WP 5.3 Development and application of specific tools for energy security in the Coal Sector (Upstream, transport, distribution)

Objectives

To develop and apply tools to assess the security of supply situation in the coal sector with respect to the following specific aspects: import diversification, vertical integration, oligopolistic supplies, and future technologies for coal use.

Participants: TUD, FEEM, CESI RICERCA/ERSE/RSE S.p.A.

Description of work

Task 1: Technical Issues - Introduction to Global Coal Markets

Lead: TUD

Description of the historical and current state of worldwide coal markets, along the value chain, with a focus on hard coal. Distinguishing between different types of coal we will identify the resulting situation for this primary energy source and demand for several uses.

Task 2: Economic Issues

Step 1: Vertical Integration Index on Market Structures and Supply Security

Lead: TUD

We propose to develop a “vertical integration-index” for the coal markets in Europe taking into account the concentration of multinational supply. This index measures to what extent different elements of the value-added chain (Task 1) are open to competition, or are foreclosed. This yields a representative measure of the economics in these markets, and allows drawing policy conclusions to improve the transparency and functioning of these markets with very complex company structures.

Step 2: Supply Security and Import Dependency

Lead: TUD; FEEM

Development and application of tools taking into account the functioning of the world coal markets, geopolitical aspects and risks related thereto, as well as the relative importance of different measures. Production data from the main producing countries importing into the EU27, and consumption data within EU member states are collected. Overview of historical and forecasted development of these indices over time. The derived indices will provide a quantifiable measurement of “outside EU supply” incorporating resource allocation and possible geopolitical interferences.

Step 3: International Trade of Coal: A Model of Supply in an Oligopolistic Market

Lead: TUD

Developing a numerical simulation of the global coal market(s) that will produce benchmark results of imperfectly competitive and competitive behaviour to assess the market structure of the international coal market. This model tool can be used to run different scenario analyses such as a cut of supplies from one or several regions (e.g., regions with a high political risk), demand shifts, etc.).

Task 3: Regulatory Issues - Downstream Aspects

Lead: TUD; CESI RICERCA/ERSE/RSE S.p.A.

The future coal use will take place in a carbon-constrained EU energy world that is regulated by environmental policy. We will assess the feasibility of future coal use requiring new clean technologies, in particular carbon capture sequestration. Different options for regulation supporting the development of clean coal technologies will be analyzed. An environmentally benign use of coal in power generation could strongly lower EU external gas dependence.

Workpackage 5.3 is carried out under the co-ordination of TUD