After reaching all-time highs in 2023, the world could be experiencing declining global coal demand, coal power generation, and carbon emissions from the power sector as early as this year – according to analyses by the International Energy Agency,1 Rystad,2 and Ember.3 Even as enduring growth in Asia has kept coal’s growth and development buoyant, the rapid expansion of renewable energy, spearheaded by solar and wind, is leading to major transformations expected to significantly alter global energy systems by the end of this decade.
Last year, a surge in new coal plants coming online in China – 47.4 GW, or roughly two-thirds of global additions – coupled with lower retirements in the US and Europe contributed to the highest net increase (2%) in global operating coal capacity since 2016, according to Global Energy Monitor (GEM).4
However, the accelerated growth in coal plant capacity may be short-lived, as low retirement rates in 2023 that contributed to coal’s rise are expected to pick up speed in the US and Europe. This is evidenced by recent developments, including the G7 committing to phasing out coal before 2035, and the US finalising carbon limits on coal plants. China also plans to shut down 30 GW of coal capacity by 2025, as the country’s coal and renewable builds have driven down average coal plant utilisation rates.
The global coal trajectory also depends to an extent on new plant construction starts, one of the key indicators of sector growth. In 2023, construction started on less than 4 GW of new projects outside China, a record annual low since data collection began, and well below the 16 GW annual average between 2015 and 2022 for the same set of countries.5 Myriad headwinds have also slowed project finance to the coal sector outside of China in recent years. GEM identified US$5.3 billion in closed coal plant project financings outside of China for 2023, a seven-fold drop since a 2017 high.6
In contrast to global trends, China’s 70.2 GW of new construction starts in 2023 were nearly quadruple 2019 levels when the country hit a nine-year annual low for new builds. Nevertheless, China’s 2023 pace of solar and wind builds, if maintained, could more than triple China’s renewable power capacity by 2030, allowing a more than 20% reduction in coal power generation, and a 35% reduction in overall coal consumption (including other sectors) by 2035.7
In 2023, 34 new coal mines producing at least 1 million tpy opened globally, adding 174 million t (or 2%) to the world’s open production capacity, for a total annual production of 8.064 billion t. As was the case with coal plants, the surge in new coal mines coming online is led by China, with the country’s 105 million t opened in 2023 representing nearly two-thirds of global additions.
The coal sector’s potential growth continues to be hyper-concentrated. The top countries developing coal assets – China, India, and Indonesia for coal plants; and China, India, and Australia for coal mines – are home to more than 80% of the in-development coal plant and coal mine capacity. Overdeveloping coal instead of being singularly-focused on phasedown will be a costly and risky gamble, when alternative solutions can meet targets and address energy security.
Ultimately, 25% (527 GW) of the world’s operating coal-fired power plant capacity is already committed to retiring, and the vast majority of the rest is captured by a national net zero or other pledge. If new coal plants and mines open as intended, but are forced to lower generation and production levels – or to close early because of market pressures, government policies, and other forces – they could default on loans and become stranded assets.
References
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