First appeared in BusinessGreen

Global coal is on the ropes. Prices of thermal coal have collapsed as demand evaporates; stocks have crashed and companies are going to the wall. The industrialised world is seeing falling demand, leading to a desperate search for new markets for exported coal. On top of that, China, historically the fall-back for coal exporters, is getting tough on air pollution and appears to have peaked coal use.

Against that dire backdrop the World Coal Association (WCA) is clinging to parts of the world with limited access to energy as a possible lifeline. In his article last month, “Developing economies need power from coal“, Benjamin Sporton, the WCA’s chief executive, positions coal as a saviour of the global poor.

In our view it is a desperate strategy.

As Sporton notes, Africa is one of the regions with the lowest levels of access to energy. However, a geography lesson is required here. First, the majority of the coal in Africa is concentrated right in the south of the continent. Secondly, the lowest levels of energy access are in rural areas that are not connected to power grids. This means that either the coal or the electricity would have to be transported to the people needing energy if coal is used as the power source.

Late last year Carbon Tracker published a detailed Energy Access financial analysis that challenged many of the coal industry’s flawed economic assumptions. In Sub-Saharan Africa, for example, it found that only seven per cent of those without suitable access to energy live in the handful of countries with coal-producing assets. Meaning it would be vastly more expensive to hook up the remainder to a centralised electricity grid powered by coal. When these realties are factored in their financial and energy access arguments fail to stack up.

Our report also found that investing in off-grid and mini-grid renewables, as solar costs fall and battery technology improves, were by far the most cost-effective solutions. Coal is therefore not the cheapest or most appropriate option for many of those without access to energy as its proponents claim. If the costs and inefficiencies of carbon capture and storage (CCS) are also added then this just makes coal even less competitive. CCS will hopefully have a role in the future, but even optimistic IEA scenarios do not see widespread deployment until post-2030. Making those without energy access in regions that have coal resources wait another couple of decades is not the urgent solution they need.

The coal industry regularly cites the International Energy Agency’s (IEA) “New Policies Scenario” as driving huge growth in demand and solving energy access problems in the developing world. However, that scenario only sees an 18 per cent global increase in coal demand, leaving nearly three-quarters of the energy poor still without suitable energy access. Moreover, in its scenario of universal electricity access by 2030, the IEA estimates three to five households will source electricity via mini/off-grid solutions – a forecast in which coal plays little or no part.

Even in urban areas – where commerce is concentrated and coal is available – our analysis found that the cost of renewables favoured comparably with new efficient coal plants. An example worth mentioning is South Africa’s state-owned Eskom projects where new renewables supply cost $75 per megawatt hour for wind energy and $100 for solar. That contrasted with the new Medupi coal plant that at the time of writing had an estimated cost of $90 per megawatt hour, with its sister plant expected to come in at an even greater cost when the costs of solar and wind are falling.

It’s a similar picture in India. Its population of 1.24 billion comprises 247 million households, 68 per cent of whom live in rural villages. According to the 2011 census close to half of these rural households – 75 million – have no electricity. Of urban households, six million remain without electricity, or about eight per cent of the total.

EAS Sarma, former secretary of India’s ministry of power, who knows India’s challenges only too well, said this month the energy access figures haven’t changed significantly since 2001, although some 95,000 megawatts of new coal-based electricity generation capacity was added during the intervening decade.

In other words coal has benefited the affluent classes, not the poor.

Sarma corroborates many of our findings. He says when a village is more than five kilometres from the grid the cost of supplying electricity from solar and other off-grid generation is much cheaper than coal. He calls it “simplistic” and “simply inaccurate” to assume that new electricity generation capacity added to the grid will automatically reduce electricity deprivation among the poor.

Not to mention public opposition to huge industrial projects that adversely affect the health of the people near the plants, uproot thousands of families, pollute their environment and disrupt their lives. Those huge social costs must surely outweigh the perceived benefits of coal. Yet solar and other off-grid generation are not dependent on major energy or transport infrastructure as coal is, and so can often be deployed more quickly and more cheaply.

To address both energy poverty and security of supply, India needs to focus on encouraging locally generated renewable energy sources and move towards decentralised electricity based on renewables, experts like Sarma believe.

The coal industry appears to be desperately chasing new markets, a move that has been dressed up as developing a social conscience. Coal-based power generation is an old technology. It has been around for over a century and is increasingly dated. New 21st century cleaner, cheaper and less capital intensive technologies are already moving beyond outdated constructs of an early 20th century energy system – a centralised grid structure for example.

And they also go beyond current definitions of energy access, which usually involve connection to a grid much as telecoms is doing with mobile and wireless telecommunications systems.

There are already thriving entrepreneurs in rural areas of the developing world with mobile phones, solar panels and solar lanterns, who have energy, light and communications. They do not register as having energy access according to the statistics, nor are they waiting around for the coal industry to ship coal around Africa and construct power lines across the entire continent.

This is the bad news that the coal industry does not want to hear – addressing energy access is not likely to result in significant demand for coal. Aside from deluding themselves with the mirage of a large new market, this is not going to provide solutions to those that need them.

Anthony Hobley is the chief executive of the London-based Carbon Tracker Initiative