The first event was a claim that coal consumption in China is declining at a time of rising electricity production. The second was a report of a major long-distance power-line construction program to shift more power stations inland and away from coastal cities.
Both developments are interesting, and even if they’re not as negative as the anti-coal crusaders would have us believe, they do represent part of a trend which points to big changes in China, just as India embarks on a period of rapid industrialisation.
The long-distance power-line project is part of China’s pollution control program and essentially involves building more power stations inland, connecting them to the main population centres through ultra-high voltage (UHV) lines.
Interestingly, most of the new UHV lines will connect to thermal power stations or those producing a mix of thermal, wind and solar, with the coal to be used coming from local sources because the power stations will be thousands of kilometres inland.
The collapsing coal use claims sit somewhat oddly with the fact that the new UHV power lines will rely heavily on coal, albeit domestic coal, which could be one reason for questioning the coal collapse claims.
One of the believers in the coal-collapse theory is Ross Garnaut, an eminent economist who is also a champion of the climate change lobby.
Whether leaders of the Australian coal-mining industry believe what Garnaut has to say the point about the man is that he is rather good at his job – and when he speaks others listen.
Last week Garnaut was in the headlines for pointing out that China had cut its use of thermal coal by 3% in 2014 even as electricity output rose by 3.8%.
The cause of that mismatch, he said, was greater efficiency in the overall power system and greater use of other power sources such as hydro, solar and wind.
“With coal use for power generation falling by more than 3% and power generation rising by 3.8% there’s a very big gap being filled by other things and that’s China’s anything-but-coal-strategy,” Garnaut told the Australian Financial Review.
The latest numbers, Garnaut said, had caused him to bring forward his estimate for peak Chinese coal use which he had previously said would be in 2020 but might now actually have been in 2013.
Spokesmen for the coal industry dispute what Garnaut has to say, which is not something The Hog proposes to do. He’s been around long enough to know that while the professor might be seen as a champion of the climate lobby he does understand numbers.
Brendan Pearson from the Minerals Council said Garnaut’s estimates did not match those from forecasters such as the International Energy Agency which does not expect Chinese coal use to peak during the current decade with annual consumption continuing to rise by 2.6% a year.
But, rather than attack Garnaut for his position as one of the men behind the now abandoned carbon price scheme of the last Labor government, or as an academic based at the Australian National University where climate change belief is strong, it might be wise to accept that what he says might be correct and plan accordingly.
What that means is that arguing over Chinese coal use and power generation statistics is rather pointless when there are better things to do such as expanding exports of coal to India, a country which is roughly at the same level of industrial development as China was 30 years ago.
In other words, China is rapidly becoming a mature market where fighting over marginal gains might not be worth the effort, especially as the plan to build a vast network of UHV lines means that any increase in coal consumption will be inland and hard for an Australian exporter to reach.
Quite simply that means there is much more to be achieved by developing a major new market, and India should unquestionably be the focus.
Opening India will not be easy. Nothing in that country ever is, but given the determination of new Prime Minister Narendra Modi to repair relations with the US and the rest of the Western world it would seem to be no-brainer that coal-fired power will play a big role in India’s modernisation.
What happened in India last week when Modi met US President Barack Obama, seemed to have very little to do with coal but if you read between the lines, and consider what really is a remarkable change in the relationship between the leaders of both countries then the potential for India becomes somewhat clearer.
China has been good for Australian coal, and will remain a major market for decades, but changes there mean that developing a new growth market is critical and all the signs point to India being that future market.
