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Coal-Fired Power

Not on track
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About this report

Global coal-fired generation has been rebounding strongly in 2021, spurred by rising gas prices in the United States and Europe and increased economic activity in China. Compared with the first half of 2020, the coal generation increase in the first half of 2021 is estimated at nearly 15%. This follows a 4.6% decline in 2020 resulting from the Covid-19 pandemic, low gas prices and a mild winter in key regions. Coal-fired generation had already decreased 3% in 2019. The second half of 2021 has seen large increases in the price of natural gas, prompting substantial switching to the use of coal to generate electricity in key markets, including the United States, Europe and Asia, and driving up CO2 emissions globally.

Final investment decisions (FIDs) for coal-fired power capacity increased slightly in 2020 to reach 20 GW, primarily concentrated in Asia. However, the overall project pipeline is shrinking – FIDs are now 80% lower than what they were five years ago. CCUS and co-firing options will need to be adopted to prevent the lock-in of emissions from today’s plants. In the Net Zero Emissions by 2050 Scenario, unabated coal-fired power generation decreases an average of ~11% per year to 2030, with a complete phaseout by 2040.

Share of unabated coal-fired power generation in the Net Zero Scenario, 2010-2050

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Tracking progress

Following a 3% decline in coal-based generation in 2019, in 2020 global coal-fired generation fell an additional 4.6% to 9 440 TWh.  

Several factors prompted the 2020 drop in coal-fired generation. Preferential dispatch or the use of renewables in many markets reduced the shares of gas and coal in the electricity mix. Plus, lower gas prices in 2020 spurred significant fuel switching away from coal, particularly in the United States (where coal-fired generation fell 20%) and the European Union (where it dropped 17%). 

Notably, most of this decline was concentrated in the early months of 2020. By the end of the year, demand had surged to above pre-Covid levels, driven by Asia, where economies were rebounding quickly and December was particularly cold. 

Coal-fired generation is showing strong recovery in 2021. Compared with the first half of 2020, the coal generation increase for the first six months of 2021 is expected to be 15% higher. China (+21%), India (+13%) and the United States (+35%) are all expected to show rises in coal-fired generation for the first quarter of 2021, compared with the same time last year. 

During late 2020 through early 2021, coal’s share in the Chinese generation mix bounced back from record lows earlier in 2020. The rebound was bolstered by reduced hydropower availability in the dry winter period and rapidly growing demand. China’s coal share has been expanding since November 2020, remaining above 64% up to April 2021. In the first four months of 2021, the share was 66.5%, higher than in the same period in 2019 and 2020. 

In early 2021, coal-fired generation in India climbed to a monthly share of 79% of the power mix, the highest level since early 2019, as hydropower and wind availabilities were low and demand growth was met by coal-fired generation. Coal-fired generation grew 11% from the first quarter of 2019 to the first quarter of 2021. 

Rising gas prices in 2021 are expected to lead to some switching back to coal, notably in the United States and the European Union. Coal’s share in US electricity generation has risen after a monthly low of 15% in April 2020, with the weekly share peaking at 30% in February 2021 during a cold wave when gas prices were at their highest and there were forced gas power plant outages.  

From March to May 2021, coal’s share in the US power mix dropped back to around 20% as renewable output increased. After having fallen 34% in the first five months of 2020 compared with the same period in 2019, absolute coal-fired generation rose to be 36% higher during the same months of 2021 than in 2020. 

Year-on-year quarterly changes in coal-fired generation by region, 2020-2021

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There was a slight increase in go-aheads for new coal-fired projects in 2020. In China, the government lowered restrictions on building new plants, allowing for greater construction approvals in more provinces. Final investment decisions for coal-fired power plants also gained speed in Cambodia, Indonesia and Pakistan in 2020, with these three countries together approving almost 5 GW of new coal capacity. In India, the approved amount dropped below 1 GW, its lowest level in a decade. 

This is not on track with the Net Zero Emissions by 2050 Scenario, which calls for no new investments in new unabated coal plants as of 2021. 

Eighteen countries currently using unabated coal for electricity generation have agreed to phase out its use, from as early as 2021 (Portugal) to as late as 2040 (Chile). Others have already done so, including Austria (2020), Sweden (2020) and Belgium (2016). However, these commitments collectively cover only 4.1% of global coal-fired generation and 1.2% of global energy-related CO2 emissions. 

These actions are not aligned with the Net Zero milestone that all unabated coal-fired power generation in advanced economies, as well as all unabated subcritical coal generation in emerging markets and developing economies, would cease by 2030. Phase-out of the remaining unabated coal plants would happen by 2040. 

Under the Net Zero Scenario, all subcritical coal-fired power plants are phased out by 2030 to stay on the pathway to net zero emissions by 2050. This requires shutting down 870 GW of existing subcritical coal capacity globally, or around 11% of all power capacity. Governments can play a key role in ensuring that initial phaseouts do not harm grid stability or economic activity. 

  • In July 2020, Japan announced its intention to phase out its less-efficient coal-fired power plants by 2030. Of the 140 coal-fired power plants in operation, more than two-thirds (representing ~50% of installed coal capacity) will be retired. Around 5 GW of new ultra-supercritical and integrated gasification combined-cycle plants will replace some of the retired capacity. 
  • In Germany, ~EUR 4.35 billion will be awarded to lignite power plant companies to compensate them for their earlier investments and to close the plants before 2030.  

Coal-fired electricity generation by technology in the Net Zero Scenario, 2010-2050

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Retrofitting coal-fired power plants with CCUS can help prevent the lock-in of emissions and protect today’s plants from becoming stranded assets in the future. This is particularly important for emerging economies in Asia, where coal plays an important role in meeting energy security and energy access goals, and where much of the existing fleet has only recently been built. 

New momentum for CCUS has spurred plans for approximately 10 coal-fired power plants with CCUS around the world. Governments and industry can accelerate CCUS adoption in the next decade by: 

  • Creating optimum investment conditions by placing a high value on emissions reductions and directly supporting early CCUS projects. 
  • Co-ordinating and underwriting the development of industrial hubs with shared CO2 infrastructure. 
  • Identifying and encouraging the development of CO2 storage in key regions. 
  • Promoting innovation to reduce costs and support the next generation of capture technologies. 

Co-firing low-carbon fuels such as ammonia or sustainable bioenergy in coal plants could be another way to reduce emissions from today’s power fleet.  

Ammonia, which does not emit CO2 when burned, is an alternative fuel to reduce emissions from coal-fired power plants. Therefore, under the Net Zero Scenario, ammonia co-firing is introduced at some coal-fired power plants by 2025. As with CCUS, co-firing ammonia can be particularly beneficial in regions where the thermal fleet is young. 

  • In February 2021, Japan’s Ministry of Economy, Trade and Industry released an interim report that seeks to expand the use of ammonia, specifically calling for a roadmap to support ~3 Mt of clean ammonia per year by 2030 and 30 Mt per year in 2050.  
  • Japanese utility JERA has already announced plans to demonstrate 20% ammonia cofiring at a 1GW coal-fired unit by 2025. This would be the world’s first demonstration project to co-fire a large amount of ammonia in a large-scale commercial coal plant.  

Meanwhile, co-firing sustainable bioenergy can allow coal-fired power facilities to continue contributing to flexibility and capacity adequacy while reducing CO2 emissions. However, the biomass feedstocks used must be considered sustainable to ensure a net CO2 emissions reduction from co-firing.  

In July 2021, Indonesia’s Ministry of Energy and Mineral Resources announced a draft plan requiring the co-firing of biomass in coal-fired power plants. The plan is part of the country’s effort to phase out coal-fired plants, which represent around 60% of electricity generation. 

Analysis