Coal

After decades of near-uninterrupted growth, analysis suggested global electricity production from coal was on track for a record fall in 2019. Generation for the year was projected to come in 3% below the level in 2018, a reduction of some 300TWh.

This article first appeared in ESI Africa Issue 1-2020.
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In the past three and a half decades, only two other years have seen declining coal power output: a fall of 148TWh in 2009 in the wake of the global financial crisis; and a 217TWh cut in 2015 following a slowdown in China – states Carbon Brief, a UK-based organisation.

The reasons for the historic projected drop in coal-fired generation in 2019 vary from country to country, but include increased electricity generation from renewables, nuclear, and gas, along with slowing or negative power demand growth.

Across the developed countries that make up the OECD, there has been strong growth in wind and solar generation in 2019, as well as reductions in electricity demand related to slower global economic growth and trade.

Falling demand is particularly clear in Japan and South Korea (part of OECD Asia Oceania), where exports have dropped sharply. In both countries, nuclear generation increased substantially, pushing down coal use. In North America, about 60% of the fall in coal came from switching to gas, as coal plants closed and new gas plants opened.

Over the preceding two years, 2017 to 2018, reductions in coal generation in the US and EU have been offset by increases elsewhere, particularly in China. In 2019, however, the fall in developed economies was accelerating, while coal generation in India and China was slowing sharply, precipitating a global reduction.

Snapshot: What is happening, country by country?

In China, electricity demand growth slowed to 3% in 2019, down from 6.7% over the past two years. Non-fossil energy sources have met almost all this demand growth. The country’s demand for coal-fired power depends on the interplay between clean electricity growth and rising demand. The gap between the two, if any, is filled with coal.

This means that when electricity demand is growing strongly, coal dependence comes to the fore. With these conditions, 2017-2018 saw coal-fired power generation grow at an average of 6.6% year on year. However, 2019 saw strong nuclear, wind and hydro power generation and relatively weak overall electricity demand growth, with coal use in electricity flat lining.

At the same time, Chinese power firms have been continuing to add new coal-fired power plants to the grid at a rate of one large plant every two weeks. This has driven coal-fired power plant utilisation rates – the share of hours in the year when they are running – back down to record lows of 48.6%. This is the fourth year in a row that the Chinese national average has been below 50% – and also below the global average, which stands at 54%.

Back in 2012, the International Energy Agency said: “China is coal, coal is China.” Fast forward to 2019 and the country still dominates the global picture for the fuel. As coal-fired generation has declined in Europe and the US, China’s dominance in power sector coal use has increased and is set to reach a record 48.1% of the global total in 2019. China is the world’s largest coal producer, consumer and importer.

However, 2019 has also seen the first contracts for wind and solar plants that will generate power at the same price as coal power plants, putting China on a path to renewable energy “grid parity” as those projects come online in 2020.

The US is on track for one of its largest annual declines in coal-fired power generation. Year-to-date August 2019, coal-fired power was down 13.9% compared with the same period in 2018. August 2019 saw coal-fired power generation down 18.2% year-on-year. Coal unit retirements in the US have continued at near record rates. Year-to-date data shows 57 units, with a capacity of 14.0 gigawatts, that were all retiring in 2019 – some 5.8% of the US coal fleet. This compares with 15.5GW (6.0%) of retirements in 2018.

Electricity demand growth in India continued to slow dramatically across the first ten months of 2019. In October, electricity demand actually fell by 13.2% against the same month in 2018. Collectively, power from all non-coal sources grew by about 12% in January to September, leading to a downturn in coal-fired generation that is accelerating sharply. Coal-fi red generation in October fell by 19% year-on-year to the lowest level since 2014.

Heavy monsoon rains affected industrial power demand, but as demand continued to plummet in November, a broad slowdown in industrial output was becoming increasingly apparent. This suggests that the country’s CO2 emissions growth is slowing further from the already low annual rate of 2%, which we estimated from data for the first half of 2019. The average thermal power plant utilisation rate in India is below 58%, meaning substantial idle coal capacity.

In the EU, an unprecedented 19% year-on-year decline was seen in coal-fi red power generation in the first half of calendar year 2019. This accelerated in the second half of the year to an estimated 23% fall in 2019. Around half the fall in coal reflects the impact of new wind and solar. The other half is due to a switch from coal to gas.

The coal-gas switch happened as the carbon price in the EU Emissions Trading System rose above €20 per tonne of CO2 and gas prices fell, pushing gas generation to be cheaper than coal throughout 2019.

Because very few new gas plants are being built in Europe, further coal-gas switching will be constrained in subsequent years. The expansion of wind and solar is increasing, however, and this will be the driving factor displacing not only coal generation, but also output from gas in the future, as long as demand growth remains tepid or negative.

All western European countries saw big percentage falls of coal use – from 22% year-on-year in Germany to 79% in Ireland – in the first half of 2019. There were times of zero or near-zero coal generation in many western European countries. For example, coal was less than 2% of the electricity mix in Ireland, France and the UK, and only 6% in Spain and Italy, across the first half of 2019. The UK had two weeks in May with all its coal plants switched off for the first time since the Industrial Revolution began.

Germany has seen by far the biggest cut in coal generation in absolute terms, with both hard coal and lignite falling substantially. The falls in central and eastern European countries have been much smaller, due to near-zero installations of wind and solar, as well as limited gas-fi red capacity.

Out of the 17,000MW of renewables installed across Europe in 2019, Poland accounted for just 39MW, Czechia 26MW, Romania 5MW and Bulgaria 3MW. Coal use fell 6% in Poland as a new gas plant at Plock came online and fell 16% in Greece as gas generation picked up. In Slovenia and Bulgaria, coal generation rose slightly.

South-east Asia is often quoted as being a driver of growth for the global coal industry. Other than Indonesia, itself a major coal producer, south-east Asia is certainly a region that is increasingly reliant on imported thermal coal. The IEA Renewables 2019 report highlights how the region lags behind the rest of the world in diversifying into renewable energy. However, there are some signs that this is changing. For example, Vietnam saw a tenfold increase in total solar installed in 2019.

Nevertheless south-east Asia was expected to see coal-fi red power generation growing at 10% in 2019, given the commissioning of a number of new coal plants started earlier this decade. The largest increase in 2019 came from Vietnam, where coal imports doubled, while domestic coal output has increase

South Korea’s thermal coal imports in 2019 to July were down 10% year-on-year and the IEA reports coal-fi red power generation in the same period was down 9.8%, putting the country on track to a record reduction in coal-fi red power.

This is due to a range of factors including increased nuclear power generation and a 28% increase in the country’s coal tax to US$40 per tonne, imposed in April 2019. The national emissions trading scheme, introduced in 2015, has also had an increasing impact, as have seasonal coal plant closures due to extreme air pollution.

In 2018, South Korea was the fourth largest coal-importing nation globally, behind China, India and Japan. However, the South Korean government has proposed increasing the country’s renewable electricity target up to 30-35% by 2040, a rise from 8% today.

In other countries, South Africa’s total power generation fell 1.5% in January to August 2019. In Russia, thermal power generation increased by 1.6% in January to September 2019, both slowing down from 2018. Japan saw thermal coal imports in January to September 2019 fall 3.5% year-on-year to 82m tonnes – including a dramatic 8% year-on-year decline in the first seven months – reflective of electricity demand that is relatively flat and rising nuclear power generation.

Overall, with China’s strong growth in electricity demand during 2017-18 driven largely by the uplift in output in traditional heavy industry – steel, cement, flat glass – and property sectors, thermal coal use globally increased as a result in 2017 and 2018, driving the fastest increase in CO2 in seven years.

But the rapid increase in non-fossil sources of power, CO2 pricing and coal-plant retirements, assisted by a global economic growth slowdown, are pointing towards coal-fired power generation experiencing a record year-on-year decline in 2019. ESI

Acknowledgement

This article is published from a Carbon Brief blog post. Analysis: Global coal power set for record fall in 2019.