All the coal in China: our top ten charts?

China's coal industry

Chinese coal provides 15% of the world’s energy, equivalent to 4 Saudi Arabia’s worth of oil. Global energy markets may become 10% under-supplied if this output plateaus per our ‘net zero’ scenario. Alternatively, might China ramp its coal to cure energy shortages, especially as Europe bids harder for renewables and LNG post-Russia? Today’s note presents our ‘top ten’ charts on China’s opaque coal industry.

Coal miners: a screen of Western companies?

In normal times, thermal coal producers have debatable ESG credentials, owing to being the highest carbon fossil fuel, and 2-3x higher CO2 intensity per MWH of useful energy than natural gas.

However, in 2022-25, we could be in a market where deployment of important energy transition technologies is being held back by energy shortages, which pull on the demand for thermal coal; and also metals shortages, which in turn pull on the demand for metallurgical coal. We might not go so far as to call coal an ESG investment.

Nevertheless, this data-file aims to screen 15 Western coal producers. This group produces around 500MTpa of thermal coal and 100MTpa of metallurgical coal from the US, Canada, Europe and Australia. Most companies have been cutting capacity and phasing back activity. In turn, this creates potential to ramp back c100MTpa of production amidst very deep energy shortages, equivalent to c400TWH of useful energy.

The screen highlights each company, its size, concentrated to coal, its asset base and other details around its longer-term strategy.

Energy return on energy invested?

Energy return on energy invested is a horrible metric: calculated differently in almost every study on the topic, and fairly difficult to delimit conceptually.

Despite this, we have made an attempt to quantify EROEI, apples-to-apples, across our own different models, calculating the energy that can be derived, over a 30-year time horizon, per unit of full-cycle energy inputs, on a net basis after efficiency losses.

Global average EROEI is around 30x. Sources with EROEI above average are hydro, nuclear, natural gas and coal. Sources with middling EROEIs of 10-20x are solar, wind and LNG. Sources with weaker EROEIs are oil products, green hydrogen and some biofuels.

European Natural Gas Demand Model

This model estimates European gas demand in the 2020s, as a function of a dozen input assumptions, which you can flex. They include: renewables’ growth, the rise of electric vehicles, the rise of heat pumps, the phase out of coal and nuclear, industrial activity, efficiency gains, LNG-transport fuel and hydrogen.

Our conclusion is that European gas demand would be likely grow at its fastest pace since the early-2000s, largely driven by the electricity sector, if there were sufficient supplies. However, as indigenous production wanes, there is a risk of persistent gas shortages, and prices will need to rise to the point of demand destruction.

The data-file also contains granular data, decomposing gas demand across 8 major categories, plus 13 industrial segments, going back to 1990 (albeit some of the latest data-points are lagged); as well as 15 different supply sources, with monthly data going back a decade (chart below).

Please download the model to run your own scenarios…

Global Energy Markets: 1750 to 2100

This model breaks down 2050 and 2100’s global energy market, based on a dozen core input assumptions.

You can ‘flex’ these assumptions, to see how it will affect future oil, coal and gas demand, as well as global carbon emissions.

Annual data are provided back to 1750 to contextualize the energy transition relative to prior transitions in history (chart below).

We are positive on renewables, but fossil fuels retain a central role, particularly natural gas, which could ‘treble’ in our base case.

A fully decarbonized energy market is possible by 2050, achieved via game-changing technologies that feature in our research.

Coal mining: the economics?

This data-file aims to approximate the economics of a new coal mine, using simple rules of thumb and data from past projects, capex (in $/Tpa) and opex (in $/ton).

Coal is ridiculously cheap, providing thermal energy at around 1c/kWh while also generating a 10% IRR on the new investment. 1 MWH pa of new energy can be produced for an up-front investment of around $10.

A high CO2 intensity of 0.55kg/kWh is also quantified in the data-file, including combustion emissions, methane leaks, diesel fuel and electricity usage at the mine.

Please download the data-file to stress test the economics and sensitivity to coal prices in $/ton.

US CCS: market sizing?

This data-file aims to bound the potential market-size for CCS in the US, which is most likely around 500MTpa.

Our bottom up calculations look industry-by-industry, and conclude that c20% of industrial and power-sector emissions could be captured, across coal-power, gas-power, ethanol, steel, cement, chemicals and smaller manufacturing.

To put this in perspective, we also quantified how many million tons of oil and gas have been extracted out of subsurface reservoirs in the US over the past 40-years, across different resource types.

US CO2 emissions by industrial facility size?

This data-file has aggregated the annual CO2 emissions from 2,500 facilities, in eight industries, which explain one-third of all US CO2 emissions. Our aim is to quantify the emissions by facility, to understand whether CCS can ‘take the edge off’?

Our conclusions are that many coal plants may be ‘too large’ to decarbonize with CCS, whereas many ethanol plants are likely too small. The best candidates are c100 specific facilities in the cement,  steel and ammonia industries, which are the “right size”, have  concentrated CO2 emissions and explain around 2% of all US CO2 emissions.

Global coal production: a supply outlook?

Our models of the energy transition ease coal production back from 8GTpa in 2019 to 5GTpa by 2030, in the interests of decarbonization. However, this model explores what is required to meet this ambition.

Around 1GTpa of new coal projects are in planning or under construction, of which half are in China. Thus to hit our numbers, an additional 70bcfd of gas must be supplied to China by 2030, in order that it can actually turn off 1.5GTpa of coal capacity.

In the meantime, we are concerned about coal shortages, because one-third of all global coal production comes from underground mines, i.e., confined and hard-to-ventilate spaces containing 300-1,500 workers per MTpa of output, which may be disrupted by COVID.

Please download the data-file to stress-test our assumptions around mine adds, decline rates, phase-downs and coal-to-gas switching.

The Top Technologies in Energy

Top Technologies to Disrupt Energy

What are the top technologies to transform the global energy industry and the world? This data-file of our Top Technologies to disrupt energy, summarizes where we have conducted differentiated analysis, across c100 technologies and almost 1,000 companies (and counting).

For each technology, we summarize the opportunity in two-lines. Then we score its economic impact, its technical maturity (TRL), and the depth of our work to-date. The output is a ranking of the top technologies, by category; and a “cost curve” for the total costs to decarbonize global energy.

To read more about our outlook on these top technologies to disrupt energy, please see our article here.

Copyright: Thunder Said Energy, 2022.