Coal Consumption in Asia Increases, Driving Global Demand

Global coal consumption continues to rise as demand from Asia surges, influencing global energy trends / AP

Despite efforts to reduce fossil fuel use and lower carbon dioxide (CO2) emissions, global coal demand has been on the rise. The affordability of coal compared to other energy sources has led to a growing reliance on it, particularly as natural gas consumption decreases.

According to a recent report by the energy watchdog Global Energy Monitor, coal-fired power generation reached an all-time high of 2,175 gigawatts (GW) in 2023, and the global demand for coal is showing no signs of slowing down. The International Energy Agency (IEA) also reported that global coal consumption exceeded 877 million tons in 2023, with this level of consumption expected to persist until at least 2027.

One of the key challenges in transitioning away from coal, according to Dorothy May, director of Global Energy Monitor’s coal mine tracking division, is that while demand is decreasing in the U.S. and Europe, it continues to rise in Asia. In fact, China’s coal imports increased by 14.4% last year, reaching 542.7 million tons, and now account for more than 56% of global coal demand.

China’s energy strategy is largely driven by a need to secure a stable power supply amidst unpredictable weather conditions. The country has been increasing its coal stockpiles in preparation for potential power shortages caused by fluctuating weather patterns. In 2023, China’s power generation mix consisted of approximately 30% renewable energy, including hydroelectric, wind, and solar power. However, a lack of rainfall reduced hydroelectric power generation, and coal-fired power plants were used to ensure energy security.

May explained that China faces challenges in transmitting green energy across its vast territory, and as a result, coal will remain a key energy source until the country’s power grid infrastructure can fully accommodate renewable energy sources.

In India, soaring demand for cooling energy due to extreme heat has exacerbated the country’s dependence on coal. Despite efforts to increase renewable energy capacity, India’s coal consumption remains high, particularly in sectors such as cement and steel production, which rely heavily on coal. India is also focused on infrastructure and housing development, further increasing demand for steel. The country’s steel consumption is projected to grow by 8-9% this year, the fastest rate among major global economies.

However, India is committed to its renewable energy goals. The country aims to replace 50% of its electricity demand with renewable sources by 2030, and as of October 2024, India had already achieved 46.3% renewable energy generation.

Southeast Asia is also seeing increased coal consumption. Countries like Vietnam, Indonesia, and Bangladesh are planning new coal-fired power plants. In fact, Vietnam overtook Taiwan in 2023 to become the world’s fifth-largest importer of coal. Indonesia also set a record in 2023, producing 831 million tons of coal, the highest in its history. The Philippines has become the most coal-dependent country in Asia, surpassing China in 2023 in terms of coal’s share of its power generation mix.

The affordability of coal has contributed to its sustained demand, with a shift away from concerns about energy efficiency. Dave Jones, an energy analyst at Ember Energy, noted that the interest in using more efficient energy sources has waned as coal remains a cheap option. The rise in coal demand in Asia has also been partly influenced by the surge in natural gas prices following Russia's invasion of Ukraine. As natural gas prices spiked, coal imports from major coal-importing countries like China, India, and Vietnam decreased, but their reliance on coal still increased.

The IEA forecasts that global electricity consumption will continue to rise, creating a need for more energy production. Rob Sirmel, senior portfolio manager at Totus Capital, emphasized that stable and cost-efficient energy sources are crucial for global economic growth. With the rising demand for artificial intelligence (AI), which requires significant amounts of energy to power data centers, coal usage may continue to be an essential energy source for the foreseeable future.

AI-driven energy demand is growing rapidly. According to Moody's Ratings, the global electricity consumption for AI data centers was 17 gigawatts (GW) in 2022, and it is projected to double to 35 GW by 2030. As the competition for AI dominance intensifies between countries like the U.S. and China, coal is likely to remain a key energy source due to its cost-effectiveness.

While coal consumption has been decreasing in parts of North East Asia and Europe in recent years, increased supplies of liquefied natural gas (LNG) and commitments to renewable energy are expected to reduce coal imports in some countries. Still, experts remain cautiously optimistic that coal demand will begin to taper off as renewable energy production increases.

In conclusion, while there are global efforts to shift toward cleaner energy, the rising coal consumption in Asia and other regions highlights the continuing role of coal in global energy systems. However, if countries can meet their renewable energy targets, particularly by 2030, the global demand for coal may eventually start to decrease.