By Mark Jaffe, EUCI energy writer
The combination of geopolitical uncertainty – driven by war in Ukraine and the Middle East – and a soaring demand for energy are reviving global prospects for coal, according to a Wood Mackenzie analysis.
“Coal-fired power could be a bigger part of the energy mix for longer than expected, scuppering efforts to meet climate change goals,” the report said. “New realities for energy markets in recent years have become more, not less, supportive of coal-fired power.”
The realities include Russia’s continued invasion of Ukraine, the turmoil in the Middle East, which have made energy security a priority for many governments, and new large-load demands from data centers and energy-intensive manufacturing.
Wood Mackenzie in its “base case,” which assumes a continuation of policies and technology improvements, projects coal demand peaking in 2026, but in a high-demand scenario, the peak comes four years later followed by an extended demand plateau.
In the coal high-demand scenario, there is about 1,700 gigawatts (GW) less wind, solar, and energy storage capacity built than in the base case.
“In our high coal demand case, the world’s power systems are still dominated by low-carbon sources of power. But nine countries in Asia hold the cards to the future of coal,” the analysis said.
The region accounts for 78% of the world’s coal consumption. Meanwhile, the demand for coal continues to fall in Europe, the U.S., Japan, and South Korea.
Coal-fired power capacity grows faster in India, Indonesia, Vietnam, Pakistan, and Bangladesh in this scenario, and markets such as Malaysia, Thailand, and the Philippines, which currently have moratoriums on new-build coal plants could “alter course if cheaper coal can sway the debate.”
China, which is adding more renewable generation than any other country in the world, still relies heavily on coal with its coal-fired output rising more than 36% between 2013 and 2025, as its economy doubled.
Between 2020 and 2025, China put into service 200 GW of advanced coal plant capacity through retrofits, allowing for more flexible operations. That is equal to about 15% of its current 1,200 GW fleet.
“China has proven adept at running its coal assets harder to meet strong demand growth and could repeat this as its power demand climbs,” the report said.
India is also upgrading and retrofitting about 6 GW of its 228 GW coal fleet.
Adding to the continued use of coal-fired plant in South and Southeast Asia is the availability of cheap domestic coal resources, Wood Makenzie said.
Three elements are key to feeding the high demand scenario: energy security and affordability, growing demand for power from data centers and electrification of the economy, and technological improvements that make coal-fired plants a more flexible power supply.
“Right now, coal is the single largest source of electricity generation globally,” Wood Mackenzie said. “This underscores the reality that coal demand has consistently proven more resilient than expected.”
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