IEA: Coal to Become World’s Largest Source of Energy in 5 Years
By 2017 coal may surpass oil as the world’s leading source of energy. That comes from the International Energy Agency’s (IEA) recently released “Medium-Term Coal Market Report.” This is an alarming projection, as coal is the most carbon-intensive fossil fuel used for energy, and it makes it unlikely that the world will make sufficient cuts to greenhouse gases in time to avoid dramatic shifts in climate stability.
More disturbingly, the IEA projects that over the next five years, the world will burn an extra 1.2 billion tons of coal per year compared to today. That is equivalent to adding more coal-fired capacity than what already exists in the entire United States and Russia combined.
What is driving this surging demand for coal? First, the world’s population continues to grow. More people, more energy needed.
Second, and perhaps more importantly, millions of people around the world are moving up the income ladder and are acquiring more housing appliances, which requires more electricity. In places like India, there are still 400 million people who lack access to electricity (by comparison, the U.S. has a population of about 311 million). There is enormous pent up demand for electricity, and in order to hook millions up to the grid, it will require more coal to be burned.
data from EIA
China too will be a major driver in coal demand for the foreseeable future. To get a sense of the growth in China, consider this: China only became a net importer of coal in 2009. By 2011, it became the largest importer of coal in the world.
In fact, the only place in the world where coal demand is declining is in the United States.
The “Shale Gale” has unlocked extraordinary quantities of natural gas, allowing the prices to plummet to around $2-$3 per million Btu. These low natural gas prices are undercutting coal, as ASP has written about extensively in previous months. The Energy Information Administration expects natural gas prices to stay below $5 for the remainder of the decade, allowing utilities to continue to switch over from coal to gas. Any new initiatives to ramp up clean energy may accelerate a trend away from coal.
For the U.S. coal industry, exports remain the only outlet. With hungry factories and wealthier consumers in China and India, U.S. coal companies want to export from ports on west coast. However, the IEA still believes U.S. coal production will decline by about 10% over the next five years.
Still, that contraction is more than dwarfed by rising production around the world, and countries like Australia and Indonesia are rapidly expanding coal mining to meet demand.
From a climate change perspective, global carbon emission must be reduced to avoid the worst effects of climate change. This means coal must be replaced with cleaner sources of energy. Therefore, the trend reported by the IEA is very troubling.
