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The future of coal requires serious debate, not slogans

To whom it may concern

This summer Straterra will be producing a number of opinion pieces covering aspects of the debate on minerals and mining in New Zealand. We do so to bring facts and evidence into this important debate for New Zealand.

Please find attached the first of our media releases from Chris Baker, CEO, Straterra Inc.

The future of coal requires serious debate, not slogans


Chris Baker, CEO, Straterra.


Some New Zealanders are calling for an immediate ban on all new coal mines. We are told this is necessary to save the world’s climate because coal is the most emissions-intensive fossil fuel.

They are fine words but take no account of the reality of coal use in New Zealand, or globally.

I say “coal use” because the criticism of banks that lend money to coal miners is misplaced. The fact is that coal production is demand driven. Coal miners don’t go out and mine because they feel like it but because there is demand for coal – demand driven globally by developing countries wanting a reasonable standard of living, and locally by businesses working hard to succeed in a competitive world.

Of the 2.8 million tonnes of New Zealand coal consumed domestically last year, 72% was used in industrial processes, and, to a lesser extent, in electricity generation.

Coal is used in steel and cement-making; in dairy, meat, fish, and other food processing; hothouse horticulture; in wool, timber and wood processing; and to heat schools and hospitals.

As a source of process heat, coal in the South Island, and goal and gas in the North Island, cost roughly one-third the price of electricity – that is what drives the demand.

New Zealanders will wish to think carefully about calls to ban all new coal mining in New Zealand, or for our country to unilaterally increase the price of carbon without reference to global carbon prices.

If either course were followed, New Zealand would end up importing coal, if that were permitted or competitive, and, if not, would import more food, often from countries that use coal or gas in food production and do not have a price on carbon.

Certainly, New Zealand should move towards less emissions-intensive energy sources. We all want a lower-carbon economy. But to achieve that will require technological advances, further cost reductions, and much increased commitment globally. As matters stand, global progress towards reducing emissions has been woeful, despite efforts being made at a local level.

In New Zealand, liquid petroleum gas (LPG), light fuel oil, and wood chips or pellets, are still more expensive than coal as a heat source, although prices have been coming down - they are now less than that of electricity.

NZ Steel has been trialling 9000 tonnes of biomass-sourced carbon for steel-making, noting that 800,000 tonnes of coal were consumed at Glenbrook in 2012. Again, it will take time to assess whether or not this product could make significant inroads into steel-making in New Zealand.

Genesis Energy’s electricity generation plant at Huntly has been increasingly using gas; 355 gigawatt-hours were generated from coal in the three months to 30 September 2013, down 46% from the same quarter a year earlier. One of Huntly’s four generators has been closed.

West Coast-based Taylor Coal has developed an additive to promote cleaner and more efficient burning of coal in boilers, as part of its customer focus.

Even with these developments, there is an ongoing role for coal, and this can be exercised responsibly. Over the last few years CRL Energy and other research providers have been exploring co-generation of industrial heat energy using coal and biomass, to achieve the twin goals of cost-effectiveness, and emissions reductions.

These developments at home are consistent with overseas trends.

Globally, the International Energy Agency reports that coal provides 40% of electricity generation capacity, and this is predicted by to drop to one-third by 2035. Many argue the “world is moving away from fossil fuels”, and certainly we are seeing the welcome development of new, lower-carbon and more efficient technologies.

But to argue that the transition is happening now and that New Zealand should stop mining coal denies the facts. Fossil fuels, including coal, will not be disappearing any time soon; far from it.

Green Party co-leader Dr Russel Norman pointed out with glee recently on the TV3 programme, The Vote, IEA data showing that renewables were the fastest growing source of new electricity generation over the last 10 years. What he didn’t say was that fossil fuels provided 60% of new generation over that same period.

With Japan having closed all 50 of its nuclear reactors, after the Fukishima disaster, and with Europe broadly following a similar path, coal imports into these parts of the world are increasing. The UK is re-opening coal mines. According to US energy expert Dr Scott Tinker, 600 million people in India are waiting to be connected to the national grid, and that the additional and very necessary energy supply will be produced with coal.

For now, coal has a vital role to play as poorer countries improve their economic conditions. Try telling China, the world’s largest greenhouse gas emitter, to stop using coal. This is a simple reality, worldwide and in New Zealand, and will remain so until new and better technologies are available.

With 22 operating coal mines around the country, New Zealand is well placed to supply to overseas and local markets. Our coal producers and researchers deserve to be supported, as an important part of New Zealand’s strategies on energy, business growth and economic development. On climate change, we need to do our share but let’s be sensible about it and not flagellate ourselves.
ends

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