Energy Series: Coal

Coal, as we all know, is formed from the decomposition of vegetation. Most coal was formed in the carboniferous period in tropical swamps in the land masses that were close to the equator. They are initially turned into peat by bacteria which eat everything and consume all the oxygen. The bacteria die from the lack of oxygen caused by their own activity and the peat that is left remains so unless it is covered by sediment in an anaerobic environment. As continents drifted and climates changed the peat was driven ever deeper and covered by sediment. With rock crushing it and geothermal heat cooking it the peat turned into coal. The quality of coal is determined by the type of vegetation growing from where it originates, the depth it is buried at, and the pressure and temperature where it is buried as well as the time period that the coal has been forming.

Coal is mined from open pits where the coal strata reaches the surface and from deep mines with shafts driven deep into the earth’s crust. Britain developed the mining techniques that were used in the 18th century and these were further developed in the 19th and 20th centuries with new techniques increasing the production of coal from more previously inaccessible seams. Coal gradually became replaced by oil from the 1860s and natural gas and electricity. To get at coal seams miners have been known to blast away entire mountains. This permanently alters the landscape and can choke up streams with sediment.

Coal is black or brownish and is basically carbon plus some other elements such as sulphur, hydrogen, oxygen and nitrogen. It has always been used as an energy source and was the most important fuel from which electricity was produced. It was developed as a primary source of energy in the industrial revolution and was used for domestic fuel and in industry for smelting and other things.

Coal is the largest source of energy for the production of electricity worldwide and is also the largest producer of carbon dioxide releases. The level of emissions of carbon dioxide in 1999 was 8,666 million tonnes and in 2011 was 14,416 million tonnes. As natural gas has replaced coal for the generation of electricity so the emission levels have reduced and in the first quarter of 2012 the US recorded the lowest carbon dioxide emissions for the first quarter of any year since 1992. The UN climate agency has declared that most of the world’s coal resources should remain underground to avoid catastrophic global warming.

Coal is a global industry and is mined in 50 countries, the biggest being USA, Russia, China and India, and it is used in more than 70. There is an estimated 861 billion tonnes of proven worldwide coal reserves which it is believed is sufficient to last around 112 years at current production rates. Coal is used for the generation of electricity, steel production, manufacturing of cement and also as a liquid fuel. It is also used in the manufacture of paper, alumina refineries and in the pharmaceutical and chemical industries. By products of coal are tar and ammonia gas and among the products made from these are aspirin, dyes, fibres, plastic, soap and solvents.

Approximately 30% of primary energy is supplied through coal and 41% of global electricity generation. Demand for coal is particularly high in countries such as India and China whereas in the US there is a surplus of coal and relatively low demand.

It is possible to transport coal quickly and easily and safely by road, sea and rail. Although most coal is used in the country in which it is mined. It is the transportation that makes up a large proportion of its price. Australia has always been one of the world’s largest producers of coal although Indonesia has recently become the largest exporter.

Coal, however, has a number of health issues such as the waste materials generated in the form of ash and sludge, the acidic rain caused by sulphur released when the coal is burned, the issue of particulates and interference with water tables. Miners can also suffer from the dust generated getting into their lungs and causing pneumoconiosis and early death.

Man has found ways to reduce the environmental impact of coal by cleaning coal by mixing crushed coal with a liquid. Some power generators use flue gas desulpherisation equipment known as scrubbers to reduce the amount of sulphur emitted from their smoke stacks. The smogs in Britain during the fifties and sixties were largely eradicated with the use of cleaner fuel, as was acid rain which had been killing forests not just in the country burning the coal but in those that were downwind of it. Coal is cheap and is used by many of the developing countries to produce the electricity that they require. The smogs in China are a repeat of those in the West in the middle of the last century

Coal can be traded through the use of ETFs (Exchange Traded Funds), coal contracts or directly through purchasing the shares of coal producing companies. Coal futures are designed for consumers and producers of coal in order to manage the risk of price fluctuations. Speculators will also attempt to take advantage of any supply and demand imbalances.

Currently, coal is an essential fuel for the world and many argue that it is needed to back up the use of renewable energy which is a less reliable generation.

Coal futures are traded on the New York Mercantile Exchange (NYMEX) under the symbol QL. Each contract is 1550 tons of coal on a minimum incremental price fluctuation of 1 US cent per ton ($15.50 per contract).

The price of coal is a lot more stable than many other commodities such as oil and gas and has been historically the cheaper priced fuel, hence why it is favoured in countries with high energy intensive industries where they have access to either their own or affordable imported supplies.