‘No sign that coal is going to fade away quickly’

Source: By Miranda Willson, E&E News reporter • Posted: Monday, December 21, 2020

Global demand for coal is projected to increase 2.6% next year due to rising consumption in Asia and an anticipated spike in electricity use worldwide, a report from the International Energy Agency said Friday.

Next year’s coal rebound — following an unprecedented decline in demand this year because of the pandemic — will be short-lived, and not significant enough to overtake 2020’s reduction in demand, IEA said. Coal demand in 2021 is still expected to be lower than it was in 2019 and could be even lower than expected if some of IEA’s assumptions are incorrect, the organization said in its “Coal 2020” report.

Still, coal consumption is not likely to decline significantly in coming years because of demand in Asia, posing a major challenge for reaching climate targets compatible with keeping global temperatures at manageable levels, the organization said.

“Renewables are on track to surpass coal as the largest source of electricity in the world by 2025. And by that time, natural gas will likely have taken over coal as the second largest source of primary energy after oil,” Keisuke Sadamori, IEA’s director of energy markets and security, said in a statement.

“But with coal demand still expected to remain steady or to grow in key Asian economies, there is no sign that coal is going to fade away quickly,” Sadamori said.

Coal use in 2020 is expected to fall 5% from 2019 levels, the most significant annual drop since World War II, IEA said. Earlier this year, analysts had estimated that demand reductions would be even steeper, but China — which accounts for over half the world’s coal consumption — saw a more robust economic recovery from the pandemic in the second half of 2020 than anticipated, the report said.

This year’s drop in coal consumption has been one of the most pronounced energy impacts of the pandemic and its economic fallout. It’s one of the reasons global carbon emissions in 2020 are projected to fall, a trend that isn’t expected to continue after coronavirus cases decline and countries ease restrictions (Climatewire, April 17). IEA said global coal demand likely peaked in 2013, when it reached 8 billion metric tons.

One factor that could influence coal use in the U.S. next year is natural gas. U.S. natural gas prices — which have been relatively low since the shale boom — are expected to go up slightly in 2021, resulting in an increase in annual coal demand for the first time since 2013, IEA said. In October, the U.S. Energy Information Administration projected that U.S. coal production would also increase by 19% next year due to higher gas prices and increased electricity demand (Energywire, Oct. 7).

A marginal uptick next year in coal demand in the European Union is also expected, marking the first time since 2012 that demand for the fossil fuel has increased there, IEA said. India, China and some other Asian countries will see more pronounced spikes, with coal demand in Southeast Asia expected to rise by 7% next year, according to the agency.

Although this year’s global drop in coal consumption was unusually steep, coal demand also fell in 2019 by 1.8% after having increased the previous two years. All told, consumption will have fallen by 7% between 2018 and 2020, an “unprecedented” decline during a two-year period since IEA began keeping records of energy use in 1971, the agency said.

Looking ahead to 2025 and beyond, developments in China could be the most significant factor driving long-term coal outlooks and trends, according to IEA. This year, Chinese President Xi Jinping said the country would achieve carbon neutrality before 2060, although questions remain about how the country will achieve that goal and how quickly it will retire its coal fleet (Climatewire, Sept. 23).

“Although China’s sheer scale and growing demand make it difficult to rein in coal consumption, coal’s share in the energy mix has been falling every year for the past decade, and the country’s policies aim to sustain this decline,” IEA said.