Coal is an anachronism that also happens to be the single largest source of electricity on the planet. Some of its resilience reflects pure politics (“beautiful clean coal”). But there’s another aspect more akin to that guilty pleasure that floods through you when you devour a hamburger.
Coal is the junk-food of energy; ubiquitous, relatively cheap, and providing a big slug of calories. Yet with its attendant emissions (including carbon), ash ponds and mining scars, it’s not the healthiest choice. Like you, though, sometimes a country wants energy fast and doesn’t want to pay for fine dining.
The chart below captures this relationship for 30 countries representing 86 percent of the world’s electricity generation. It shows how energy intensive each economy is, how much it relies on coal, and how this compares with its standard of living:
The first, most obvious observation is that higher-income countries – particularly those large circles representing western Europe in the bottom-left corner – tend to be both less energy-intensive and use less coal. Equally, those using more coal tend to be energy-intensive developing economies, with China and India being obvious examples.Two things should be borne in mind, though: That chart is a snapshot in time, and the anomalies matter too.
Start with the anomalies. Australia sticks out for being rich, energy efficient and yet addicted to coal – not a big surprise, given it is a huge producer. To a lesser degree, the same can be said of the U.S., but with the added spice of President Donald Trump’s patronage. Poland and Germany also have long-established mining industries; and the latter’s efforts to phase out nuclear power after Japan’s Fukushima disaster in 2011 left a big hole for coal to fill. The same obviously goes for Japan. Similarly, the Netherlands has used more coal in recent years to compensate for shortfalls in natural gas (see this).
Just as Australia’s geology steers its choices, the Middle East’s petro-states and Russia are obviously geared more toward oil or natural gas for generation. Similarly, Brazil’s hydropower riches and Mexico’s access to natural gas (increasingly surplus U.S. shale output) make them stick out as low-income, reasonably energy-intensive economies that nevertheless don’t burn much coal.
Such contingencies underline the importance of local factors in sometimes making coal power resilient even where you would expect it to have shriveled.
Yet, as I said, that chart is just a snapshot. Looking at those anomalous developed economies, coal is clearly on the decline in most. The Netherlands announced earlier this year it would ban coal power in the coming decade. Trump’s love affair with coal hasn’t resulted in a renaissance (though exports are up). Similarly, as my colleague David Fickling has written extensively, coal power still dominates in Australia today, but its prospects are waning. Even Poland, hosting UN climate talks starting in a few days, has just released a target to reduce coal’s share of power to 32 percent by 2040.
Japan (along with South Korea) shows it has been tougher for resource-poor rich economies in Asia to kick the habit. Post-Fukushima, and always mindful of energy security, Japan encourages solar power but also embeds a role for more-efficient coal plants. In its latest Climatescope study, published earlier this month, Bloomberg NEF estimates new solar and onshore wind projects won’t out-compete new coal-plant economics in Japan until 2025 and 2040, respectively, much later than the rest of the world. And Japan’s attachment feeds resilience elsewhere in Asia, as the country’s financial institutions provide funding for new coal plants – and thereby technology exports – outside the country .
The two countries that really matter, though, are those that fit the junk-food analogy best: China and India. In all three of the scenarios in the IEA’s World Energy Outlook, these two countries dominate any projected growth in coal burned for power or contribute a large part of the decline in a greener climate:
This is coal’s last redoubt. Working in its favor is the political power of incumbent mining industries employing millions in the two countries, as well as sheer sunk cost. Between 2010 and 2017, China and India built a combined 432 gigawatts of new coal-fired capacity. To put that in perspective, the entire U.S. coal fleet at the end of 2017 was 279 GW.
Construction has slowed. India built 4 gigawatts of new capacity last year, down from an annual average of 17 gigawatts in the prior five years, according to Bloomberg NEF. China’s has also slowed, but the country plans to start up another 110 gigawatts of coal-fired capacity in the next three years. That is still a lot of new facts on the ground, even if more than 500 gigawatts of capacity has been canceled, delayed or retired in China since 2014, according to CoalSwarm (which tracks coal-plant activity).
However, continuing problems with air quality in Chinese and Indian cities and the rapid decline in the cost of renewable power and battery storage present chronic problems for coal. Solar power and onshore wind power are now the cheapest sources of new electricity in China and India, as they are in all major economies other than Japan, according to Bloomberg NEF.
Those economics are what ultimately kill the construction of new coal-fired plants. But the price of renewable energy needs to drop below the running costs of existing plants in order to force their closure. Bloomberg NEF estimates that point will be reached in China in about a decade, while for India it begins from the mid-2030s. If that sounds far off to you, then you obviously don’t own a newish coal plant expected to run for at least 40 years. This coming tipping point not only represents a problem for existing operators but should weigh on final investment decisions for planned plants, like all those China is contemplating.
In some ways, the bigger headache here is for natural gas, which is uncompetitive in these growth markets. Unlike the U.S., where a combination of cheap shale gas and renewables is squeezing coal, the high cost of importing natural gas to Asia and coal’s sheer incumbency make natural gas the residual choice for power there. Strikingly, new renewables are already competitive with the running costs of existing gas-fired plants in India and are due to hit the same tipping point in China in the early 2020s.
Even so, the appetite for coal power is waning inexorably. At some point, why pay more for junk – in terms of money and health –when the healthier stuff is cheaper?