Global coal demand seen lowest in decade due to China slowdown

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Picture courtesy: BHP

Reduced demand from China, which represents, is pushing global coal demand after more than a decade of robust growth, the International Energy Agency (IEA) said in annual coal market report. Greater policy support for renewable energy and energy efficiency – the foundation of the COP21 agreement in Paris – is also expected to dent coal demand.

The IEA’s Medium-Term Coal Market Report 2015 slashed its five-year estimate of global coal demand growth by more than 500 million tonnes of coal equivalent (Mtce) in recognition of the tremendous pressures facing coal markets. The revision comes as official preliminary data indicate that a decline in Chinese coal demand occurred in 2014 and is set to accelerate in 2015. A decline in coal consumption in China for two consecutive years would be the first since 1982.

Coal demand in China is sputtering as the Chinese economy gradually shifts to one based more on services and less on energy-intensive industries. New Chinese hydro, nuclear, wind and solar power are significantly curtailing coal power generation, driven not only by energy security and climate concerns but also by efforts to reduce local pollution, the report said.

Preliminary data show that India is likely to overtake China as the world’s largest coal importer in 2015. The Indian government’s push for universal energy access and an expansion of manufacturing will drive electricity growth, the report said. Besides India’s ambitious renewable targets (175 GW of renewables by 2022, of which 100 GW are solar PV), coal will provide a significant share of the additional power requirements – as much as 60 percent through 2020, the report added.

The report said that with the recent COP21 agreement in Paris calling for the global increase in temperatures to be limited to “well below” 2 degrees Celsius, the IEA reiterated that Carbon Capture and Storage (CCS) technology will be essential for enabling future use of coal without large carbon dioxide emissions.

The report sees coal demand outside China modestly increasing through 2020 as the structural decline in Europe and the United States is more than offset by growth in India and Southeast Asia. The Indian government’s push for universal energy access and an expansion of manufacturing will drive electricity growth. In addition to India’s ambitious renewable targets (175 GW of renewables by 2022, of which 100 GW are solar PV), coal will provide a significant share of the additional power requirements – as much as 60% through 2020. Indeed, preliminary data show India overtaking China as the world’s largest coal importer this year.

The region with the highest growth rate in coal use in the outlook period is in Southeast Asia, where Indonesia, Vietnam, Malaysia and the Philippines among others plan to underpin their power generation with new coal power plants. Unfortunately, about half of the new coal-fired generation capacity under development in the region still uses inefficient subcritical technologies, the report said.

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