Is BHP talking its book on coal? Or just ignorance.

Is this the last big play of an industry in decline? Faced with the inevitable and irreversible slump in coal demand in western countries, particularly Germany and the US, Big Coal is turning its sights on the emerging world to secure its own future.

But things are not going to plan. China, the biggest consumer of coal, is doing an about face and is placing a cap on coal consumption. The second great black hope, India,  has infrastructure that is so chaotic that it simply cannot deliver its fossil fuels to where it is needed.

The last frontier, and plan C, for the fossil fuel industry is the one fifth of the population that do not yet have access to electricity. Most of these are in Africa. And big fossil is trying to jawbone its way into their market, and shout down those who would deprive fossil fuel of financing support, such as the World Bank and a growing number of institutional investors.

You would hardly imagine the fossil fuel industry to do much else. Faced with a growing push to leave up to two thirds of their “assets” in the ground, the CEOs are bound by short-term performance contracts and have no choice but to talk their book.

But as we heard from Andrew Mackenzie, the CEO of BHP Billiton this week, and from the heads of BP, ExxonMobil and Chevron before them, their push for greater fossil fuel consumption is based on three tenuous assumptions: One that the future is going to look like the past, that climate action is not worth doing unless someone else does it first, and that new technologies will not erode the historic economic primacy of fossil fuels, particularly coal.

Mackenzie this week insisted that coal was the only solution to relieve energy poverty for the world’s poor. He argued, in a speech in New York and in newspaper interviews, that not building coal fired power stations would cause more pollution.

This is the big new talking point of the coal industry. Peabody, the largest US coal producer, makes it a key feature of their new multi-million dollar global lobbying campaign, “Advanced Energy For Life.”

“Coal plays a special role in the war to end global energy poverty and increase access to low-cost electricity while using today’s advanced technologies to improve emissions,” Peabody CEO Greg Boyce claims. “Coal is key to human health and welfare along with a clean environment.”

But there were two questions that leap out from the claims of Big Coal. One is the question of climate science, which they continue to blithely ignore. The scenarios they paint for fossil fuel consumption are those that miss climate targets by a catastrophic amount. As the Climate Council’s Tim Flannery pointed out this week, it is pure spin.

The second is this: that Mackenzie, Boyce and their fellow Big Fossil CEOs seem to be unaware, or unwilling to talk of, the alternatives. With so much of their assets at risk, they would be highly unlikely to talk up the competition.

But the competition is there. China’s premier Li Keqiang this week underlined his country’s determination to “change the way energy is consumed and produced”. It will focus on nuclear and renewables, the deployment of smart power transmission grids, and the promotion of green and low-carbon technology.

In India, coal is proving to be a disaster. As we highlighted last year, and as this report from Associated Press highlighted this week, India’s catastrophic infrastructure means that coal is unable to be delivered to where it is supposedly needed. And certainly not cost effectively.

As the International Energy Agency noted last week, renewables such as wind and solar are now competing with new build fossil fuels – gas in particularly because it is being priced out of the market, but also coal. Jeff Immelt, the CEO of General Electric, noted that the cost of wind is now down to 5c/kWh. No new coal plants can be built at that price. Wind is easily beating fossil fuels in auctions in Brazil, another country hungry for new capacity.

Newly emerging economies, with no legacy infrastructure, face less difficulties and costs than developed ones in introducing renewables on to the grid. The added attraction of solar and distributed generation, is that new grids may not have to be built to the same scale. As David Crane noted last week, why would a modern grid be built around 120 million wooden power poles?

In India, this is already the case. Energy companies, big and small, are walking away from coal-fired generation because of the costs and the risks. Much of the country’s easy-to-access surface coal has been extracted, with the remaining reserves harder to reach: underground, beneath cities or within national parks and tiger reserve. Imported coal is too expensive.

As Associated Press reports:

“For the first time, solar electricity prices have fallen to near parity with India’s coal-generated power prices. Subsidies at about a third of cost put solar prices at about 7 rupees (11 US cents) per kilowatt/hour, versus coal’s 5-6 rupees per kilowatt/hour.
Solar projects also need fewer clearances and take just six to 12 months to develop, versus about eight years for a coal plant.

“Analysts say India is set to surpass its target of having 15 percent of its energy produced by the sun and other minimally polluting sources by 2022.
”Today’s coal availability is inadequate. And investors are worried. In India, if there are coal shortages, there will be power shortages, and industrial growth will be inhibited,” said Vivek Pandit, senior director at the Federation of Indian Chambers of Commerce and Industry.” (Quite a contrast to Australia’s equivalent chamber, ACCI).

HSBC agrees with its analysis. It says wind already has parity with coal in India. Even the IEA has cast doubt over the future of Australia’s new coal provinces, and numerous investment banks, including Goldman Sachs, HSBC and Deutsche Bank, have said the thermal coal industry is in decline.

In Africa, solar alternatives are also emerging, at both utility scale and on the distributed level. South Africa, the biggest blackouts since 2008 have been forced by the grid operator because rain is disrupting supplies of coal. Meanwhile, it is undergoing one of the biggest and most successful programs for installing renewable energy such as wind farms, solar PV, and solar thermal, including with storage.

Elsewhere in Africa, Kenya, also rich in geothermal, is starting the first projects in a 750MW pipeline of solar PV installations; Nigeria is building 500MW of solar with the support of Germany, Ghana is building a 155MW solar farm; Rwanda is installing a solar farm that will provide 8% of its electricity needs.

On a distributed level, solar lamps are also proving popular. One such company, Greenlight Planet, expects to sell lamps to 16 million homes by 2016, a penetration rate impossible to be match by centralized generation. Other groups have similar targets.

Jawboning coal into poor countries isn’t going to deliver cheap energy. And it isn’t going to address the climate problems.