Introduction
The Paris-based International Energy Agency (IEA) published its annual report on global coal trends on its publication on Friday 16 December.
The report finds that the world’s coal consumption is expected to reach a new high in 2022 due to the energy crisis. The IEA forecasts that it will then remain flat at that level through 2025 as declines in mature markets are offset by continued robust demand in emerging Asian economies.
Main Findings
- Global coal consumption is set to rise 1.2% in 2022 to reach an all-time high of more than 8 gigatonnes (Gt), exceeding the previous record set in 2013. Global coal-fired power generation is set to rise to a new record of around 10.3 terawatt-hours (TWh), while coal production is forecast to rise by 5.4% to around 8.3 billion tonnes.
- It forecasts the world’s coal consumption will remain flat to 2025 -the time horizon for the report- in the absence of stronger efforts to accelerate the transition to clean energy.
- Higher natural gas prices amid the global energy crisis led to an increased reliance on coal for generating power, but slowing economic growth reduced electricity demand and industrial output.
- In China, the world’s largest coal consumer, drought forced a shortage of renewable power and increased demand for coal power generation during the summer, despite strict Covid-19 restrictions slowing demand.
- In Europe, gas prices and similar shortages in renewables during the summer of 2022 led countries to turn to cheaper coal power, as cooling for nuclear power was compromised in countries like France and hydropower output was weaker.
- The report predicts coal consumption will remain flat between 2022 and 2025; a decline in mature markets in Europe and North America will be offset by strong demand in emerging Asian economies. This means coal will continue to be the global energy system’s largest single source of carbon dioxide (CO2) emissions.
- The largest increase in coal demand is expected to be in India at 7%, followed by the European Union at 6% and China at 0.4%. Europe’s coal demand has risen due to more switching from gas to coal due to high gas prices and as Russian gas has reduced to a trickle. However, by 2025 European coal demand is expected to decline below 2022 levels, the report claims.
- Production is expected to reach a peak by 2025 when the IEA believe it will fall below 2022 levels. The three largest coal producers – China, India and Indonesia – will all hit production records this year but there is no sign of surging investment in export-driven coal projects. This reflects caution among investors and mining companies about the medium- and longer-term prospects for coal, the report claims.
WCA View
- It forecasts the world’s coal consumption will remain flat to 2025 -the time horizon for the report- in the absence of stronger efforts to accelerate the transition to clean energy.
- Keisuke Sadamori, Director of Energy Markets, states “At the same time, there are many signs that today’s crisis is accelerating the deployment of renewables, energy efficiency and heat pumps – and this will moderate coal demand in the coming years. Government policies will be key to ensuring a secure and sustainable path forward.”
- The endorsement of intermittent electricity sources and electricity-intensive consumer solutions seem to contradict each other when said in the same sentence.
- Higher natural gas prices amid the global energy crisis have led to increased reliance on coal for generating power, but slowing economic growth has at the same time caused a forced ‘destruction’ of demand and constrained industrial output, while at the same time, renewables capacity levels also reached record levels, but clearly not enough to offset the energy crisis.
- Coal will continue to be the global energy system’s largest single source of carbon dioxide (CO2) emissions, emissions will continue to grow in Asia, yet ironically, the wealthy nations will allow emissions to go unchecked by paying no interest in advocating or investing in CCS in the coal power sector, and instead wait for the end of the lives of baseload-capable coal plants where the rich Global North hope poorer countries will close coal plants and replace them incompletely with intermittent renewables.
- The largest increase in coal demand is expected to be in India at 7%, followed by the European Union at 6% and China at 0.4%. Europe’s coal demand has risen due to more switching from gas to coal due to high gas prices and as Russian gas has reduced to a trickle. Energy consumption, however, will remain a fraction of Europe on a per capita basis, and small increments will cause large changes. Similarly, in China, a small increase in such a large energy market could produce huge changes in absolute terms.
- By 2025 European coal demand is expected to decline below 2022 levels, the report claims, therefore demonstrating optimism for non-coal alternatives, i.e. the LNG market and renewables developments, both of which have proved highly disruptive and led to staggering levels of price inflation across the world.
- Production is expected to reach a peak by 2025 when the IEA believe it will fall below 2022 levels. The three largest coal producers – China, India and Indonesia – will all hit production records this year but there is no sign of surging investment in export-driven coal projects. This reflects caution among investors and mining companies about the medium- and longer-term prospects for coal, the report claims.
Key Takeaways
- Attention appears to be drawn towards coal peaking and creating the conditions to support record levels of consumption and production due to demand in Asia in short to medium term.
- The report suggests that emissions will also follow the demand for coal and therefore keep rising. Rather than concluding that emissions from fossil-fuelled power need to be addressed through advocacy and financial support for modern advanced coal technology, the report dwells on the warning of the spike in emissions.
- Asia, particularly India and China are highlighted as parties responsible for future rising emissions, but the report recognises that development, social and employment considerations must be taken.