Rock steady – A report on the resilience of coal demand
The shale-gas bonanza in North America will slow coal's growth, but it won't erode its resilience as a fuel source according to EIU's latest report. Here's a snapshot look...
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The Economic Intelligence Unit (EIU) published a report in May 2013 forecasting coal demand from the world's largest consumers. It noted that at first glance, the outlook for coal is gloomy. Slowing growth in China is resulting in decreasing demand for coal, while the discovery of shale gas in America has driven domestic demand down, with tightening global regulations on emissions further dampening the appetite for coal.
But coal remains resilient, the report concluded. And while governments try to shift away from coal usage, their efforts can only slow the growth in coal use but not reverse the environmental impact of coal as a fuel source. The report also gives a summary of key drivers and trends in coal for several countries, along with forecasts for coal consumption to 2015 and projections of coal's share of the overall energy mix to 2020.
China
China's coal consumption is estimated to grow by 18 percent from 2011 to 2015, a slower rate when compared to the 2006 to 2010 period. Looking ahead, China's energy mix is set to change. In 2010, coal made up about 66 percent of the energy mix and by 2020, this is estimated to drop by 11 percent. However, about 40 percent more carbon dioxide will be released in 2020 than in 2010.
United States
The demand for coal in the US has been shrinking for two main reasons--the output of natural gas from shale rock and stricter environmental rules for the power sector. Coal's share of the US energy mix has dropped from 50 percent at the beginning of the century to 37 percent in 2012. Natural gas has since taken a 30 percent share. As a result, US carbon emissions have fallen to their lowest levels since 1994. Despite this, the report claims that US miners will continue to target overseas markets, causing climate gains to "go up in smoke".
European Union
While the overall coal consumption in EU grew by 2 percent in 2012, the consumption in the UK, France and Spain increased ten times as fast the overall EU average. Coal consumption in Germany and Poland increased as well, despite the rapid expansion of renewable-energy in Germany. This increase is mainly due to coal's affordability compared to LNG. The report suggests that a rebounding economy would reverse these effects as this will force carbon prices up and coal use will decrease.
India
About 70 percent of India's electricity comes from coal. Bringing electricity to the masses remains a priority and challenge for the Indian government but the report concludes that due to inefficiencies, India's domestic coal production will continue to be unreliable and they will therefore continue to rely on importing coal, causing the global coal demand to grow in the coming years.
Russia
Russia's energy mix is likely to remain unchanged by 2020. The country has the world's second-largest reserves of fuel, but only requires 16 percent of its resources for domestic use. By increasing coal-fired power generation domestically, Russia is able to use their gas resources for lucrative sales abroad. Russian coal exports have also increased sevenfold since 2000.
Japan
Japan has been desperately seeking alternative sources of fuel since the devastating earthquake in March 2011, where the country's nuclear reactors were destroyed. LNG imports surged immediately after, and a year later, coal imports increased as well. Japan's coal consumption is unlikely to change much in the coming years.
Australia
The country's coal consumption is likely to remain unchanged in the short term. However, new government regulations implemented in 2012 will cause the closure of coal-fired power stations and discourage the building of new ones. The government also aims to ensure that 20 percent of domestic electricity will come from renewable sources by 2020. The report estimates their consumption of coal to drop from 41 percent in 2010 to 32 percent by 2020.
South Korea
While a "green growth" strategy was implemented in 2008 to reduce coal demand, in January 2013, the government announced plans to award 8,000MW of additional coal-fired capacity to be built by 2027. Given their growing appetite for fuel, coal will continue to play a significant role in their energy mix.
This report provides a snapshot of a country's key drivers and trends in regional coal demand, along with forecasts for coal consumption to 2015 and projections of coal's share of the overall energy mix to 2020.
By: Economist Intelligence Unit (EIU)