Lucas Davis at the Haas School of Business questions the IEA’s optimism revealed in its latest World Energy Outlook 2022 that predicted coal will peak in the next few years. In 2021, global coal consumption increased 5% and global electricity generation from coal reached an all-time high. China is the main driver – last year over half of all coal-fired electricity generation came from China – and its energy demand keeps rising. Between 2000 and 2020 it went from below 1,000 TWhs of electricity generated from coal to 4,775 TWhs. Hence it’s building the equivalent of a new coal plant every week, each with a typical operating lifespan of 35 years or more. It is also building a lot more than any other country of everything else – wind, solar, hydro, and nuclear – but that does not mean coal will peak and decline any time soon, says Davis. And all those new EVs hitting the roads in China are being mostly powered by coal-generated electricity.
I’m a little surprised by the optimism in this year’s “World Energy Outlook 2022” from the International Energy Agency. For the first time, the IEA is predicting that “coal demand peaks within the next few years”. David Wallace-Wells in the New York Times Magazine has a similarly optimistic view, arguing that the worst climate outcomes are now much less likely, largely because the world is shifting away from coal.
I’d like to believe this. But, I am having trouble reconciling this optimism with recent data on coal consumption. Total global coal consumption increased 5% in 2021, and global electricity generation from coal last year reached an all-time high.
This continued reliance on coal reflects, in part, a multi-decade coal plant building binge in China. Last year over half of all coal-fired electricity generation came from China, so understanding the country’s trajectory for coal consumption is critical for global efforts to address climate change.
For today’s post, I want to look at data on electricity generation from coal in China. How much electricity does China generate from coal? How has this changed over time? And, to put this into context, I want to compare this to the United States, where the industry is going in a sharply different direction.
U.S. 20-year decline in coal
The figure below plots annual electricity generation from coal. Other sectors use coal too, but electricity generation is the most important.
In 2000, the United States generated 2,000 TWhs of electricity from coal. This was peak U.S. coal consumption, with just under one billion tons of coal burned for electricity generation, the equivalent of 3.5 tons of coal per person.
Since that time, U.S. electricity generation from coal has declined steadily, reaching 770 TWhs in 2020. This is still a lot of coal, but the overall pattern since 2000 is a remarkable decline that has been widely studied (here, here, and here).
China’s rapid rise in coal (and everything else) continues
China has been going in the opposite direction. From below 1,000 TWhs in 2000, electricity generation from coal in China reached 4,775 TWhs in 2020. I’m struck both by the rapid growth in China, and by the wildly divergent patterns for the two countries. China goes from 0.5x the United States, to 6x the United States by 2020.
The biggest single factor explaining the divergent patterns is that China’s demand for electricity is soaring, while U.S. demand is practically flat.
To meet this massive increase in demand for electricity, China has built more of everything. More wind, solar, hydro, and nuclear than any other country, and yes, much more coal.
This continued dominance of coal has many implications. For example, it makes me think about the environmental impact of electric vehicles. From a climate change perspective, electric vehicles in the United States make more sense than they did even just a few years ago. But the case is harder to make in China with a coal-dominated grid, even as the country leads the world in new electric vehicle sales.
What’s next for China?
It is always hard to predict the future. Nicholas Stern and coauthors predicted in 2016 that China’s coal use had already peaked, and that economic growth in China had been “decoupled” from growth in coal. Now with the benefit of a few more years of data, those predictions seem pretty clearly wrong.
If anything, coal in China seems to be gathering momentum. While coal recedes in other parts of the world, China is adding dozens of gigawatts of coal generating capacity each year, the equivalent of one new large coal plant per week. And a recent report finds that China has 247 gigawatts of new coal power plants under development.
On the other hand, a recent study by Energy Institute alum Amol Phadke and coauthors finds large opportunities for China to substitute away from coal. In their analysis, large-scale investments in solar, wind, and battery storage create a Chinese power sector that is both lower-cost and much lower-emitting.
I’m not sure what is going to happen, but I do know that much is at stake. One of the authors of a recent related study spoke about the inherent inertia in electricity markets, “China is like a big ship, and it takes time to turn in another direction.”
One important element of this inertia is coal plants themselves. Coal plants have a typical operating lifespan of 35 years or more, so every time a new coal plant is built, this threatens to lock in decades of future carbon dioxide emissions.
It is a reminder, as well, to take any predictions with a large grain of salt. Yes, there are reasons for optimism, and opportunities for decarbonisation that simply did not exist a few years ago. But coal and other fossil fuels are still cheap, convenient, and used in vast quantities around the world.
Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley
This article is published with permission
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