Energy price fears fuel possible coal comeback

Date: 28/02/02

By Maria Kielmas

THERE'S nothing like a blackout, or a noisy windmill, to make the public think fondly of coal.

California's energy crisis forced a rethink on energy supplies and coal emerged by a process of elimination: a lingering antipathy to nuclear power, potential scarcity of gas and Americans' lack of enthusiasm for a wind farm in their backyard.

Now the same thinking has travelled across the Atlantic to a European market worried about energy supply and prices, or so the coal industry hopes.

The life of Andrea Clavarino, the Rome-based general director of commodity trader and transporter Coeclerici and also the president of the Italian coal industry association, Assocarboni, has become ore sociable.

'Three years ago no-one even thought of coal, now I go to every conference. Certainly things have changed after 11 September,' he says.

Italy imports over 80 of its energy needs. Some 60 of its energy demand is met by imported oil and gas - the price for which, Clavarino claims, is responsible for making Italian electricity prices 40-60 higher than in the rest of the EU.

By 2005 more than half of Italy's energy needs will be met by imported gas from just two countries, Algeria and Russia, the founder members of the Gas Exporting Countries Forum (GECF), dubbed the 'Gas OPEC'.

The forum was created largely to counter the erosion of long-term contracts as the EU energy market is liberalised.

Clavarino claims these two countries will have the power to set prices in an import-dependent Europe.

Coal is used in 8 of total Italian electricity generation but 'clean' coal technology, which eliminates carbon dioxide as well as sulphur and nitrous oxide emissions from coal-fired power plants, can transform the fuel's use.

'There has been [initial] resistance from local population and environmentalist groups but we are getting support,' says Clavarino.

Italy has minimal hydroelectric power generation capacity. Nuclear plants were closed in the mid-1980s. Electricity demand will soon exhaust installed capacity.

Clavarino's views are shared by Claus Lindroth, president of the Stockholm-based Swedish Coal Institute, who sees growing public opposition throughout Scandinavia to wind power, until now the preferred alternative to conventional energies.

No more hydroelectric plants may be constructed in Sweden while a nuclear power phase-out is still the subject of debate.

But as Sweden has much surplus installed capacity, coal's renaissance in that country - it provides 7 of power generation capacity - will only be in the medium term.

UK coal producers have little to hope for with current policy. 'The government is desperate to take a lead on climate change and presumes that oil and gas prices will remain low,' says Colin Godfrey, a Gloucester-based coal consultant.

The government is pushing for renewable energy to make up 20 of the national energy mix in the medium term and refusing requests from the coal industry for any state support.

However, state support for the French, Spanish and German coal industries remains.

Domestic-mined coal costs three times the world market price, according to Wolfgang Ritschel, managing director of Germany's Verein Kohlenimporteurer, based in Hamburg.

But even this subsidy is lower than that provided for wind energy, Ritschel says.

As these national industries wind down - under pressure from the Commission in the case of Spain and Germany - the slack is being fed by increasing coal imports.

These come mostly from countries outside the EU such as Australia, South Africa and Colombia.

EU candidate Poland, though a major coal producer, is rationalising its own industry and will be unable to replace closed German coal production, says Ritschel.

Article is part of a survey on energy.