PESD researcher Richard K. Morse was invited by the International Energy Agency (IEA) to present PESD analysis of possible US west coast coal exports into the international market.  Morse argued that significant exports from the Powder River Basin area could reach international markets in the coming years, and demonstrated how that would impact the international coal trade in Asia.  Morse's insights will be used to help craft the IEA's 2011 World Energy Outlook, which will focus on coal markets.

The IEA convened a meeting of international coal experts to help guide the research for its flagship publication, the World Energy Outlook, which will focus on coal in 2011.  Morse contributed insights from PESD coal research to the global audience of energy executives, researchers, and policy makers.

Platts Coal Trader International
Vol. 11, Issue 67, Pages 5-6

Australia faces serious challenges over the next 20 years in maintaining its hard-won place as a leading coal exporting country and capturing new market share, according to a research paper published by Stanford University's Program on Energy and Sustainable Development April 5.

Following earlier papers on China, Indonesia and South Africa's coal industries, the latest PESD paper, entitled Australia's Black Coal Industry: Past Achievements and Future Challenges, has been written by coal industry expert Bart Lucarelli.

The paper sketches the development of Australia's export coal industry, from its shaky start in the aftermath of the Second World War amid a glut of cheap oil, to the "phenomenal success story" of today.  The renaissance of Australia's coal industry was assisted by the discovery of vast deposits of high-quality coking coal and thermal coal in Queensland's Bowen Basin and the

Hunter Valley of New South Wales respectively, along with new mining technologies and the economic expansions of Japan, South Korea and Taiwan, Lucarelli said.

During the Australian coal industry's competitive phase - 1987 to 2003 - export coal prices were relatively stable, but the growth rate of Australia's coal industry slowed as Indonesia became a significant coal exporter.  Since 2003, Australia's coal industry has been in a "volatile price phase," as export coking and thermal coal prices have soared to record highs with the entry of China and latterly India into the international seaborne market, while weather events have affected supplies from coal exporting countries.

Looking to the next 20 years, Lucarelli forecasts serious challenges to the preeminence of Australia's export coal industry in the shape of infrastructure constraints, regulatory risks and under-investment in railways and ports by government-owned companies.  "The most pressing and immediate technical challenge to the black coal industry of Australia is the shortage of rail and port infrastructure to support its further growth," said Lucarelli in the research paper.

‘Chronic infrastructure shortages' Governments in Queensland and New South Wales have proposed projects for expanding their rail and port networks to support a significant increase in Australian coal exports, which are forecast to grow to 540 million mt by 2020 from 240 million mt in 2010.  "Part of the reason that chronic infrastructure shortages are likely to persist has to do with the type of technology being implemented - large rail and fixed land port systems," Lucarelli explained.  Large port and rail projects are required for economies of scale, but involve long lead times, high upfront costs and complex regulatory clearances. 

"A second reason for the chronic shortage of infrastructure has been the reliance on state-owned entities to make the necessary investments in the rail and port systems," Lucarelli said. Government-owned rail and port companies tend to be less nimble and entrepreneurial in their decision-making than the private sector, though some port and rail companies have been privatized recently - most notably Queenslandbased rail company QR National and the port of Brisbane.  Regulatory uncertainty stemming from the Australian government's stop-start policy on curbing carbon emissions and its proposed Mineral Resource Rent Tax on coal-mining profits are additional factors clouding the expansion of Australia's coal industry.  "Potential coal mining projects most at risk due to regulatory uncertainty are the massive new steam coal projects planned for the Galilee, Gunnedah and Surat basins," Lucarelli said.  Illustrating the potential for expansion within Australia's coal industry, Lucarelli said that if only two of the advancedstage projects in the Surat Basin in Queensland started production on schedule, they could add 110 million mt/year of thermal coal exports by 2015.  This is almost as much thermal coal as Australia exported for the whole of 2008, at 115 million mt. 

Gang He traveled to Singapore this past month to present for the Energy Studies Institute (ESI) at the National University of Singapore's conference on "Policy Responses to Climate Change and Energy Security Post-Cancun: Implications for the Asia-Pacific Region's Energy Security".  The conference examined policy responses post-Copenhagen with a focus on the Asia-Pacific Region - the world's largest energy consumer.

Among participants from around the world, Gang He presented on the dynamics between energy security and climate change in China.  In addition, PESD Working Paper #88 was featured in the conference and included in ESI Bulletin on energy trends and development.

As Asian coal demand skyrockets, the world's largest coal exporter now faces a number of critical challenges:  infrastructure constraints, emerging carbon policy, resource depletion, and regulatory challenges.  Drawing on a detailed analysis of Australia's coal industry since WWII, Dr. Bart Lucarelli addresses key questions that will shape both the Australian and global coal trade in the coming decade. 

Covering everything from new mining investments to the potentially disruptive emergence of a the coal bed methane sector and Australia's investments in carbon capture and storage, the study offers the most comprehensive, forward-looking analysis of Australia's coal sector available in print.

Speaking to key decision makers from the Department of Energy and the Department of State, Morse analyzed how to address the fact that coal is now both the leading fuel of choice in the developing world (passing oil in 2006) and the leading cause of climate change. 

Morse offered two strategic frameworks for US policy to reduce emissions from coal-fired power: substitution and decoupling. 

Under the substitution strategy, Morse compared the relative costs and carbon mitigation potential of a portfolio of alternative baseload power generation technologies that could be deployed in the developing world, taking into account political and resource constraints in key countries such as China and India. 

Under the decoupling strategy, Morse analyzed the options for carbon capture and storage compared to the mitigation potential of increasing the combustion efficiency of the existing coal fleet.  Drawing on PESD analysis of coal, power, and gas markets in the developing world, PESD put forward pragmatic strategies to US Government officials that could reduce carbon emissions at scale, without waiting on the emergence of a global carbon market.