Energize Weekly, January 8, 2020
Global coal demand in 2019 dropped, driven by coal-fired plant retirements in Europe and the U.S., but should be stable over the next five years due to growth in China and Asia, according to the International Energy Agency (IEA).
The outlook for coal in the U.S. over the next five years is of continued reductions and its share of electricity generation continues to decline, according to several analysis.
Coal demand saw a 1.1 percent rebound in 2018 with coal-fired electricity generation reaching an all-time high and despite the sharp drop in 2019, the IEA it would not be “a lasting trend.”
“Over the next five years, global coal demand is forecast to remain stable, supported by the resilient Chinese market, which accounts for half of global consumption,” the IEA said.
The 2019 drop in coal demand is the result of the largest decline ever in coal-fired electricity generation, 2.5 percent or about 250 terawatt-hours for the year, led by sharp cuts in the U.S. and Europe.
In the U.S., the development of cheap shale gas has led to natural gas-fired plants supplanting coal units with natural gas-fired generation increasing 63 percent since 2010 and coal-fired generation decreasing about 50 percent.
The IEA forecasts coal demand in the U.S. continuing to decline by almost 4 percent a year over the next five years, and coal’s share of the electricity supply dropping to 21 percent in 2024 from 28 percent in 2018.
Total U.S. coal production for 2019 was about 703 million short tons, a 6.6 percent drop from 2018, according to the U.S. Energy Information Administration.
An analysis from investment bank Morgan Stanley & Co. estimated that as much as 700,000 megawatts for coal-fired generation in the U.S. could be “economically at risk” to newer and cheaper renewable energy technologies and that coal’s share of power generation could drop to 8 percent by 2030.
In Europe, the combination of clean air and a greenhouse gas reduction polices, declining prices for wind and solar electric generation and cheap natural gas has dampened coal demand. “In Europe and the United States, coal power generation is sinking to levels not seen in decades,” the IEA said.
Nevertheless, the IEA projects that coal demand will rise just under 1 percent a year over the next five years. While its share of power production will drop to 35 percent from 38 percent, it will still be the largest single power source worldwide.
“This is not the end of coal, since demand continues to expand in Asia,” Keisuke Sadamori, the IEA’s director of energy markets and security, said in a statement. “The region’s share of global coal power generation has climbed from just over 20 percent in 1990 to almost 80 percent in 2019, meaning coal’s fate is increasingly tied to decisions made in Asian capitals.”
India’s coal-fired generation is projected to increase 4.6 percent a year through 2024 and the country’s coal demand to grow more quickly than any other country in absolute terms.
Coal demand in Southeast Asia, led by Indonesia and Vietnam, is expected to increase 5 percent a year over the next five years.
“Ultimately, global trends will depend largely on China, where half of the world’s coal is produced and consumed,” the IEA said.
The agency is projecting a slower growth rate for coal in China, with its share of power production declining to 59 percent in 2024 from 67 percent in 2018, with demand plateauing in 2022 followed by a slow decline.
The IEA said that the coal demand forecast could be impacted by climate change policies aimed at reducing carbon emissions and renewable energy generation, particularly solar photovoltaics (PV) and wind – the world’s fastest growing power sources.
“Wind and solar PV are growing rapidly in many parts of the world. With investment in new plants drying up, coal power capacity outside Asia is clearly declining and will continue to do so in the coming years,” Sadamori, said.
