Energize Weekly, December 26, 2018
Global coal consumption is set to rise for the second consecutive year in 2018 and demand is projected to be stable over the next five years—as the world divides between coal-free and coal-burning regions, according to an International Energy Agency (IEA) market forecast.
After two years of decline, coal demand was up 1 percent in 2017 to 7,585 million tons and is set to rise again this year, spurred by demand from China, India and Southeast Asia.
“Despite significant media attention being given to divestments and moves away from coal, market trends are proving resistant to change,” the IEA said.
The IEA says global demand will be stable through 2023 as coal use declines in Europe and the United States while it rises in Asia and China.
While China is the largest market, consuming one out of every four tons of coal worldwide, India has the fastest growth with consumption rising 3.9 percent a year, as power demand increases 5 percent a year.
Coal’s share of the global energy mix will drop to 25 percent from 27 percent by 2023, primarily due to growth of renewables and natural gas, the IEA said.
“The story of coal is a tale of two worlds with climate action policies and economic forces leading to closing coal power plants in some countries, while coal continues to play a part in securing access to affordable energy in others,” Keisuke Sadamori, IEA director of energy markets and security, said in a statement. “For many countries, particularly in South and Southeast Asia, it is looked upon to provide energy security and underpin economic development.”
By 2023, France and Sweden will have closed their last coal power plants, leaving Germany as the only significant coal consumer in Western Europe. Mirroring the larger global coal schism, coal demand will remain stable in Eastern Europe.
The stability seen in the market, however, does not mean coal is not under pressure.
“Coal’s fate largely rests on the Chinese power sector,” the IEA said and the agency is projecting that structural changes in the economy will over time reduce its electricity intensity blunting the further growth of coal by 2020.
The key markets will increasingly become India and five South and Southeast Asian countries—Indonesia, Pakistan, Bangladesh, Philippines and Vietnam—with a combined population of more than 800 million people.
The increased demand and tighter markets have driven up coal prices in the last two years, putting more cash in coal producers’ pockets. While that has led to the expansion of some existing operations, there has been no investments in new mines.
The risks of another downturn, climate policies targeting coal and the threat of stranded assets have tempered interest in new production, the IEA said.
“Banks, insurance companies, hedge funds, utilities and other operators in advanced economies are exiting the coal business,” the agency noted. “In many parts of the world, growing opposition to coal projects has provided strong disincentives for investors.”
The two-world coal scenario is making it difficult to hammer out global climate policy, reduce coal emissions and further the goals set by the Paris climate accord, the IEA said.
“Carbon capture, utilization and storage (CCUS) is the bridge between the two worlds,” the agency said, referring to the technology that can capture and store or reuse carbon dioxide emissions from power plants. If there is to be continued coal use in the longer term while meeting the overall goals of the Paris agreement, CCUS has to be in the portfolio.”
