, it is understandable. The estimated total investment for the power plant and the transport and storage of CO2 is expected to be about €1 billion. The plant will have an expected gross output of about 450 MW and could be commissioned in 2014 if the planning and implementation proceed smoothly.

If built, it will be the first large-scale power plant with integrated coal gasification, CO2 separation and CO2 storage in Europe – a landmark project heralding the return of the ‘King’ and a new meaning for a certain four-letter word.

Junior Isles
Publisher & Editorial Director