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Global coal-fired power generation to reach an all-time high in 2021: IEA

On Monday, January 10, 2022 at 05:46 IST

With electricity demand outpacing low-carbon supply, and with steeply rising natural gas prices, global coal-fired power generation is estimated to have increased by 9 percent in 2021 to hit an all-time high, the International Energy Agency (IEA) said in its latest report.

Paris-headquartered IEA estimated global coal-based power generation at 10,350 terawatt-hours (TWh). However, coal’s share of the global power mix in 2021 is expected to be 36 percent, around 5 percentage points below its 2007 peak. In the United States and the European Union, coal power generation is forecast to increase by almost 20 percent in 2021 but will not reach 2019 levels.

By contrast, the estimated growth of 12 percent in India and 9 percent in China will push coal power generation to record levels in both countries. Taking into account the rebound in global industrial output, overall coal demand worldwide is expected to grow by 6 percent in 2021, bringing it close to the record levels it reached in 2013 and 2014.

Meanwhile, the decline in global coal-fired power generation in 2019 and 2020 led to expectations that it might have peaked in 2018. But 2021 dashed those hopes, the IEA report said.

Even before the pandemic, coal faced a difficult outlook for 2020. Demand was being squeezed by a mild winter in the Northern Hemisphere, low natural gas prices, and strong renewables growth. When electricity demand and natural gas prices plummeted as the Covid-19 crisis escalated, coal-fired power generation bore the brunt of the impacts. The reduced industrial activity also hit coal demand, although in a more limited way. In the early months of the crisis, a double-digit annual decline in global coal demand looked plausible.

But economic recovery in China came sooner and stronger than initially expected, with year-on-year growth resuming as early as April. With economic recovery following elsewhere and a cold snap in December in Northeast Asia, global coal demand fell by 4.4 percent in 2020 – the largest decline in many decades but less than initially expected. The regional disparities were large. Coal demand grew by 1 percent in China in 2020 but dropped by nearly 20 percent in the United States and the European Union – and by 8 percent in India and South Africa.

In an expected move, China’s influence on coal markets is difficult to overstate, the IEA said. China’s power generation, including district heating, accounts for one-third of global coal consumption. China’s overall coal use is more than half of the global total. Coal demand in China is underpinned by fast-growing electricity demand and the resilience of the heavy industry.

“This is despite a decade of strong and sustained efforts to diversify the country’s power mix – during which China has expanded hydro, wind, solar, and nuclear power capacity by more than any other country in the world – and intensive switching from coal to natural gas in the residential heating and light industrial sectors. China is also the world’s largest coal producer and importer, with domestic price swings from supply-demand imbalances immediately impacting international markets,” said the report.

In a surprising move, global coal consumption beyond 2021 is set to revert to the pattern seen over the previous decade: declines in advanced economies offset by growth in some emerging and developing economies.

After its brief rebound in the United States and the European Union in 2021, coal demand will resume its decline through 2024. This is mostly driven by the power sector where slow electricity demand growth and rapid expansion of wind and solar PV are eating into coal power generation. In addition, a big part of the recent switching from natural gas to coal will reverse as gas prices retreat from their highs.

“At the same time, countries such as Viet Nam, the Philippines, and Bangladesh, where very strong growth in coal demand had been expected a few years ago, are now set to show more modest increases as they shift more towards sources of electricity that are less carbon-intensive. However, global coal trends will be shaped largely by China and India, who account for two-thirds of global coal consumption, despite their efforts to increase renewables and other low-carbon energy sources,” the report added.

In China, coal demand growth is expected to average less than 1 percent per year between 2022 and 2024. In India, stronger economic growth and increasing electrification are forecast to drive coal demand growth of 4% per year. India’s growing appetite for coal is set to add 130 million tonnes (Mt) to coal demand between 2021 and 2024. Based on current trends, global coal demand is set to rise to 8,025 million tonnes in 2022, the highest level is ever seen, and to remain there through 2024.


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