And yet, quite unexpectedly, coal now stands to benefit in terms of its strategic contribution to energy production. This is because Covid has altered national infrastructure and energy policy planning scenarios across the world. A new analysis shows that gas resources around the world will see development delays, with the construction of planned regasification facilities also at risk and coal may benefit as a result.

The analysis cites the case of Vietnam, a country with its own rich gas resources, but will fail to meet domestic production expectations, requiring an increase in liquefied natural gas (LNG) imports instead. Planned regasification facilities also risk delays due to the downturn, leaving the use of coal as the only financially viable option to meet growing power demand.

Before the Covid outbreak, the global coal production was estimated to have reached 8.1 billion tonnes in 2019, up by 2.7 percent over 2018. The increase was driven by production increases from the major producing countries such as China, India, Indonesia and Australia, between them accounting for 69.8 percent of the total global output. However, production in 2020 is expected to rise only by 0.5% due to disruption caused by the outbreak of the pandemic.

Despite the efforts by many countries to move away from coal for electricity generation purposes, Asian countries such as China and India are still expected to have coal as a key component of their electricity generation mix. This will be further reinforced by declining domestic gas production, again due to the impact of the pandemic.

In India’s energy sector, coal fired power generation was already under pressure from overcapacity, low electricity demand growth, and increasingly competitive renewables. Although coal’ vulnerabilities to economic outlook continue to be as pronounced as ever, the vital importance of coal to major dependent states, such as Chhattisgarh, Jharkhand, Odisha, and to a lesser extent West Bengal and Madhya Pradesh, for employment cannot be overemphasised. Millions of people depend on coal mining directly or indirectly for their livelihoods and a less dynamic coal mining sector would further exacerbate problems of unemployment and underemployment in these states.

The price of coal was already depressed before the corona virus crisis, and the demand curtailment during the lockdowns was accompanied by a domestic production drop in major producing countries, balancing the market.

As a corollary of the Covid crisis, there has been an unexpected subtle shift in public opinion and policy regarding the speed of transition towards a low carbon power generating future. In a post-pandemic world coal, while having lots of problems, is still considered to be a cheap and reliable source of energy to rebuild the economy. Also, in economies struggling to bounce back, there may be less scope for absorbing the unemployment associated with the end of coal mining and power generation. These factors could potentially lead to a slowing of the rate of the energy transition.

For instance, China’ coal mining capacity is now reportedly moving quickly back towards full capacity, and power generation is returning to normal levels. Thermal coal import demand into China, which rose initially on the back of domestic production shutdowns, is likely to total close to the 2019 annual numbers, though reports indicate that some ports have already reached their 2020 annual quota limits.

India’s opening of coal mining sector to the private sector is expected to impart new dynamism to the industry. The government has auctioned 19 blocks, which witnessed keen interest from the private players. It is expected that blocks that auctioned blocks will generate total revenues of around Rs 7,000 crore per annum and create more than 69,000 jobs once they are operationalised.

It is widely recognized that any plan to hasten the transition away from coal must take into account the threat to livelihood of millions. Such loss of livelihoods in India’s coal-dependent states would contribute to further deterioration in the economic recession and widespread human suffering. The country is already struggling with job creation and coal mining communities have few obvious alternatives to offer.(IPA Service)