Santa's naughty list could well be shorter this year as coal demand waning and growth set to stall for next five years

Francesca Washtell
Follow Francesca
Annual Macy's Thanksgiving Day Parade Delights Spectators In NYC
Coal is still the world's primary resource for power generation (Source: Getty)

Waning appetite from key consuming nations and swift growth in other sources of energy will stall global demand for coal over the next five years, according to the International Energy Agency (IEA). (Though maybe it's just that so few children were naughty this year that coal's no longer needed...)

Coal demand fell last year for the first time this century and will not reach 2014 levels again until 2021, the IEA has forecast. Its share in the global power generation mix will drop to 36 per cent by 2021, down from 41 per cent in 2014.

The fall in 2015 was driven primarily by lower demand from China and the US, though fuel was added to the fire from "fast" growth in renewable power supplies and a "strong focus on energy efficiency".

Read more: Britain's coal-fired power stations to close by 2025

In the US, coal consumption dropped by 15 per cent last year– its largest ever decline – as competition heated up from cheap natural gas, renewable power and regulations to reduce air pollution that led to coal plant retirements.

However, the IEA has emphasised that demand is still continuing a major geographic shift to Asia, and China in particular, to the extent that the expectations that demand will fall over the next five years "depend greatly on the trajectory of China's demand, which accounts for 50 per cent of coal demand and almost half of production".

Read more: Glencore lands thermal coal supply deal for $95 a tonne

Chinese domestic demand has been known to single-handedly move commodity market prices.

A recent spike in the price Australian thermal coal, which is used in power generation, has been attributed to cuts to the number of working days at domestic coal mines in China, which prompted electricity generators and steelmakers in the economic powerhouse to make up for a shortfall via imports.

Keisuke Sadamori, the director of the IEA's energy markets and security directorate, said:

Because of the implications for air quality and carbon emissions, coal has come under fire in recent years, but it is too early to say that this is the end for coal.

Coal demand is moving to Asia, where emerging economies with growing populations are seeking affordable and secure energy sources to power their economies. This is the contradiction of coal - while it can provide essential new power generation, it can also lock-in large amounts of carbon emissions for decades to come.

Read more: UK coal power generation falls to a record low

World Coal Association chief executive Benjamin Sporton said: “Coal... will continue to play a major role in delivering energy access and security long into the future. While recent years have been challenging for the industry, 2016 has shown coal’s resilience and importance to the global energy system. As demand patterns shift further into developing and emerging Asian economies, we will continue to see strength well into the future.”

Despite consumers' interest in coal waning, it remains the world's number one fuel for generating electricity, producing steel and making cement. Although it provides 30 per cent of the world's primary energy now, this is estimated to decline to 27 per cent by 2021.

Related articles