What is the Future of Coal-Fired Power Generation?

What is the Future of Coal-Fired Power Generation?

By Energy CIO Insights | Monday, August 10, 2020

Coal is an important element in power generation and countries have used it for a long time. However, climate change has prompted several countries to reduce their coal consumption. 

FREMONT, CA: For years, coal has been the base of electricity generation for many countries as it has helped power economic development and lifted billions of people out of poverty. Since 2000, the global consumption of coal has increased by approximately 66 percent as China and India have upped their use of coal.  Over the same period, the global coal trade doubled to 1.5 billion tones. The global coal landscape was effectively redrawn with a rapidly expanding supply from Australia, Indonesia, Japan, and South Korea. At the same time, coal was mainly contributing to climate change and air pollution. The Paris Agreement targets to restrict global warming well below 2oC, and for that, coal burning to generate power must reduce rapidly.     

The urgent need to address air pollution and the increasing competitiveness of renewable energy is prompting coal-dependent countries to make changes in their power generation strategies. China accounts for almost half of all global coal consumption and trades one in every four tones of coal. The global demand for coal fell from 2013 to 2016 but slightly increased in 2019. This shows that the coal demands may plateau rather than declining at the pace required. The future of coal remains uncertain as global trends hide different regional stories. At the same time, climate and air quality policies, the collapsing cost of renewables, and the emergence of shale gas all add to the decline of coal.      

While an international consensus to reduce coal in a fast and orderly fashion is forming, exporters of coal have hopes for its future in their countries. Despite the disruption in the coal market, new coal supply, and demand infrastructure is continuing to develop. These new developments might lock out cheaper and cleaner energy technologies.   

Britain was the first country to develop coal-fired energy, and it might be the first country to end it. The UK had its first ‘coal-free’ day since the beginning of the Industrial Revolution, and the days without using coal-fired power are increasing. At this rate, the country will eliminate coal plants by 2025. In the EU, at least ten coal-burning countries have pledged to reduce coal up to 2030. France plans on going coal-free in 2021, and the UK and Canada have committed to phasing out by 2025 are harnessing the momentum with the launch of the Power Past Coal Alliance at the UN Climate Summit. Approximately 28 countries have joined the alliance.

The factors that contribute to the decline of coal are a shift towards gas as a low-carbon ‘transition fuel’ and the rising prices of carbon. However, the real game-changer is reducing the cost of renewable energy. In the UK, renewable power generation is cheaper than new gas per megawatt-hour, and the prices will continue to drop in the future. In Europe, subsidy-free renewable energy is on the rise. Simultaneously, coal plants are making losses, and according to the NGO, Carbon Tracker, all the coal plants will face losses by 2030. A delay in closing these plants could result in a 22 billion Euro loss for Europe and 12 billion Euro losses for Germany by 2030.

In countries such as Germany, China, Poland, and the U.S., managing the decline of coal is far more complicated as the domestic coal interests are powerful constituents. In the United States, the revival of the coal sector has turned out to be a political fight even though the industry employs approximately 50,000 people. The decline of coal in the U.S. is due to its inability to compete with domestic shale gas and renewables at home, and low-cost and high-volume exporters overseas. China is the largest coal consumer, producer, and importer in the world. The Chinese government has not made any statements to phase out coal, but it is proactively phasing coal out. Improving the air quality and closing down surplus and inefficient coal and heavy industries are some of the responsibilities a country must take.

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