Following the recent COP28 climate conference, experts predict a potential turning point for coal. They believe global coal use in power generation may soon reach its highest level ever, marking the start of a sustained decline.
Over 100 years, coal has become the backbone of electricity generation, powering the global economy.
Despite being the most polluting fossil fuel, coal remains a stubborn source of global energy.
Energy experts at Wood Mackenzie predict that 2024 could be the turning point for global coal consumption, marking the start of a decline.
Wood Mackenzie’s forecast hinges on a potential economic recovery in China, which could boost coal use in its power plants.
According to Natalie Biggs, head of thermal coal markets at Wood Mackenzie, coal’s resilience is undeniable.
Coal’s decline hasn’t been as swift as some predicted. Wood Mackenzie previously forecast peak coal demand in 2013, highlighting the challenges in accurately pinpointing this turning point.
Phasing out coal in Asia remains challenging. Coal is currently the most affordable and dependable source of electricity, and large-scale renewable alternatives with battery storage won’t be cost-competitive for over a decade.
Biggs identifies the ongoing construction of coal plants in China, India, and Southeast Asia as a major hurdle. These existing projects will keep coal relevant for years to come, making it difficult to pinpoint the exact peak of coal consumption.
Coal is at the top
A significant outcome of the recent COP28 summit in Dubai was a near-universal agreement among countries to move away from fossil fuels, a key step in addressing climate change.
Despite record fossil fuel consumption, nearly 200 countries at COP28 reached a landmark agreement to transition away from them, underscoring the immense challenge of actually achieving this goal.
John Kerry, a key US climate official, emphasized the urgency of phasing out coal power plants globally. He argued for a complete ban on new permits for these facilities, acknowledging the current lack of progress towards this goal.
Coal use around the world reached a record level in 2022, showing strong and continued demand.
At COP26 in 2021, there was a strong push to eliminate coal power entirely. While the final agreement didn’t go that far, countries did commit to speeding up the process of phasing out coal plants that don’t capture emissions.
Despite pledges to move away from coal at COP26, consumption reached an all-time high just one year later.
In a surprising twist, the price of thermal coal, used for electricity generation, skyrocketed in 2022 following Russia’s invasion of Ukraine. This surge even surpassed the price of metallurgical coal, a higher quality type typically used in steel production and usually more expensive.
The most recent COP agreement, reached last month, emphasizes a shift away from fossil fuels like coal and oil in how we generate energy.
Coal power is on the decline in North America and much of Europe. Places like Ontario have already eliminated it completely, and Canada has a national phase-out plan in place that’s even exceeding some regional requirements.
Alberta used to rely heavily on coal for electricity, with half coming from coal plants just ten years ago. Now, only two remain, and they’re scheduled to switch to natural gas in 2024.
Despite progress in some areas like North America and Europe, global coal use remains high. This is largely due to new coal plants being built in other regions, particularly China, the world’s biggest coal consumer.
While new coal plants are being built, particularly in China, they are often more efficient than older facilities. In some cases, they might even be used as backup when renewable energy sources aren’t generating enough power, according to Paul McConnell from S&P Global Commodity Insights.
An expert predicts a global peak in coal demand within the next few years. However, he acknowledges that weather patterns and China’s economic situation could influence this timeline.
A peak in global oil demand is expected around 2030, with natural gas following suit by 2040, according to a research firm’s forecast.
While there’s uncertainty about the exact year, expert Paul McConnell believes peak coal demand likely occurred in 2022 or could happen within the next two years (2024-2025).
Paul McConnell predicts a long-term downward trend for coal demand in the foreseeable future.
India’s need for coal
Despite a potential global peak in coal use, China’s consumption is expected to rise until 2030, with India potentially following a similar trend until 2040.
Analysts point to India’s surging electricity needs and the challenges of job displacement in the coal sector as reasons why the country might rely on coal for a decade longer than the global peak.
India and China are global leaders in coal mining.
According to Paul McConnell, coal’s dual role as a major energy source and a significant employer in India is likely to continue driving up demand for the foreseeable future.
Coal’s forthcoming
Shifting away from coal presents hurdles beyond job displacement and the cost of alternative energy sources in some countries.
While some countries are exploring carbon capture technology to reduce emissions from coal plants, this approach may prolong coal dependence despite its environmental benefits.
The growing popularity of electric vehicles, green steel production, and overall electrification efforts across industries will likely lead to a surge in global demand for electricity.
An analyst from Wood Mackenzie, Fergus Biggs, highlights the challenge: as economies require more electricity, shutting down coal plants becomes more difficult.
Despite the urgency to combat climate change by reducing reliance on fossil fuels, energy researchers caution against overly optimistic predictions of their swift decline. This is because increasing global energy demands create pressure to maintain existing sources like coal plants.
