coal revival

The following piece is from today's Moneyweek.

Although applying to Wales we may well see that the same economic pressures may lead to some of the Somerset mines reopening - there is still plenty of coal under our feet. So the new S&D may well be hauling coal on to the network in the future.

Another aspect of course is that good steam coal will become even more expensive and that wood burning will become an increasingly attractive option for the steam railways of the future - especially when home grown by the line using it.

It's funny but just a year ago ideas like this were seen as fringe, but now seem to become increasingly part of the mainstream - and are business-led. Economics is a funny old thing - who would have thought a few years ago that economists and businesspeople would become the leading forces for change towards a sustainable society?


It seems that becoming a coal miner may once again become a viable career ambition for the young of Wales. Two mines that have been shut since the mass closures of the 1980s are set to reopen shortly.

The restarting of the Aberpergym and Treforgan mines in South Wales will be funded by the flotation of Energybuild on Aim, which listed yesterday. The mining group is already producing coal from an opencast mine, supplying an RWE-owned power station in the Vale of Glamorgan.

It’s becoming economical again to supply power stations with home-hewed coal, because of a strong surge in coal prices. According to the McCloskey coal consultancy, the price for world coal delivered to the UK was $102 per tonne last month, compared to $74 last July.

Now coal’s always been important. It accounts for a quarter of global energy consumption, compared to nearly 40% for oil. More than half of America’s electricity comes from coal, while a full 80% of China’s does.

But what’s driving the current revival? One factor behind the recent strength in the price has of course been high oil prices - the drive to find cheaper sources of power has been a boon to alternative fuels across the board. And it’s not just about burning coal in power stations. Coal can also be converted into liquid fuel – this technology was used by South Africa under apartheid-era sanctions, but it is now becoming of wider interest. Coal to diesel technology is thought to be cost-competitive at oil prices of around $35 to $40 a barrel. China is pumping $15bn into the industry and aims to replace 10% of its oil imports with coal-liquefied oil by 2013.

There’s also the question of energy security. At the moment, much of our oil comes from parts of the world that are volatile, to put it politely, and in many cases downright hostile. This wouldn’t be a problem if we could somehow replace oil with coal. America has such abundant reserves of the black rock that some have described it as "the Saudi Arabia of coal".

And of course, there’s the huge economic boom in the east, and particularly China, which has driven the price of almost all raw materials higher. Even though China is the world’s biggest coal producer, it is likely to become a net importer within the next couple of years, the government reckons. And India’s government reckons it will be consuming four times as much coal as it does currently by 2031.

Original article by John Stepek at Moneyweek.