Rapid economic recovery is pushing global coal power generation to a record in 2021 and overall coal demand to a potential all-time high as soon as 2022, underscoring the urgent need for policy action, according to Coal 2021 report published by the International Energy Agency (IEA).
Global power generation from coal is expected to jump in 2021 by 9 percent to an all-time high of 10,350 terawatt-hours, after declining in 2019 and 2020. The recovery is being driven by this year’s rapid economic upswing, which has lifted electricity demand much faster than low-carbon supplies can keep up. The steep rise in natural gas prices has also increased demand for coal power by making it more cost-competitive.
In 2021, global coal demand, including uses other than electricity generation, such as cement and steel production, is expected to expand by 6 percent. This increase will not push it above the previous levels set in 2013 and 2014. Overall coal demand could hit new all-time highs as early as 2022, depending on weather patterns and economic growth.
In China, where more than half of global coal-fired electricity generation takes place, coal power is expected to grow by 9 percent in 2021 despite a slowdown at the end of the year. In India, it is forecast to grow by 12 percent. This would set new all-time highs in both countries, even as they roll out impressive amounts of solar and wind capacity.
Fatih Birol Executive Director IEA
“Coal is the single largest source of global carbon emissions, and this year’s historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net zero. Without strong and immediate actions by governments to tackle coal emissions in a way that is fair, affordable and secure for those affected, we will have little chance, if any at all, of limiting global warming to 1.5 °C.”
While coal power generation in the United States and the European Union is expected to increase by almost 20 percent this year, it will not be enough to push it above 2019 levels. Due to slow electricity demand growth and rapid renewable energy expansion, coal use in these two markets is likely to drop again next year.
According to the report, global coal demand declined by 4.4 percent in 2020, the highest drop in decades but much less than the annual drop that was estimated at the height of the lockdowns early in the pandemic.
Coal prices have been on a rollercoaster ride over the past two years. After falling to $50 per ton in the second quarter of 2020, they started to climb towards the end of the year.
In 2021, prices were lifted further by demand outstripping supply in China, the world’s largest coal user, as well as supply disruptions and rising natural gas prices globally. In early October 2021, coal prices reached all-time highs, with imported thermal coal in Europe hitting $298 per ton. As of mid-December, European prices were back below to $150 per ton.
