July 24, 2024

Global coal demand is set to remain largely flat this year and next as higher electricity demand in some major economies offsets the rapid expansion of solar and wind, the International Energy Agency said in an update on the coal market.

Global use of coal rose by 2.6% in 2023 to an all-time high, driven by strong growth in the two largest coal consumers, China and India.

While coal demand grew in the electricity and industrial sectors, the main driver was the use of coal to fill the gap created by low hydropower output and rapidly rising electricity demand, the report showed.

“Our analysis shows that global coal demand is likely to remain broadly flat through 2025, based on today’s policy settings and market trends,” said Keisuke Sadamori, IEA’s director of energy markets and security.

“The continued rapid deployment of solar and wind, combined with the recovery of hydropower in China, is putting significant pressure on coal use.

But the electricity sector is the main driver of global coal demand, and electricity consumption is growing very strongly in several major economies,” he added.

Without such strong growth in consumption, there would be a decline in global coal use this year, he said.

Although the continued deployment of solar and wind power is slowing the growth in coal use in China, it’s electricity demand is forecast to rise by 6.5% this year, making a decline in coal consumption unlikely.

In India, coal demand growth is set to slow in the second half of 2024 as weather conditions return to seasonal averages and hydropower output improves.

After falling by more than 25% in 2023, coal power generation in the European Union is forecast to drop by almost as much again this year.

Coal use has also been contracting significantly in the United States in recent years, but stronger electricity demand and less switching from coal to natural gas threaten to slow this trend in 2024, the report said.

REUTERS