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Coal ‘is here to stay,’ IEA says

Global demand for coal will continue to grow in the next five years, albeit at a more modest pace, the International Energy Agency said Monday in its medium-term outlook for the fuel.

Demand will grow 2.3% a year through 2018, compared with a 2012 forecast of 2.6% for the five years through 2017 and an actual growth rate of 3.4% a year between 2007 and 2012.

“Like it or not, coal is here to stay for a long time to come,” IEA Executive Director Maria van der Hoeven said. “Coal is abundant and geopolitically secure, and coal-fired plants are easily integrated into existing power systems.”

Although it is “easy to see” why coal demand continues to grow, it is “equally important to emphasize that coal in its current form is simply unsustainable,” she added.

Coal is a major source of carbon dioxide and other greenhouse gases, blamed for global warming.

The slightly lower demand expectations for coal are rooted in a more bearish perspective on China’s coal demand.

Meanwhile, U.S. consumption will be “far below” the peak in 2005-2007, and nearing last year’s demand, the IEA said.

“While growing shale gas production will push coal prices down, environmental emissions regulation will cause the closure of considerable coal capacity and carbon dioxide (CO2) policy will prevent investments in new coal plants,” according to the IEA report.

International markets may take the pressure off U.S. domestic coal producers, but current low prices are not helping, the agency added.

Coal is cheaper thanks to the U.S.’s shale gas revolution and significant mining expansions in coal-producing countries such as Australia and Indonesia.

“Overall, there’s simply too much coal on the market,” the IEA said, which advises nearly 30 mostly rich member countries on energy matters.
Coal demand in other rich nations is waning, but the real issue is demand in emerging economies. Southeast Asian nations, with abundant access to coal and 400 million people without access to electricity, will rely on the fuel to supply power.

The popularity of coal also depends on demand from China where, due to political and public pressure over pollution and environmental issues, old facilities will be phased out and cleaner technologies adopted, the IEA said.

“However, the degree to which curtailed coal demand can prove compatible with high gross domestic product growth is unclear,” the agency warned.

Two opposing trends have emerged: An economy with a less energy-intensive model and the establishment of an urban middle class with “increasing power needs,” the IEA said

Source: MarketWatch