Is coal the only way to deal with energy poverty in developing economies?

As the world moves to combat climate change, it’s increasingly doubtful that coal will continue to be a viable energy source, because of its high greenhouse gas emissions. But coal played a vital role in the Industrial Revolution and continues to fuel some of the world’s largest economies. This series looks at coal’s past, present and uncertain future.

The availability of efficient and reliable energy for industrial, agricultural and household use is critical for productivity growth and improvement in human wellbeing. But many people across the planet live in a state of energy poverty.

The energy-poor are people living without electricity services and clean energy – for cooking, lighting, heating and other daily needs. According to the World Bank, one-third of the world’s economies have severe energy crises and about 1.1 billion people lack access to electricity.

A large population in developing economies, particularly in Africa, relies on traditional biomass sources of energy that themselves cause problems, such as severe deforestation and carbon pollution. What’s more, many inhabitants of these countries face power outages of up to 20 hours a day.

An economical and sustainable energy source for deprived populations is clearly needed.

Enter coal

Coal is a relatively cheap, abundant and well-established source of energy, but it’s also a major source of carbon pollution. Hence the controversy about whether burning coal can end energy poverty in the coming decades.

In the past, coal has occupied a significant share in the energy mix of developing economies, but it has been under attack due to its emissions, which include sulphur dioxide, nitrous oxide and carbon dioxide.

Amid calls for the use of efficient and clean technologies for electricity generation, the world’s largest producer and consumer of coal has already embarked on dynamic pathways to achieve energy efficiency and sustainability and combat carbon emissions. China’s initiatives for boosting the use of renewable energy sources, cutting the use of high-ash coal and resuming import tariffs on coal have reshaped the global energy mix landscape.

Likewise, other developing countries including India are changing their energy mix by shifting their focus to renewables to reduce their reliance on coal-based energy. Although more than 50% of India’s new electricity generation is expected to be met by renewables, the country still needs to rely on coal-based generation to meet expanding demand.

The World Bank has already paused funding for new coal power generation except for exceptional cases, leaving a question mark over coal as a cure for global energy poverty.

But the slowdown in world coal demand is partly due to China’s structural shift away from construction and export-led manufacturing, which has significantly reduced coal prices. This has, in turn, slashed revenues of many exporting countries. And the collapse in prices is resulting in the closure of many mining businesses as companies are unable to recover production costs.

Still, energy-poor developing economies need coal as a cheap and readily available resource to provide electricity for their growing populations unless they find a way to completely replace it with alternative renewable sources.

Current and future trends

Many developing economies are facing a huge shortfall in electricity and are expanding their energy production capacity. This situation is likely to intensify as the world population increases. By the end of 2030, developing countries will need about 950 terawatt-hours electricity to meet their energy needs.

Consider India, which has the second-largest population in the world. It accounts for only 6% of global energy consumption and has 240 million people without access to electricity. With another 315 million Indians expected to move to urban areas in the next few decades, the country’s energy demand is likely to surge in the coming years.

Neighbouring Pakistan is facing a serious energy crisis and many people in that country are spending more than 12 hours each day without electricity. The new Pak-China economic corridor has created an opportunity for the country to use indigenous Thar coal reserves to generate 6,600 megawatts (MW) power, expanding its installed capacity of 24,829 MW by 25%.

According to global statistics, coal contributed to 39% of the world’s energy mix in 2014. The World Coal Association claims that about 1 billion people around the globe have received electricity from coal-powered energy generation. And that the industry has created 7 million jobs worldwide.

Many developing economies, including China and India, are connecting millions of their inhabitants to coal-based electricity systems. Over the last two decades, China has been able to electrify about 700 million households through coal-fired energy production.

India is still meeting the majority of its energy demand from coal-fired electricity generation and was among the world’s three largest coal importers in 2015.

Prospects of coal energy

Energy poverty is a major human and environmental crisis. A balanced energy mix with a high degree of physical safety, low environmental hazards and sustainable supply prospects is essential for poverty alleviation and energy security.

But, in the face of competing alternative energy sources, the role of the coal industry in energy poverty alleviation has become even more challenging.

While renewable energy sources are in their infancy and facing many uncertainties, developing economies have a long way to go before they can completely abandon fossil fuel energy sources. Indeed, these countries need major structural reforms and risk-tolerant investment capital in the renewable sector if the twin goals of reduced carbon emissions and the elimination of energy poverty are to be achieved.

All that means the coal industry will potentially remain a major part of the world’s energy mix. But it needs drastic measures to produce clean and efficient energy if it is to play a role in energy security and poverty alleviation without the adverse environmental effects that threaten to introduce other risks to water, global climate and food security.

The author would like to thank Associate Professor John Steen and Dr Jo-Anne Everingham for their valuable comments on this article.

This is the third article in our series on the past, present and future of coal. Look out for others over the next week or two.