Coal & Energy Security
Location of the World's Main Fossil Fuel Reserves (billion tonnes of oil equivalent)
Source: BP Statistical Review of World Energy 2011
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- or short-term disruptions. Interruption of energy supplies can cause major financial losses and create havoc in economic centres, as well as potential damage to the health and wellbeing of the population.
Providing a secure supply of energy comprises two areas:
- long-term security or resource availability; and
- 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 now and into the 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.
Energy Security Drivers
There are many drivers governing the secure supply of energy.
Diversification of generation capacity – a well-balanced energy system, comprising various power generation technologies, and with suitable capacity, enables the advantages of each to be maximised, allows prices to remain reasonably stable, and ensures a continuing supply to the consumer.
Prices – the provision of affordable energy to the consumer is dependent on the cost of generation, transmission and distribution. 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.
Levels of investment required – significant investment is needed to meet the forecast growth in energy demand. The availability of that investment – particularly problematic in many developing countries – will be a significant factor over coming years.
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.
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 from politically unstable countries, there may also be an increased risk of supply disruption.
Availability of infrastructure 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.
Interconnection of energy systems – the interconnection of energy systems, particularly electricity, must also be considered in terms of security. A limited market or connection increases the risk of supply disruption by reducing the options available to meet demand.
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.
Political threats – the energy supply system can be vulnerable to disruptions caused by political interests and even terrorist attacks.
Benefits of Coal
Coal has an important role to play in meeting the demand for a secure energy supply. Coal is abundant and widespread. It is present in almost every country in the world with commercial mining taking place in over 50. Coal is the most abundant and economical of fossil fuels. At current production levels coal will be available for at least the next 118 years - compared to 46 years for oil and 59 years for gas. Indigenous coal resources enable economic development and can be transformed to guard against import dependence and price shocks.
Coal is also readily available from a wide variety of sources in a well-supplied worldwide market. It 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. Coal can also 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.
Coal is also an affordable source of energy. Coal prices have historically been lower and more stable than oil and gas prices and it is likely to remain the most affordable fuel for power generation in many developed and industrialising countries for several decades.
Coal-based electricity is well-established and highly reliable. Over 41% of global electricity is currently based on coal. The generation technologies are well-established and technical capacity and human expertise is widespread. Ongoing research activities ensure that this capacity is continually being improved and expanded, facilitating innovation in energy efficiency and environment performance.
Coal can also be used as an alternative to oil. The development of a coal to liquids industry can serve to hedge against oil-related energy security risks. Using domestic coal reserves, or accessing the relatively stable international coal market, can allow countries to minimise their exposure to oil price volatility while providing the liquid fuels needed for economic growth.