Coal globally


The world's insatiable need for energy ... and why coal remains the preferred option in developing countries

Global demand for energy continues to grow. Going back five years, the International Energy Agency (IEA), World Energy Outlook 2016, forecast global energy use  grow by 30.5% by 2040, driven primarily by Asia, under the IEA's "New Policies" scenario. Renewables would grow by 78% out to 2040, natural gas, 49%, nuclear 78% (mainly in China), and coal, by 5%.

From 2020, global demand for coal - for both electricity generation and steel and cement-making – has been fluctuating in different parts of the world and the Covid-19 pandemic is forecast to have a dampening effect on demand in the short term. A rebound during the second half of 2021 is foreshadowed, in particular, in Asia.

The IEA’s Global Energy Review 2020 published in April 2020 forecast a global decrease in demand for coal by 8% in the first quarter of 2020 compared with Q1 of 2019.

The report said that China is responsible currently for more than half of the world’s coal consumption. Coal is used there in 60% of primary energy, including cement, steelmaking and chemicals manufacture, and the percentage is higher for electricity generation.

In October 2020, the IEA produced its World Energy Outlook 2020, assessing that the decline in energy consumption around the world would reduce energy-related CO2 emissions to that of a decade ago. The IEA paints a number of scenarios for the future in terms of energy consumption. It predicts global energy demand growth between 2019 and 2030 of between 4% and 9% depending on the post Covid-19 scenario chosen. That compares with a pre-Covid-19 growth prediction of 12%.

The impact of Covid-19 is being felt most deeply among the world’s most vulnerable, the report says, and this will lead to more use of emissions-intensive energy. To illustrate, of the world’s 773 million people who lack access to electricity, 580m or 75% of that figure live in sub-Saharan Africa. Their priorities in life would be understandably other than worrying about climate change. The overall figures in this category improved by 4% between 2014 and 2018, which is encouraging, nonetheless, reveals the challenge for certain nations of alleviating energy poverty.

More broadly, the IEA considers that Covid-19 will have a permanent impact on coal consumption. Coal will decrease to less than 20% of the global primary energy mix, the lowest percentage since before the Industrial Revolution. In terms of electricity generation, coal falls from 39% of the world total to between 15% and 28% by 2030, depending on the scenario chosen. These figures equate to falls in the absolute consumption of coal not just the relative consumption, a major reversal of global trends over recent decades.

If the IEA is correct, annual coal production will fall over time, on the basis that large parts of the world are restructuring their economies, in particular, in OECD countries. Looking at the numbers, the World Coal Association estimates that the world produced 7.9 billion tonnes of coal in 2019, up on 6.9 billion tonnes in 2015. Reserves today would provide for another 132 years of production at current rates. (The figures do not include lignite or peat.)

Within a scenario of declining global coal demand, the rates of change will be uneven around the world. India’s consumption is predicted to flatline to around 1 billion tonnes a year, Bloomberg has reported, because of higher efficiency in new power plants as older ones are decommissioned and with increasing investments in renewable electricity generation.

As an indication of its intentions, India announced earlier in 2020 an investment of USD$6 billion in coal transport infrastructure, as part of its Covid-19 economic stimulus package.

Reuters reported in November 2020 that China had 100 coal-fired plants under construction, and that the country plans to add 1300 gigawatts of capacity to meet growing demand by 2030.

In May 2020, Global Energy Monitor calculated that about 500 gigawatts of coal power capacity is planned or under construction around the world, with an investment cost of $638 billion. More than 80% of this commitment is occurring in Asia, including in Japan and South Korea.    

In conclusion, the world may see a decline in global coal production in coming years, however, there will still be significant consumption of coal. This is because coal is and will continue to be an essential part of the economic fabric of countries such as China and India (together, one-third of the world’s population) for years and decades to come. Certainly, investment in renewable energy technologies is occurring, and its importance to the world will only continue to increase, however, it would be incorrect to assert that the world is at the brink of a renewable energy transition.