At TransportBlog, we focus on transport and urban issues. However, other topics pop up occasionally. Energy and electricity have always had a link to transport – oil, one of the world’s most versatile energy sources, is mainly turned into petrol or diesel, but it can also be used to create electricity (NZ did this in a small way until the late ’70s). Electricity powers our trains, and could also be important for light rail and electric vehicles in the future.

At an energy conference a few years back, I heard a climate change expert talk about coal’s importance to the world power supply, and that China was opening a new coal power plant every week. If things kept going as they were, the world would have ‘locked in’ the rest of its carbon budget within five years.

What’s a “carbon budget”? This is the amount of carbon dioxide and other greenhouse gases which can be burnt before the world is set down a path of 2°C global warming. We’re not at that point yet, and it will be quite a few years before we reach it – but the problem is that we keep burning every year, and we really need to cut down on those emissions before we reach the end point.

The other problem is that many of the things that generate emissions are long lasting. A new coal plant is going to be around for decades, say 30-50 years. This is the thing about ‘locking in’ the carbon budget – investment decisions today will affect the level of emissions for a long time to come. Sure, you can build the coal plant and then shut it down after ten years, but that’s terribly expensive: the owner would never get a return in that time. Or, as an everyday example of these investment decisions with long-term implications, cars that roll off the assembly line today will be on the roads for 20+ years before they’re thrown on the scrapheap.

So I’m pretty happy to see that coal power is looking much shakier. I’ll start with a global view, then look at China, Australia and New Zealand.

The World

It seems odd to us here in New Zealand, but coal still supplies almost half the world’s electricity. It’s also the highest-emissions way of generating power – natural gas is an improvement, although still quite emissions intensive.

Globally, coal consumption has been growing over the last 50 years, as shown in the graph below:

Source: BP Statistical Review of World Energy 2016

As the graph shows, coal demand has been growing much more slowly in the last few years, and even fell in 2015. The graph also shows the importance of China to what happens globally: this one country now accounts for half the world’s coal consumption, and pretty much all the consumption growth in the last decade.

Besides China, you’ve got the US (which grew until 2007 and then started dropping – part of this will be economic factors), the other OECD countries (demand falling slowly in the last few years), and the rest of the world. The ‘rest of world’ is growing quickly, mainly due to developing countries building new power plants. Essentially, coal consumption is shifting from the developed countries to the developing countries, which is likely to continue.

There’s an economic development question which has to be balanced with climate goals: is it fair to deny developing countries access to a very cheap energy source, when they don’t have the money to pay for more expensive energy and it’s the developed world which has made up the lion’s share of emissions to this point, and has much higher emissions per capita? It’s generally agreed that this isn’t fair, so it does get taken into account in world climate talks.

So where does coal head from here? Was that 2015 dip the start of a long-term decline, or does coal consumption stay flat, or will it start growing again? From a CNBC article:

[The International Energy Agency] expects worldwide growth in coal consumption to average just 0.6 percent between 2015 and 2021 as developed countries continue to abandon the energy source and China’s consumption plateaus. That will offset growing demand among emerging nations, particularly in India and Southeast Asia.

Whether coal demand returns to 2014 levels or falls short of the mark will largely depend on consumption in China, which accounts for about half of the world’s appetite… coal demand is falling in China, and the IEA believes it will continue to dip through 2018 before entering an upward trend through 2021.

The Energy Information Administration, part of the US government (not to be confused with the IEA!), projects world coal demand to grow by 0.6% per year through to 2040. However, this projection is almost a year old, so it may not reflect the latest changes in the coal market. Again, China is the big factor, and it seems to have changed tack in the last year.


In the last year or so, China has made some big announcements on coal. It cancelled 103 plants which were planned or under construction, and won’t approve any new plants entirely until the start of 2018. However, another article gives some useful context on the issue: China’s aim is to have 1,100 gigawatts of coal capacity by 2020, compared with 920 at present – but there were so many power plants being built or planned that it would have overshot the 1,100 mark substantially. Already, China’s power plants are running at a very low utilisation level, only generating about 40% of their maximum capacity. There’s already an oversupply in many parts of the country, which would have been made even worse if the new plants came online.

Still, cancelling power plants once they’re under construction is a big deal. As noted above, it’s an expensive way to do things. China is looking for cleaner energy alternatives – it now has more wind and solar capacity than any other country – and also pledged, under the Paris Agreement, that its overall emissions would peak by 2030. China’s commitment on this, as a developing country, makes New Zealand’s ‘commitment’ look pretty weak by comparison.

Although it’s early days, China has certainly shifted its stance on coal, and committed to being a climate leader. Coal is in the black books not just for its greenhouse gas emissions, but also because it’s so polluting – with terrible effects on the air quality in many Chinese cities.


The Herald ran a great piece recently looking at the Australian situation:

A couple weeks ago Prime Minister Malcolm Turnbull announced that his government is planning to subsidise the construction of clean coal power stations to make electricity more secure and affordable… However, the power generation companies who Turnbull would be relying on to build these new coal powered generators appear to want nothing to do with it.

Clean coal power stations are hugely expensive to build and they need to operate for 30 years to produce a return. That comes with a political and technological risk that power companies aren’t prepared to carry… energy companies don’t want to build new power stations when there is a risk of them becoming stranded assets that don’t produce a return and no one wants to buy.

I’m appalled that the Australian government is wanting to subsidise new coal plants – and ‘clean coal’ is a very misleading term at that. Still, it seems like the Australian power companies don’t want to touch this deal. The ‘political’ risk is that at some point, maybe not too far away, some stronger climate change agreements will get signed, and those coal plants will face heavy emissions costs. The ‘technological’ risk is that renewables, solar and wind, keep getting cheaper. This could leave coal unable to compete.

Here’s an interview with a power company CEO:

Well, I think CS Energy certainly has no intention of building any coal-fired power plants, ultra-centre super-critical or not. And it would surprise me greatly if there was any more coal-fired technology was built in Australia.

I think when you look at the risk of the investment, you’re talking about $2 billion-plus investment up-front. These assets have a plant life of roughly 40 years, and so it’s a very, very big long-term bet. So given the current uncertainty, I think it would be a very courageous board that would invest in coal-fired technology in Australia.

New Zealand

Coal has never made up more than 10% of our power supply, and it’s become less important in recent years:

Coal, oil and gas plants all fall under the category of ‘thermal’ generation, and with a bit of effort you can convert from one to the other. As shown in the graph, NZ was no longer burning oil for electricity after the late ’70s, and most of our thermal electricity comes from gas.

More than 80% of NZ’s total electricity now comes from renewable sources, and that’s been trending upwards slowly. The government has a goal in place of getting to 90% by 2025 – hardly ambitious – and we have a good chance of getting there. Over the last few years, coal and gas plants have been closing, or running less frequently.

Huntly is the only major power plant which still uses coal. It has steam turbines, which can run on either coal or gas, but generally Huntly runs them on coal. Two of the four coal/ gas units closed, in 2012 and 2015. This dropped Huntly’s capacity from 1,450 megawatts to 950. There was talk in 2015 about closing the last two coal/ gas units – leaving Huntly as a gas-only plant, and essentially ending large-scale coal power generation in NZ – but a deal was signed in 2016 to keep them open until 2022.

The Otahuhu power station, actually in Otara, has closed and been sold as a long-term development site. The 400 megawatts of gas generation there had been built in stages from 1968, with the last stage in 2000 – it only operated (intermittently) for 15 years. The smaller Southdown power station also closed in 2015 – 114 megawatts, with part of that capacity only added in 2007.

I expect that’s as far as we get for a while. The current big question mark in NZ electricity is what happens with Tiwai Point, the aluminium smelter near Invercargill. There’s been years of talk about it potentially closing, or reducing its operations. And this single place uses a whopping 13% of NZ’s electricity, around the same as every household in Auckland combined. Even without Tiwai Point, power demand has been quite flat, rather than growing as it was up until 2007. There’s plenty of renewable generation consented and ready to build, but the power companies won’t build it until the demand and prices are there to support it. So for now, we’re stuck with what we’ve got.

The death of coal?

This is what the death of coal looks like. It’s not a sudden fall to zero worldwide coal consumption. It’s consumption turning flat after decades of growth. There are still coal power plants in almost every country, but older plants are being shut down early and not replaced. New plants aren’t being built, at least not in the developed countries – because in a future where climate change is one of the only certainties, coal is a terrible long-term investment.

And yet we don’t have globally binding climate agreements, or a clear way to determine who will pay what for their emissions. We’ve got developing countries, keen to improve their living standards and bring reliable electricity to their citizens. Coal is cheap, and getting cheaper now that developed countries are turning their backs on it. Poorer countries are likely to still find coal attractive – but for how long, and how fast will they be able to transition to other power sources?

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  1. The interesting thing is that people are moving on from coal to something better. The world didn’t ‘run out’ of it like all those Values Party numpties used to claim in the 1970’s. Expect the same thing to happen with oil, although it will take longer. The Saudi oil minister Sheik Yamani once said the stone age didn’t end because they ran out of stones.

    1. Oil will take longer, and the change won’t be quite as stark. The world has enough coal for hundreds of years’ supply, scattered widely around the world, albeit more common in some countries than others. But coal is a much lower value fuel: high emissions and not the slightest bit versatile. Oil is concentrated in a few countries, and while we’re not running out, I don’t think anyone would say that there’s hundreds of years’ supply, or not without exorbitant cost. Oil is cleaner, and much more versatile. That’s why it’s the dominant energy source for transport.

    2. Oil is also used in the creation of plastics (although there is some interesting alternatives involving E. Coli)

  2. With China they are also converting existing coal plants into Gen III+ Pebble Bed Reactor Nuke Plants that will keep power production up but drop emissions at the same time. Also China (along with Canada and the UK) are working their way through with regulators to bring Nuclear Gen IVs online by mid 2020’s (Gen IVs especially Molten Salt kind the Americans first built in the 60s can not melt down). So at least China is attacking the coal issue pretty much head on.

    Now while we can get coal out of power production that leaves us with the issue of coking coal for steel production that is pretty emission intensive itself. Steel will always be needed the catch is how do we lower emissions from it. Whether it be melting down old steel to blend it with virgin steel or just straight out virgin steel high amounts of heat (and electricity) is needed. Nothing 700C of thermal heat and 500MW of power a reactor couldnt provide but I digest.

    I believe Vietnam has shunned nuclear and is now accelerating coal fired plants in the nuke’s place. Not the most desirable outcome going from a clean source to an outright dirty one for a fast growing nation.

    1. “high amounts of heat (and electricity) is needed. Nothing 700C of thermal heat and 500MW of power a reactor couldnt provide but I digest.”

      Yes, we all digest…but that aside, 700C of thermal and 500MW of power just won’t do the job. The primary role of coal in the steelmaking (strictly ironmaking) process is as a source of carbon for displacement reactions whereby iron oxide is reduced to iron and carbon is oxidised to carbon monoxide (and then separately oxidised to carbon dioxide).

        1. Recycling steel is generally done with an arc furnace – 100% electric….and steel is heavily recycled.

        2. There are 2 streams that steel goes to; those that can be recycled relatively quickly (cars, appliances etc) and those that are tied up for a much longer time (buildings, bridges etc). Some steel (such as rebar) is uneconomic to recover and recycle. The net result is that there is considerable demand for new steel in spite of the proportion of old steel that is recycled. That new steel requires a carbon source and coal is overwhelmingly the source of that carbon.

    2. I’m glad that somebody mentioned the pebble bed reactor tech. Developed by Germany, then purchased by China. A very promising technology (as are Thorium Bed Reactors).

      Also worth mentioning is Combined Cycle power generation. A standard (single cycle) plant may have ~33% efficiency, where a combined cycle has 50-60%.

      In April last year, the General Electric 9HA to be used by Électricité de France in Bouchain was certified by Guinness World Records as the worlds most efficient combined cycle power plant at 62.22%. The stated efficiency is 41.5% simple cycle efficiency and 61.4% in combined cycle mode. These are big numbers. Whilst it would be best for base-load capacity to be non-fossil fueled, changing to more efficient designs in the interim is something that should be encouraged.

      Whilst you could retrofit older coal plants, converting them to integrated gasification combined cycle plants, this only gives about 43% efficiency and is pretty damn expensive with many reports of failing to live up to the hype…

  3. Do we have a responsibility in the OECD to help fund renewable power generation in poorer countries? I think yes. NZ should aim to help make the pacific 100% renewable by 2030. I can’t imagine it would be very expensive considering countries such as Tokelau is 100% renewable. The EU itself has helped fund renewable energy in Niue, why shouldn’t we? It is all well and good to say NZ is small and cannot make a difference, but we live in the same world as everybody else, we will all die if we destroy our planet

    1. Fiji had a recent plan for a hydro dam that would have provided all of Viti Levu’s power (home to most of the population). However it fell over in government corruption and tribal politics, so they continue to import and burn diesel for electricity generation.

    2. New Zealand has helped nonrenewable for countries overseas in the past, (and I am personally proud to have worked at GENZL back in the 1990’s).

      At the time, NZ expertise and money helped build a geothermal plant (Ulumbu) in the Indonesian island of Flores and elsewhere. The island was burning hundreds of tonnes of diesel per month, but a few wells and small turbines replaces that with ‘always on’ power source which means far less oil is being burnt despite growing demand..

      I wish NZ helped more islands that rely on diesel generators (including Chathams and smaller Pacific Islands), used Wind, Solar and Geothermal more.

    3. A friend of mine has been going out to places like Niue and Kiribati and installing 100% solar PV farms, so that they don’t have to import any more diesel for the generators. Working like a dream. Then he went to Nicaragua and did the same there. The future is solar my friends….

    1. I think you are right, although I believe this is also the amount they use most of the time.

      Further on Tiwai, if it were to close getting the power to where the biggest demand is and where the population growth is (Golden triangle) would not necessarily be easy, as the line losses would be huge coming all the way from Manapouri. I suspect we might see another industrial user look to set up in the lower South Island to make use of the cheap power.

  4. The missing piece in the commentary about coal use in NZ is the recent increase (to pre-GFC levels) of coal use in industry. Industry, primarily Dairy, consumes close to 40% of NZ’s coal consumption and has been increasing post-GFC. Where Australian power generators are concerned about stranded coal assets, dairy processors (and strangely Canterbury DHB) have invested heavily in new coal boilers, locking in coal as the fuel of choice for the dairy industry for the next 30 years.

    1. I think the boom in South Island dairy farming is a significant driver of this. The North Island plants run on gas as it is piped across the NI, whereas there is no large scale piped gas in the South Island so coal is the way they for their dryers.

      1. Te Awamutu, Hautapu and Waitoa still coal fired AFAIK. Fonterra was looking at opening their own mine in the Waikato to supply them a couple of years back

    2. In terms of some of their decisions (or non-decisions) then its time we as a country had a tough conversation about the dairy industry and the environmental impact they are having on our air and waterways. Is it all worth it.

      I don’t expect it to happen under National given traditional voter base. But it has to happen.

      1. I don’t think targeting one industry is particularly helpful. I agree we should be regulating atmospheric and water pollution much more than we do now, but that should be across the board not targeted towards one industry.

    3. Archie – re the dairy processors locking in coal-powered boilers for the next 30 years – they’re going to be well pissed off if people stop digging coal out of the ground then, aren’t they? Our coal digging industry is pretty much over, isn’t it?

  5. I would question your statement that Huntly “generally runs on coal”. It is my understanding that they on run on coal only a few days per year to test that it still is able. The coal is in case there is a break in the gas line from Taranaki. Most of NZ’s power generated from coal is from Fonterra Co-Gen plants, mainly in the South Island. These plants have little alternative as dairy requires heaps of steam.

    1. And Huntly’s going to need to go on running on gas for the foreseeable future. Use of wind power in particular creates a big requirement for spinning reserve, to be used at minimal notice when the wind drops. In the long term future the answer may be batteries, but we’re a long way from that yet.

      I note the original article doesn’t mention Germany. But that case is instructive. Stuff up your energy policies thoroughly enough and even a rich country can end up burning a lot of lignite.

      1. “In the long term future the answer may be batteries, but we’re a long way from that yet.”

        Long way from battery storage? Really?

        South Australia is a mere 100 days away from having 100 MWHr of battery storage from Tesla installed for a “pack level price” of $250USD per kWhr installed.

        All they have to do is sign the contract, and if its not installed 100 days later its free, so says Elon Musk, CEO of Telsa.

        I think with a few of those sized packs installed nearer Auckland, would allow Huntly to be “gone by lunchtime” on day 101.
        No need for a spinning reserve when you have a solid state one.

        GI in Auckland has a smaller Gen 1 Tesla battery peak smoothing system already installed and running as of earlier this year.
        For a price so Vector said that was nearly half that of the usual fix of running more cables to cater for peak demands.

        I note that the UK’s CO2 emissions from coal burning [mainly coal powered power plants] is now back levels last seen in the 1890s, thanks to the contribution from renewables [solar and wind] in the UK. Of course total UK CO2 emissions is way up thanks to transport related CO2 emissions. But coals contribution is way way down.

        And the UK Transpowers equivalent as just been pinged for paying “peaker plant” operators about GBP 180m over the last 3 years, to have way too many stand by coal plants sitting around “just in case”.

        How many Tesla 100MWhr battery packs could that money have bought instead?

        So the need for spinning reserve is going away just like coal is for power generation.

        1. or would do if various National Governments hadn’t f**ked up our electricity market in hardheaded neo-liberalism.
          Now there is no incentive for (mostly Meridian) to hold back on hydro generation when the wind is blowing elsewhere (except for some of their own windfarms).
          In the past with ECNZ in dry years they would use more of other generation and hold back hydro as reserve. In wet years they would have hydro running full tilt and cut back on others. Now in wet years hydro will often spill and be wasted while other plants are running because it is a competition. Thankfully Huntly is now the only one and an agreement has been reached to allow it to be cut back but kept as reserve.
          All the electricity reforms did was add layers of bureaucracy/corporate overheads and have done nothing for the consumer or the country as a whole. All that advertising, multiple head offices, duplication of roles etc comes at a huge cost (not too mention the above system inefficiencies) then there was the hundreds of millions of dollars spent to list and sell shares on the sharemarket. We probably would be at 100% renewables by now if not for the electricity reforms and most definitely would have cheaper electricity prices (which could have affected decisions about the NIMT etc).

  6. Interesting update from the supply side. I suspect that the demand side of the equation is likely to change fairly substantially over the next decade or so with the electrification of the transport sector, and smart metering allowing users to purchase power when the price is low (e.g. recharging their vehicles, running appliances). This will probably have flow on impacts for electricity supply, particularly in reducing our dependence on peak generators by smoothing out the demand curve across the day. Further, we’re currently quite limited in our use of intermittent generation due to the inflexibility of demand. If demand were to become more responsive, significant capacity could be unlocked for wind in particular. The holy grail of this, as I understand it, would be a large fleet of electric vehicles hooked up to smart meters, and acting as decentralised batteries feeding energy into the grid when needed, and charging up while the wind is blowing.

  7. “China’s commitment on this, as a developing country, makes New Zealand’s ‘commitment’ look pretty weak by comparison.”

    The problem with this is that NZ has for many decades been one of the cleanest countries in the world for emissions (barring agricultural emissions). We have one of (if not the highest) level of renewable electricity generation. We don’t have lot’s of factories belching out toxic emissions. What we do have is cows – and a lot of them. Unlike factories there isn’t much you can do (currently) to reduce their burb and fart emissions. The world still wants milk and beef so if we don’t make it then someone else will (and they will do it with higher emissions since they don’t have lots of plentiful green grass).
    By comparison China in particular is belching out all sorts of emissions and other pollution in unprecedented amounts (no country has ever had higher CO2 emissions per annum than China does now). Yes over history developed countries have done a lot of the emitting (they also have developed the technology so that it is no longer necessary to have such high emissions – but most developing countries are choosing the cheapest dirtiest option and not using these improvements).

    Where NZ does have a problem is stupid government policies such as Kiwirail buying diesel loco’s to replace the electric ones (yes this is government – KR wouldn’t make that call on their own).
    Government lack of regulation on vehicle emission testing as part of WoF (dirty diesels belching smoke).
    Forestry – we shouldn’t be cutting down our pine plantations without replacing them. In fact we should be planting more!

    1. Two points:

      1) A large proportion of China’s CO2 belching must surely be a result of manufacturing cheap goods for the rest of the world, including us. The rest of the world has simply outsourced its emissions to China and is smugly comfortable for the Chinese to keep on belching as long as it keeps prices down.

      2) Cows do not add extra carbon to the eco system. They convert grass into methane which reverts to CO2 after about 10 years. As far as I can see, they are not causing the long-term effects that extraction and burning of fossil-fuel does.

      1. Yes cows emit methane (which does do more damage than CO2 – but as mentioned would be produced anyway elsewhere – do emissions from other animals in other countries get counted too?).

        As for China, yes it is true that they manufacture goods for other countries – however that was often not by choice of those other countries – China undercut the costs so the manufacturing was off-shored. How did they do this? Well obviously with 1.4B people they had cheap labour however they also had cheap costs from not having any environmental concerns – cheap dirty power, pollution etc. If they had the same environmental standards then their costs would have been a lot higher and some of that manufacturing would have remained in the developed countries.

        1. “Yes cows emit methane (which does do more damage than CO2 – but as mentioned would be produced anyway elsewhere – do emissions from other animals in other countries get counted too?)”

          10 Ha of land with dairy cows produces more GHG than 1 Ha of land for crops and 9 Ha of forest. That is the comparison that we need to be making.

  8. Interesting about the Huntly deal I missed that. After they had their high spot pricing disallowed by the regulator I was wondering how this would be dealt with.

  9. Smart meters are great. We were on a Genesis trial for a year with time of day pricing and we reduced our bill by 20% then Genesis canned the ‘trial’. When I complained to the CEO he admitted that if everyone made the behaviour changes we did & got similar reductions his business was toast so we went back to flat pricing and my usage & bill have gone up again. So the tech is there & it works, govt & big business are just keeping us from it.

    1. *Some* smart meters are great 😉 – “A recent study from researchers at University of Twente (UT) and Amsterdam University of Applied Sciences (AUAS) has found that three-phase static (electronic) energy meters, which are replacing traditional electromechanical meters, can exaggerate energy consumption by as much as 582 per cent.” And “While the highest deviation between actual energy consumption and reported energy consumption was 582 per cent, some of the meters made errors in favor of the customer.”

      Ouchies! When reading the article further I ended up scratching my head, wondering how the manufacturer didn’t test their design properly.

  10. India will have the world’s largest solar power plant this year.
    It’s in Tamil Nadu, has a capacity of 648 MW and covers an area of 10 sq km.
    China, USA, Australia and Germany have large solar plants too and are leading the push to cut CO2 emissions.
    Unfortunately we are not doing much in NZ. We spend $9billion each year on our biggest import, oil. It takes all our milk powder exports and more to pay for it.
    A switch to electric powered buses, cars would be a big boost to the economy as we have plenty of renewable power.

    1. Not sure about the USA and Australia “leading the push to cut CO2 emissions”, but definitely agree that we should be doing much more in NZ, even to just avoid being left behind this century!

    2. Yes NZ should be doing more with PV. We probably don’t need solar farms as such (considering we don’t live in a desert) but their definitely should be a push particularly in the sunnier parts of the country. The amount of business in large warehouses/office buildings could surely do with a bunch of PV panels on the roof!
      When you couple our large hydro capacity with batteries (to cover the difference between usage and hydro capacity+geothermal capacity which is approximately 10% of total capacity in the evening when the sun isn’t shining and the wind might not be blowing, then the addition of PV would be excellent. The hydro and batteries could be used in the evening for peak residential demand, during the day the PV helps power businesses etc. With EV becoming more common they can act like power packs around the country too.

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