Coal is one of the big winners from the war in Ukraine, which has deeply destabilized world energy markets through Western sanctions on gas and oil giant Russia.
Last year, coal consumption thus reached a record level, at more than 8 billion tonnes, up 1.2%. In Europe, it increased for the second consecutive year, with demand up 6%, in particular to offset the decline in Russian gas imports. However, this recovery should be short-lived, with the acceleration in renewables. In five years, half of the coal-fired power plants have been closed on the European continent, i.e. more than 150 units.
Pakistan can no longer afford to run its gas-fired power plants
But in Asia, the opposite movement is taking place, probably for longer. Pakistan has just announced a quadrupling of its electricity production capacity from coal, bringing it to 10 GW, and has decided not to build any more new gas-fired power stations in the years to come. Just for the sake of savings.
For several months, the country has had to face a shortage of natural gas, which represents more than a third of the country’s electricity production. Entire regions were plunged into darkness last year. In great financial difficulties, Pakistan does not have the means to cope with the surge in the price of LNG (liquefied natural gas), which sometimes increased tenfold last year on certain deliveries.
Bangladesh is in the same situation. For lack of gas to produce electricity, the government had to cut power this fall for several hours a day.
Europe pushes prices up
This situation is the consequence of a sort of domino effect. Faced with the gradual cessation of Russian gas deliveries, the Europeans have sought new sources of supply. European LNG imports have increased by 60% in 2022, with in particular a doubling of the volumes purchased in the United States. But the Europeans had to pay the price, thus contributing to the surge in world prices.
“We had to divert around 10% of the global LNG market to Europe. We took it from China, which needed it less due to the slowing economy, but also from many countries in Southeast Asia which had switched to gas to reduce their emissions,” explains Patrick Pouyanné, CEO of TotalEnergies. The group is today the leading exporter of LNG from the United States.
If the Chinese economy recovers, tensions will be even more acute and should exclude more and more countries from the gas market, he believes.
Respond to growing electrical needs
For all those who have to deal with a growing demand for electricity, gas seems less and less like a credible alternative, given its price and the investments to be made in terms of infrastructure. Because although prices have fallen sharply in recent weeks, thanks to storage and mild weather in Europe, they remain high, remaining two times three times higher than their level at the start of 2021. By replacing coal, gas nevertheless makes it possible to halve CO2 emissions.
In Vietnam, for example, the government’s plan calls for increasing annual coal consumption for power generation from 53 million tonnes in 2021 to 95 million in 2025 and 125 million in 2030. It had already doubled between 2010 and 2020. The declared priority of the Vietnamese authorities is to meet the needs of the population in electricity, a corollary of the rise in the standard of living, but also the expectations of industrialists.
India forces its coal-fired power plants to operate
For identical reasons, the Indian government announced the establishment of an emergency law, Monday, February 20, to force power plants that use imported coal, much more expensive, to operate, subject to tariff incentives. Coal production is on the rise (India is the world’s number three in the sector), but it is not sufficient to meet electricity demand, which is expected to peak between March and June.
India still depends on coal for around 70% of its electricity generation, and it is expected to play a significant role in the country’s energy mix until at least 2040, according to government forecasts. This year, the demand for coal to produce electricity should thus increase by 8%.