IEA: Coal power set to reach record high in 2021 and keep growing, threatening global net-zero transition

Generation

Published today (17 December), the Agency’s ‘Coal 2021’ analysis and forecast through to 2024 states that global coal power generation fell by 4.4% in 2020. While this was the sharpest decline since World War Two, it was less steep than the Agency originally predicted. In 2021, global coal power generation is on course to increase by 9% to an all-time high. Demand is also likely to be up 6% year-on-year.

While coal’s share of the global power generation mix is likely to be 36% this year, down from 41% at its peak in 2007, the world now plays host to a record level of coal power generation capacity, the IEA report states.

The IEA’s new analysis reveals how the coal drop-off due to the pandemic was steeper in the US and EU than expected, with demand dropping 20% in these geographies between 2019 and 2020. But demand in China actually grew by 1% in this timeframe, and both demand and supply have rebounded rapidly in China and India this year.

“China’s influence on coal markets is difficult to overstate,” the IEA said in a statement.

“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 heavy industry.

“This is despite a decade of strong and sustained efforts to diversify the country’s power mix …  and intensive switching from coal to natural gas in the residential heating and light industrial sectors.”

Moreover, coal has rebounded strongly in the US, EU and other developed nations, to new highs. The IEA is forecasting a swift decline in these regions through to 2024, but a far slower transition for key developing and emerging economies including China, India, Viet Nam, Bangladesh and the Philippines.

In India, the IEA is forecasting, coal demand will grow by 4% each year through to 2024. The level of growth is likely to be 1% annually for China. These trends will push coal demand to record highs in 2022, and an ultimate peak is not expected in or before 2024. Production, likewise, will likely reach a new high in 2022.

At COP26, China and India notably pushed for a watering down on the headline coal-related commitment in the Glasgow Climate Pact. The final text that “unabated” coal power should be “phased down” (not out) as a priority and that “inefficient subsidies” for all fossil fuels should be removed, although no specified dates are mentioned.

The IEA’s executive director Fatih Birol said: “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.”

The report notes that while action from investors, national net-zero commitments and international agreements – like the Global Coal to Clean Power Transition Statement signed at COP26 – put pressure on coal, the transition is ultimately not fast enough to be compatible with global net-zero by 2050.

Earlier this year, the Agency published its first comprehensive global pathway to delivering global net-zero by 2050 and limiting the global temperature increase to 1.5C. Among the 400+ milestones detailed in the pathway is an immediate halt to new fossil fuel exploration and generation capacity.

Today’s report states that the Agency is not, at this point, able to categorically say how much coal will be needed in a net-zero economy. The level of generation and demand, the report states, will depend on how successful efforts are to deploy carbon capture, utilisation and storage (CCUS) technologies.

For context, global emissions in 2020 were 42 gigatonnes. At present, man-made carbon removal solutions are estimated to be capturing just 38.5 million metric tonnes of CO2e annually; less than one-thousandth of the global total. While a rapid expansion of capacity is forecast, it is, of course, not guaranteed.

Sarah George

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