2018 Year In Review: Coal drops in EU and US, but grows in India and SE Asia
The International Energy Agency (IEA) published its latest coal market report, Coal 2018, earlier this month revealing what many have already suspected — global coal demand will increase in 2018. Global coal returned to growth in 2017 after two years of decline, rising 1%, and is now expected to grow again in 2018 due in large part to strong coal power growth and demand in China and India.
Unfortunately, for those looking to restrict and constrict coal-fired power generation, the IEA believes that “market trends are proving resistant to change” despite the increased attention across the globe being given to fossil fuel divestment and moves away from coal power generation.
“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,” said Keisuke Sadamori, Director of Energy Markets and Security at the IEA. “For many countries, particularly in South and Southeast Asia, it is looked upon to provide energy security and underpin economic development.”
The global coal dichotomy is highlighted strongly in the change in coal consumption between 2016 and 2017 (below) which, according to most observations, will follow through 2018.
Change in coal consumption, 2016-17
The IEA’s figures can sometimes be a little too fossil fuel-optimistic, and given the timing of this report, no one is around to shed any light on the IEA’s methodology. However, while the IEA has been accused of failing to properly integrate the growth of renewable energy sources into their models — and the attendant speed of fossil fuel decline in Western markets — its Coal 2018 report is unlikely to be too far off the mark, if at all.
The reality is that there is a lot going on in the global power mix at the moment, as can be highlighted by the fact that, even as coal demand is expected to remain relatively stable through 2023, its share of the total energy mix will nevertheless decline from 27% to 25%, according to the IEA. Global coal demand will continue to be constricted in Western markets like Europe and the United States — as policies and natural market dynamics push these regions away from coal and towards renewable energy sources — but will be offset by strong growth in India and other Asian countries. Specifically, India’s increase in coal demand is currently 3.9% per year, but is slowing, as the country continues to invest in a large-scale expansion of its renewable energy sector. The IEA also expects to see significant increases in coal use in Indonesia, Vietnam, Philippines, Malaysia, and Pakistan.
Coal power generation in India continues to grow
Unsurprisingly, China is the world’s main source of coal demand — accounting for 14% of global primary energy, the largest share in the world — but the IEA expects to see a gradual decline in demand through the report’s forecast period as the country continues to implement clean air policies that will crack down on polluters and serve to somewhat constrain China’s coal demand. The IEA expects Chinese coal demand will fall by around 3% over the next five years.
In the West, however, the equations are not as simple as they might first appear. Large-scale coal declines are the hallmark of the energy sector in the United States and Europe. US coal consumption is expected to hit its lowest level in 39 years in 2018, according to the United States’ own Energy Information Administration, down to 691 million short tons (MMst), a level not seen since 1979.
Demand in the United States is being heavily influenced by both the explosive growth of renewable energy generation sources such as wind and solar as well as the drop in natural gas prices, which together have served to consistently eat away at the United States’ coal industry.
Across the pond, however, the IEA highlights a “a tale of two Europes” as Western Europe continues on its hard turn away from coal consumption — tied in with national and regional action on climate change and air pollution — and Eastern Europe continues to not only engage in business as usual coal consumption, but in some places is actively building new coal power plants (such as in Poland, Greece, and in the Balkans).
Coal’s share in power generation
The IEA, therefore, also highlights the role that carbon capture, utilization and storage (CCUS) will play in bridging the gap between countries which are choosing to voluntarily reduce their coal consumption levels and those countries which view it as a necessary means towards energy independence and economic growth. It is nothing but a stop-gap measure, but one that might prove ultimately vital if South and Southeast Asian countries set on developing coal are to also contribute towards reducing global warming.
“Tackling our long-term climate goals, addressing the urgent health impacts of air pollution and ensuring that more people around the world have access to energy will require an approach that marries strong policies with innovative technologies,” said Keisuke Sadamori. “It must rely on all available options – including more renewables, of course – but also greater energy efficiency, nuclear, CCUS, hydrogen, and more.”