- Report highlighted how energy security concerns, unprecedented power demand, and technological advances could extend coal’s life and reshape the global energy transition
Global coal demand could remain stronger for longer, with coal-fired power generation potentially staying dominant through 2030, well beyond current projections for Peak Coal, says Wood Mackenzie in its new Horizons report.
The report – “Staying Power: How New Energy Realities Risks Extending Coal’s Sunset” has suggested that a combination of factors – from a rapidly electrifying global economy to energy security priorities rising from geopolitical and cost shocks to Asia’s young and evolving coal fleet, could extend coal’s role as a vital power source well into the next decade and even beyond.
Quoting Anthony Knutson, global head, thermal coal market who was reported to have said: “Extending coal’s prominence through 2030 would fundamentally alter the global energy transition timeline. We’re talking about delaying the phase-out of the world’s most carbon-intensive fuel source during a critical decade for climate action.”
“While the long-term trajectory towards renewables remains intact, the path is proving far more complex than many anticipated as countries grapple with energy security and affordability concerns.”
Learning from Woodmac’s base-case Energy Transition Outlook, coal-fired power generation is projected to decline by nearly 70% between 2025 and 2050, a decline which Energy Window International (Media) has also learnt would be driven by decreasing renewable energy costs, advancements in battery storage technology, a resurgence in nuclear energy, plus an increase in natural gas capacity. The report however and equally highlighted the potential for coal demand to remain stickier than expected, with a ‘high coal demand’ case offering a significantly different perspective that coal generation could average 32% higher than the base case through 2050.
Under the high coal demand case according to the report, output from global coal fleets will be optimized to help meet steep and rapid load growth expectations which will also lead to a significantly less renewable and gas energy deployment. This equates, the report highlighted, to 2,100 gigawatts (GW) less global wind, solar, energy storage, and then natural gas capacity between 2025 and 2050. “Without carbon capture and storage investment, unabated emissions from the coal sector would increase by two billion tonnes compared to the base case scenario.”
The report also indicated that a higher coal demand case would expose investment gaps in the coal supply replacement process which would ultimately and potentially push its prices up by 2030. Says Knutson: “Private equity and sovereign wealth funds will be needed to fund Greenfield and brownfield mine expansions”.
“We expect most Western financial institutions to continue limiting thermal coal investments, with the strongest impact on supply growth from 2025-2030 and longer-term market implications if supply replacement momentum is not maintained.”
The report also sees lack of commensurate investment as posing the largest risk factor in the coal markets at the moment, with Woods saying that it expects/foresees a higher coal prices eroding fuel’s core cost advantage assuming demand increases without any corresponding supply response. Knutson said: “While we understand coal demand may remain resilient in coming years, eventually supply constraints will emerge, and this could accelerate price increases globally and erode future demand.”
Here the report also highlighted the potential for carbon capture, utilization, and storage (CCUS) which it says offers a pathway to extend coal’s operational life in a decarbonising world. “CCUS could theoretically transform coal’s environmental profile by capturing carbon dioxide emissions before they enter the atmosphere, but the economics remain challenging without substantial policy support and capital investment,” says David Brown, Director, Energy Transition Practice.
Adding he said: “Higher coal utilization rates would improve the investment case, but we’re still years away from cost-competitive deployment at scale, particularly in Asia, where carbon storage costs are likely to limit widespread adoption.”
In Woods opinion, technologies that reduce carbon intensity of coal must be given the needed priority particularly now, according to Woods, that governments and asset owners are repositioning for a low-carbon future. “Without innovation in areas like CCUS, co-firing and flexible, load-following coal capacity to work in concert with renewables, a high coal demand scenario becomes increasingly difficult to justify.” “Where CCUS is deployed, pairing it with gas-fired generation may offer a more efficient path, given the lower CO₂ capture requirements per unit of electricity produced.”
A new paradigm shift is imminent at this point as market indicators show, pointing towards the need for significant transformation in the industry’s global priorities. “For increased coal consumption is neither an inevitable outcome nor an optional scenario” as long as the current market trends continue to show this rapid transformative posture. “As nations develop comprehensive energy planning strategies, they are increasingly prioritizing energy sovereignty and domestic resource control to support their long-term objectives. This shift reflects countries’ efforts to accelerate electrification initiatives that are both cost-effective and dependable for their populations, while maintaining greater autonomy in their energy planning decisions.”
Brown concluded: “Despite potential higher coal demand, we have the tools to phase it out.” “Without urgent actions, the world faces a growing risk of drifting towards a 3°C pathway. Our high coal demand case is not a forecast, but it’s a warning of what inaction could bring, and a reminder of what can still be prevented.” Source: Woodmac