China accounts for around half of the world's coal consumption and will likely be the driving force for the fuel's growth over the coming years. However, India is also starting to materially increase its use of coal. And, like China and the United States, India is working on cleaning up the dirty fuel. That's going to help support demand for the technology that takes the filth out of coal.
Big players
According to Peabody Energy (BTU +0.00%), over the next five years or so China and India will account for around 80% of the demand growth for coal. China is a much bigger consumer today, using around 4,060 million tonnes. India, for comparison, uses just 725 million tonnes.
Peabody projects that China's consumption will increase to almost 4,900 tonnes while India's coal use will advance to 920 million tonnes. That's a 20% increase for China and an about 25% increase in India. So while China's consumption growth will be larger on an absolute basis, Peabody thinks India's growth will be bigger on a percentage basis.
Technology
And while environmentalists are up in arms about the use of dirty coal, Peabody, which can serve both China and India out of its Australian operations, thinks the U.S. example will be replicated in Asia. Domestic coal consumption has increased three fold since 1970 while regulated emissions have declined almost 90%.
Technology has been the driving force for the improved environmental footprint. That's why companies like General Electric (GE +1.30%) and Siemens (SI +0.52%) are both worth watching on the coal side. Coal gasification will be a big part of that.
China, for example, is using coal gasification technology so it can pull coal out of cities but still make use of the cheap fuel to power its growth. Once coal is turned into a gas in a rural area, it can be sent over pipelines to power urban centers. India has only just begun to examine coal gasification on a more material basis. But if it works as well in India as it has elsewhere, there's little doubt it will catch on.
The next step
Southern Company's (SO +1.42%) Kemper coal plant is a great example of what's to come. The big technology at the nearly complete facility is carbon capture. The coal gasification tech that's also being used is nearly forgotten about. Although the plant is billions of dollars over budget and its grand opening has been delayed, gasification isn't the culprit.
When Southern brings the plant on line, it will provide years of low-cost and clean coal power to customers. Although even clean coal plants are a hard sell in the U.S. market where natural gas is cheap, that same dynamic doesn't exist in the rest of the world. So growing countries like China and India will be more amenable to adopting the type of high-tech systems Southern Company is testing out for the first time in the United States.
Bigger than coal
Coal gasification is just one part of what GE and Siemens do, too. Both industrial giants are big players in other key energy areas like natural gas and wind turbines. So not only will they benefit from increasing demand for cleaner coal in high growth markets, but also from increased use of other clean power sources, too. That's partly tied to the environment, but also to the mainstreaming of new technology. New power plants generally use the cleanest technology they can afford.
For example, if Southern's Kemper works as planned, the rest of the world will likely start trying to emulate the plant's best features. That will keep Peabody in business for a long time, but it will also be a boon for GE and Siemens. And, interestingly enough, Southern is part owner of the technology it's using—so it, too, could be a direct beneficiary if other countries start building similar plants.
China is just as important to these automotive players as it is to coal
