Global coal demand hit a record high in 2023, according to a report by the International Energy Agency (IEA). Power generation from coal rose by 1.9%, reaching 10,690 terawatt-hours (TWh).
This increase emboldens coal’s position as the dominant source of electricity worldwide, despite growing efforts to transition to cleaner energy sources.
The spike has largely been fueled by surging coal consumption in China and India, which offset major declines in coal use across the European Union and the United States.
In 2023, global coal demand increased by 2.6%, reaching an all-time high of 8.7 billion tonnes. China, the world’s largest coal consumer, saw a 6% rise in demand, translating to an additional 276 million tonnes of coal.
Meanwhile, India’s coal consumption jumped by 9.2%, or 105 million tonnes, as the country grappled with a growing economy and higher electricity needs. These surges outweighed sharp reductions in the European Union, where coal demand fell by 22.5%, and in the United States, which saw a 17.3% drop.
The industrial sector, particularly the iron and steel industries, also played a significant role in driving coal consumption, alongside the power generation sector. Despite this growth, there are signs that global coal demand may stabilize in the coming years.
Outlook for 2024: A stabilising trend
The IEA projects that global coal demand will remain broadly flat in 2024. A major reason for this is the resurgence of hydropower production in China, paired with the rapid expansion of wind and solar power.
Since April, China’s hydropower output has rebounded, though its electricity demand has continued to rise, driven by growth in both the services and industrial sectors.
However, China’s heavy industries, such as steel and cement, are facing difficulties due to a slowdown in the real estate market. These struggles are expected to limit further increases in coal demand.
Additionally, while coal demand in India and Vietnam surged in the first half of 2024 due to strong electricity needs and reduced hydropower output, India’s demand is expected to taper off in the latter half of the year.
In the United States, where coal use has steadily declined since 2008, coal demand remained nearly unchanged in early 2024. This was largely due to reduced switching from coal to natural gas in power generation.
Meanwhile, Europe continued its shift away from coal, with demand expected to drop another 19% by the end of 2024. The EU’s coal decline is driven by the rapid expansion of renewables and sluggish overall demand for electricity.
While the IEA’s forecast for 2024 indicates little change in global coal demand, it notes that unpredictable factors such as extreme weather events, economic conditions, and fluctuations in natural gas prices could still cause variations, particularly in China, which accounts for one-third of global coal consumption.
A Plateau ahead: 2025 forecast
Looking further ahead to 2025, global coal demand is expected to plateau at around 8.7 billion tonnes. This forecast is shaped largely by coal’s dominant role in electricity generation, which accounts for two-thirds of global coal use. While industrial coal consumption is harder to substitute, coal use in power generation tends to fluctuate more significantly due to the availability of alternatives like natural gas and renewables.
In advanced economies, coal demand is clearly on the decline, as nations continue their push toward greener energy sources. In contrast, some emerging economies are expected to see further increases in coal use, driven by their growing energy needs and industrial activities.
The biggest unknown remains China, which continues to be a critical player in global coal markets. While China’s renewable energy capacity is expanding rapidly, the country’s high dependence on coal for electricity means it will remain a key driver of global coal demand for the foreseeable future.
While China continues to shape global coal demand, other regions are taking steps in a different direction. In the Middle East, the decision by Dubai Electricity and Water Authority (DEWA) to abandon coal signals a significant shift in energy policy, marking a departure from the original vision for the $8 billion Hassyan Power Complex.
When the project was first unveiled in 2016, it was intended to be a model for coal power generation in the Middle East, which has long relied on oil and gas for electricity. The plant was initially designed as a dual-fuel facility, capable of running on both natural gas and clean coal. GE Steam Power and Harbin won the contract to build the 6,510 MW facility, which would consist of six units, each with a capacity of over 1,000 MW.
GE Vernova’s (GE then) ultra-supercritical technology promised coal plants with efficiency rates of up to 47.5%, far exceeding the global average. However, the timing of the coal project was unfortunate. In recent years, the Middle East has rapidly shifted focus toward renewable energy, and a coal power plant seemed increasingly out of sync with Dubai’s commitment to sustainability.
The plant is now being converted to run on natural gas. Dr. Steve Griffiths, Senior Vice President of Research and Development at Khalifa University, noted at the time, “The UAE has been an environmental leader in the region by announcing a Net-Zero 2050 ambition. Given that the elimination of coal-fired power generation is crucial for reaching global Net-Zero targets, the coal project was no longer appropriate.”
Griffiths pointed out that carbon capture technologies could have made coal a more viable option, but the economic and logistical challenges of such systems were significant.
The UAE’s “Net Zero by 2050 Strategic Initiative,” announced last year, further aligned the nation with global efforts to reduce greenhouse gas emissions and limit global temperature rise.
Rajeev Singh, Partner at EY Consulting, highlighted that several factors led to Dubai’s decision to move away from coal. “Climate change, the ESG agenda, and the political will to send the right strategic message to the global ecosystem were major drivers,” said Singh.
The decision also came at a time when Dubai was in preparations to host COP28, which further increased pressure on the country to showcase its commitment to clean energy.
Weathering the energy transition
The IEA report also highlights the increasing difficulty in predicting short-term electricity demand due to the rising impacts of extreme weather events. These unpredictable factors could make it harder to forecast coal demand accurately in the coming years.
Still, the global energy landscape is clearly shifting. As more countries adopt renewable energy technologies and look for ways to reduce carbon emissions, coal’s long-term future remains uncertain. Advanced economies are accelerating their transitions away from coal, while emerging economies face the challenge of balancing their growth needs with environmental concerns.
While coal remains a vital energy source, its role in the future global energy mix may gradually diminish as cleaner, more sustainable energy solutions gain traction.
