King Coal will return to his throne

Nuclear power, windpower, wave power and even waste power. They've all been touted as the fuel of the future over the past few years. But so far, none of them have been able to come close to being the answer to the world's energy problems. Instead, our attention has once again been grabbed by a rather more unglamorous source of energy. Yes, King Coal' is back: coal prices have doubled in the last year, and according to many analysts they'll double again by 2005.

Ask pretty much any question these days and the answer will be China. And so it is with the wild increases in the coal price. Only a few short years ago, China emerged onto the scene as a net exporter and pushed prices down. But today its own rapacious consumption has tipped the balance and the emerging giant is on the way to being a net importer. China's effect on coal prices has indeed been rather dramatic, say Franesco Guerrera, Carola Hoyos and Victor Mallet in the FT. But as it starts to import coal itself, that effect will be magnified. Most coal stays in the country it is mined in: the quantity of the world's coal that is internationally traded is "relatively small". Any change in that status quo will have a "predictable" effect on prices. But it isn't just China that is coming back to coal, says Dan Roberts, also in the FT. In the US, it already fires more than half of all power stations and a "sympathetic" US government predicts that coal's contribution to global energy consumption will double to 50% by 2015 as developing countries not just China, but the likes of India too also seek a supply of low-cost energy.

High oil prices aside, one of the major reasons for the renaissance of coal turns out to be a disillusionment with natural gas. Throughout much of the 1990s, low prices and a "seemingly abundant" domestic supply of gas encouraged electricity generators with their eyes fixed on the rear-view mirror to move away from traditional coal-fired steam plants to more efficient gas turbines. The result was predictable: 175,000MW of new gas-guzzling capacity came on line just as gas production began to peak in the US (note that natural gas is hard to transport across water from other countries, as it has to be liquefied first). This then caused dramatic price spikes. "Prices for natural gas have been volatile, and are trending higher for the foreseeable future," says Steve Roalstad, a spokesman for Minneapolis-based Xcel Energy.

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One group that is clearly unimpressed by the return of coal to top spot in the energy market is the environmentalists, who see encouragement for coal-fired electricity plants killing any hope of reaching international consensus on carbon dioxide emissions. Coal "should be a part of the past, not the future", Mark Detsky, an energy lawyer at Environment Colorado, a conservation group in Denver, told The New York Times. But what should be rarely is, and coal looks like it's going to be very much part of the future. Why? Firstly because there is a great deal of it about, and secondly because an awful lot of the world's coal is underground in the US, a country that has already been hit hard by both rising oil and natural gas prices. Not only does the US possess a greater share of the world's coal than Saudi Arabia does of the world's oil, but its energy content measured in British thermal units is five times that of Saudi Arabian crude and slightly greater than that of all the oil and gas in the Middle East put together. At a time when energy is scarce all over, coal thus has a good chance of being the fuel of the future.