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Coal ideas: the revival of Hungary’s mining industry – or not?

Hungary’s new energy strategy puts emphasis on the role of coal in its energy mix, but the sector faces several challenges, including regulatory and environmental issues. There is some revitalization in the industry, but the future of coal mining lies in clean coal technology.

Hungary is not in a position to abandon fossil energy; in particular, natural gas purchased at fair prices will continue to play a major role, while domestic coal and lignite stocks represent the strategic reserves of Hungary’s energy industry, according to a text available on the government’s website. Hungary’s action plan for exploiting its mineral assets is expected to be submitted to the government in the first half of 2012 as part of the National Energy Strategy.

Coal mining was once a booming industry in Hungary, ensuring the livelihood of many, mostly in underdeveloped areas. But after the collapse of communism, all that changed: mines were privatized and soon after, many closed down due to their uneconomical operation and the then lower prices of other energy sources, Ákos Zoltay, general secretary of the Hungarian Mining Association told the Budapest Business Journal.

There were eight coal mine companies in Hungary in 1990, but only a few are left in operation. Twenty years ago, the mining industry employed 81,000 people (of which 52,000 worked in coal mines; today, the few existing mines give jobs to about 2,000 people only, and the number of employees in the entire industry has dropped to 22,500.

Underlying potential

But in spite of the decline of the mining industry, Hungary is still rich in fossil resources: its geological asset is 10.6 billion tons. According to industry professionals, 3.3 billion tons of this could be exploited economically. The annual output of coal mining is 9-10 million tons.

“With the current output pace, such reserves could be enough for a few more centuries, and could reduce Hungary’s dependence on imports,” András Perger, project leader at Energiaklub told the BBJ. But for the time being, exploration is uneconomical and raises several environmental issues. The concession procedure itself is also extremely time-consuming. The other big problem the industry faces today is that there is no adequate training for miners. As a result of all these factors, mining development has come to a near standstill.

Going deeper in the ground

In spite of such hurdles, there are some signs of the revival of Hungary’s mining industry. With the upgrading of coal, the Mecsek coal basin, located in the south Transdanubia region, has come into the limelight.

After several years of preparation, Hungarian engineering company Calamites Kft has just started trial operations in its open pit in Nagymányok, where there is more than 2 million tons of black coal buried underground.

During the current trial phase, the mine employs 10 people, but if production is ramped up to full capacity, staff will be increased to 40, István Kalmár, co-owner and business development director told the BBJ.

Although preliminary plans include selling the coal to power plants, such options are rather limited in Hungary at the moment, therefore the mine currently sells coal to local residents.

Clean coal technologies

Coal, which is primarily used for the generation of electricity, is the second largest domestic contributor to carbon dioxide emissions. Clean coal technology (CCS) is a collection of technologies being developed to reduce the environmental impact of coal energy generation. Carbon capture and storage (CCS) is a process based on capturing carbon dioxide (CO2) from large point sources and storing it in such a way that it does not enter the atmosphere.

Storage of the CO2 is envisaged either in deep geological formations, deep ocean masses, or in the form of mineral carbonates. But in the case of deep ocean storage, there is a risk of greatly increasing the problem of ocean acidification, an issue that also stems from the excess of carbon dioxide already in the atmosphere and oceans. Geological formations are currently considered the most promising sequestration sites.

Another effort to reduce the environmental impacts of coal mining is the use of the methane released in coal mines from the coal seam and the surrounding disturbed strata during mining operations. It is a potent greenhouse gas, with a global warming potential 23 times that of carbon dioxide. While coal is not the only source of methane emissions – agricultural activities are major emitters – methane from coal seams can be utilized rather than released to the atmosphere with a significant environmental benefit. The so-called methanol economy is the brainchild of Hungarian-born Nobel Prize-winning professor György Oláh, and such projects are currently in the research phase.

But despite the difficulties, the company has further development plans. It wants to open a deep-mine in Mátra-Váralja, an area with 250 million tons of black coal underground. After spending hundreds of millions of forints from its own resources on the project, Calamites is not about to give up.

“We are determined to continue the project,” Kalmár said. “We are currently gauging the market and will go on with development in line with market needs.”

Clean future

The future of the coal industry is inevitably clean coal technology, professionals say. Environmental concerns are pushing the industry to develop and employ technologies that reduce harmful environmental impacts so that the sector can meet the European Union’s 20-20-20 goals (20% increase in energy efficiency, 20% reduction of CO2 emissions, and 20% renewables by 2020).

“In the midst of the global crisis, such goals are a bit unrealistic,” Zoltay said. “They seriously hurt the competitiveness of the sector, which has the potential to contribute to creating employment and generating income for the state in the process.”

But he agrees that clean coal technology is inevitable for the further development of the sector. “It is utterly important for Hungary to be able to join the framework research program of the EU,” Zoltay emphasized.

There are promising signs though: preparations for an international committee in which Hungary would be a member have started at a government level. The aim of the committee is to further develop and realize clean coal technology in Hungary.

Firing the world's engines

Despite its drawbacks, coal remains a major energy source in the world, accounting for 40% of the world’s electricity production. Most of the new coal demand comes from the developing world and is used for electricity generation. China now accounts for more than half of the world’s coal production and consumption. But coal consumption is also on the rise in the developed economies. In the EU, coal consumption increased by 4.8% last year and coal provides around 29% of the EU’s electricity. Europe is also an important producer of brown coal, with almost half of world production coming from the continent last year. Coal provides nearly half of the power demand of the US, but it also contributes a third of the country’s climate-changing gas emissions.

More than 6,185 million tons (Mt) of hard coal is currently produced worldwide, along with 1,042 Mt of brown coal (lignite). The largest coal-producing countries are not confined to one region – the top five hard coal producers are China, the US, India, Australia and South Africa. Much of global coal production is used in the country in which it is produced; only around 15% of hard coal production is destined for the international coal market. ZsV