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Coal challenges gas as fuel option for power

Dirty, yet abundant and easily shipped, coal is starting to challenge natural gas as the fuel of choice for new power plants.

This is because coal prices are relatively cheaper and not so volatile, industry executives and experts say.

Utilities around the world have increasingly turned to gas to meet a doubling of electricity demand over the next 25 years, while curbing greenhouse gas emissions, like carbon dioxide, blamed for causing global warming but this is changing.

"The role of natural gas role in power generation is not a slam dunk. There are relative price, emissions and security issues to take into account," said Gerald Doucet of the World Energy Council on the sidelines of a gas conference last week.

At a separate coal conference, the mining industry was also upbeat about demand to turn coal into synthetic fuels like diesel or gas, and urged greater efforts to develop technology to clean up the fuel's emissions.

"The prospects are improving for coal-fired stations. The future is clean. The coal industry can play a great role. It's a great opportunity which we must not lose," said Leigh Clifford, chief executive of Rio Tinto.

Demand for coal is growing faster than expected, rising 25 per cent in the last three years, to 1.1 billion tonnes.

"Coal is the only fuel with sustainable growth. Coal has stepped up to fill the void left by the limitations on oil and gas," said Gregory Boyce, president of the largest US coal producer Peabody Energy.

The International Energy Agency, the West's energy watchdog, says coal will continue to dominate electricity generation with a 40 per cent share, as most of the world's supplies are conviniently located in the strongest and fastest growing economies, the United States, China and India.

"This is likely to continue as demand for power grows mainly in the developing economies. But coal must remain competitively priced, especially as pollution abatement costs increase as carbon emission plans increase," said IEA chief Claude Mandil.

The European Union's emissions trading scheme that began this year has allowed gas and coal to compete for future power generation market share as CO2 allowances were given free to polluting power stations, says Europe's top power producer EDF.

"Gas is no longer the obvious environmental choice as it was two years ago," said Dominique Venet, executive vice president for gas at French power giant EDF.

Mr Venet said that coal would be the preferred fuel for future power generation with oil at $40-45 per barrel, free CO2 allowances and coal at €35 a tonne.

EDF, the world's largest nuclear power producer, will add its 59th reactor by 2012, but also plans to modernise four coal-fired plants, and to reopen four oil-fired plants as it mainly uses its thermal plants to meet peak demand.

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