Coal Bounces Back: 2022 Resurgence Eases Energy Security Concerns
Global coal demand increased in 2022 as countries looked for affordable, secure energy supply after Russian oil and gas exports were curtailed due to its Ukraine invasion.
Yet despite coal’s resurgence, global emissions remained relatively flat as a slowing global economy dampened energy use.
The International Energy Agency (IEA) estimates global coal use climbed 1.2 per cent in 2022, surpassing eight billion tonnes for the first time, and eclipsing the previous 2013 record.
China accounts for more than half of all coal demand.
Global coal consumption, 2000-2025. (Source: IEA)
The jump in coal demand could be temporary, or it could reflect a longer-term realignment in the energy trilemma, with security and affordability taking precedence over climate change concerns. If coal’s resurgence is more permanent, it could impact global LNG markets as well.
Coal-fired power production in Germany jumped 13.3 per cent year-on-year in the third quarter of 2022, according to official statistics agency Destatis, as the country’s parliament acted to bring mothballed generating facilities back into service.
Germany generated 36.3 per cent of its electricity during the quarter from coal, up from 31.9 per cent in the third quarter of 2021.
The U.K., France, Netherlands and the Czech Republic likewise introduced measures to restore or extend the life of coal-fired power production.
It didn’t mean hitting the brakes on emissions targets, though.
The Centre for Research on Energy and Clean Air reported that neither coal use nor CO2 emissions went above pre-pandemic levels.
There was also a tail-off in EU consumption of both gas and coal in the latter part of the year, and coal use is expected to decrease in 2023.
High energy prices and concerns over supply served to rein in demand. The IEA reported that EU electricity demand contracted by 3.5 per cent due to unusually mild winter weather and a fall in industrial consumption.
A more normal 2024 winter will provide a clearer picture of coal’s staying power in Europe.
China lifts production
China’s coal use also jumped, driven partly by a severe drought undermining hydroelectric production.
In 2022, 4.5 billion tons of raw coal were produced, a year-on-year increase of nine per cent, the National Bureau of Statistics of China reported, though this again tapered off towards the end of the year.
The gains were also offset by a comparable decline in imported coal.
Similarly, China’s emissions were broadly flat in 2022, the IEA reports, due to weaker economic growth and reductions in industrial and transport emissions, partly because of ongoing COVID restrictions.
China’s coal use accounts for about 55 per cent of the nation’s total primary energy consumption, down from around 70 per cent in 2001. Coal is used predominantly for electrical power, as well as steel and cement production, and residential heating.
China continues to build new coal plants to meet demand.
India expects to burn about eight per cent more coal in 2023 than last year, according to its power ministry. The country missed its 2022 renewable energy goal by more than 30 per cent, the ministry said in a January presentation. India is the third-largest energy consumer and emitter of greenhouse gases globally. The country has recently struggled with power shortages that idled factories. The ministry said coal will provide energy security as it tries to get its economy back on track.
Pakistan also embraced coal, part of a strategic shift that focuses on domestic indigenous resources, moving away from imports.
That means an emphasis on domestic coal and renewables, rather than imported gas.
It recently launched its largest thermal power project — the 1,320-megawatt Thar Block-1 integrated coal mine and power plant, built by Shanghai Electric — to meet the electricity demands of up to four million households. The open pit mine will produce 7.8 million tons of lignite (brown coal) annually.
Coal-rich South Africa is another country reassessing its options, with debilitating power shortages crippling the nation’s economy.
Though the failings of its dysfunctional electricity market and debt-laden state power utility Eskom can be traced back more than a decade, the short-term focus to reduce the severity and frequency of load shedding means all options are on the table.
Wind, solar and battery storage remain integral to plans, but South Africa will remain wedded to its coal industry for the foreseeable future.
There are hopes new offshore gas finds will also play a role in alleviating the country’s energy crisis, as well as long-stalled LNG imports from overseas.
Slower economic growth dampened electricity demand and overall industrial output in 2022, limiting the emissions impact of rising coal generation.
With China’s economy expected to return to higher growth rates, and India’s economy expected to recover lost ground, both coal use and emissions are likely to rise in 2023. It is highly unlikely increased emissions will deter coal use in China or emerging economies, as security and affordability take precedence.
Increased global economic growth should also generate opportunities for North American gas producers looking to export LNG going forward, as the EU works to rebalance energy markets and emerging Asian economies seek to increase energy security by diversifying supply.
But gas producers and potential LNG exporters should keep an eye on rising coal use. The world’s three largest producers — China, India, and Indonesia — all reported record production in 2022. Governments and consumers in emerging economies have been reminded of the affordability, stability and security coal power provides.
The World Coal Association is keen to redefine coal’s reputation. It says up to 99 per cent of emissions, including CO2, can be eliminated through current and available abatement technologies.
Whether governments and the public are ready to listen to this message is another matter — though further shocks to the global energy market could well stir a new level of interest.