Fading fast in the US and Europe, coal still reigns in Asia

The electricity generated by coal worldwide is expected to fall this year by the largest amount ever. But this may not be the start of a lasting decline, according to the latest analysis by the International Energy Agency.

This is because the future of coal will be determined largely in Asia, whose share of global coal power generation soared from just over 20% in 1990 to almost 80% this year. Coal power generation in the region is set to keep growing in the coming years, offsetting steep declines in the United States and Europe.

Those two markets are expected to be the main drivers of the drop in coal power worldwide this year. The global decline of over 2.5% (over 250 terawatt hours) would be the third since the year 2000. 

In the United States, coal generation is plummeting, following a big wave of coal plant retirements in 2018. The industry is facing fierce pressure from the continued expansion of electricity generation from renewables like solar PV and wind, as well as from cheap and abundant natural gas supplies. In the European Union, low natural gas prices and increased carbon prices have led to a massive shift from coal to gas in the power sector. In some cases, gas plants have even replaced lignite-fired power generation, the cheapest coal-based electricity in Europe. As a result, coal power generation in the European Union is expected to experience its biggest ever decline this year (around 20%, i.e. over 130 terawatt hours).

In Asia, the picture is very different. Coal power generation continues to rise in the region, driven by economic growth, an increasing population and an expanding middle class using electrical appliances.

Coal is struggling in one major Asian market this year. Coal power generation in India is set to decline this year for the first time since 1973. This is the result of a combination of unusual factors, including a relatively low increase in electricity use because of slower economic growth and high hydropower output displacing some coal power. But we forecast that coal power generation in India will grow 5.7% per year on average over the next five years.

The following chart shows how Asia’s share of global coal-based generation has climbed since 1990. This is a key issue for efforts to combat climate change. As Asia’s share continues to rise, the rest of the world is becoming increasingly irrelevant in the conversation about coal power generation, which is one of the key sources of global CO2 emissions.

There are three important points to bear in mind about coal power generation in Asia. The first is the stage of development. The chart below shows electricity consumption per capita in Asia and in the European Union. Per capita electricity use in Asia – even when it includes Japan, Korea and China – is less than half of the EU level. And per capita use in the United States is double that of the European Union. To put it in perspective, additional electricity may be used for an extra television in a household in Germany. In India, it may be needed to power a fridge to keep a family’s vital medicines cool.

The second important point is what is happening to consumption trends. European electricity demand has been stagnating or even declining for decades. In Asia, electricity demand is increasing strongly. In a stagnating system, where new capacity is not needed, the integration of additional variable renewable sources like wind and solar PV is helped by existing conventional plants, which can be phased out over time.

In an expanding system, new capacity is needed, and the system cannot afford to retire existing plants unless they become obsolete. China and India are leading the world in the deployment of variable renewables, but their electricity systems also rely heavily on coal plants to keep the lights on for their vast populations.

The third point is the age of the coal fleet. The average age of a coal plant in Asia is around 12 years, three decades younger than in the United States or Europe. More than half of the coal power fleet in Asia was built in the past 19 years.

This makes it very possible that many Asian plants could continue operating for decades to come. This situation highlights the appeal of carbon capture, utilisation and storage – or in a more comprehensive approach, the retrofitting, repurposing and retiring strategy outlined in World Energy Outlook 2019.

More analysis and forecasts will be available in Coal 2019, the IEA’s annual market report that will be released on 17 December. It covers global coal demand, supply and trade, with regional and sectoral breakdowns through 2024.