Despite a strong push for renewable energy, coal remains a key variable in meeting electricity demand. The disparity between the rapid pace of electrification and slower demand for renewable infrastructure has stalled its phaseout efforts.
Last month, the International Energy Agency (IEA) revised its forecasts for coal consumption upwards, noting that it will remain high well into the next decade.
The IEA's World Energy Outlook reveals that coal demand in 2030 is now projected to be 6% higher than previously estimated, equating to the coal use of Japan, the fourth-largest coal consumer worldwide.
There are around 9,000 coal power plants globally, collectively contributing approximately 2,185 gigawatts of energy capacity. Many of these are in emerging and developing economies where the average plant age is less than 15 years, compared to over 40 years in more developed regions like North America.
Electric vehicles, air conditioning, and technological infrastructure like data centers are particularly notable sources of electricity demand. Asia, particularly China and India, leads this surge, with coal accounting for 60% and nearly 75% of their energy mix, respectively.
While a total phaseout is (eventually) on the cards, the U.K.'s recent example shows the limitations of its early decision. Its National Energy System Operator published a Winter Outlook, claiming that the country must rely on European electricity imports to meet demand at peak times. As the nation closed its last power plant in October, the projected demand gap has widened from 7.4% to 8.8%.
Still, a recent breakthrough in Australia shows that a coal transition can be gradual. Typically, coal power plants had limits in downsizing their operations as, beyond a certain point, the industry believed it was technically unsafe and economically unsound.
However, AGL AGLNF, one of the country's largest energy companies, temporarily shut down a unit at its Bayswater coal plant before restarting it.
"Bayswater power station achieved a major milestone recently with the successful completion of our first two-shift trial," noted the plant's general manager, Len McLachlan, per ABC's report.
Although still experimental, the "two-shifting" approach would allow coal plants to operate flexibly, generating power during peak demand and scaling back when solar output is high. If this approach takes off, it could mean an easier, more gradual coal phaseout, easier infrastructure scale-up, and lower electricity costs.
Range Global Coal Index ETF COAL is down 8.44% year-to-date.
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