Global Surge in Electricity Demand Leads to a Record High in Coal Usage

Rising coal consumption driven by energy shortages and economic growth in Asia, despite global efforts to reduce fossil fuel reliance / Reuters 

As global energy demand continues to rise, particularly in developing nations, coal has reached its highest level of use in decades. Despite ongoing international efforts to cut back on fossil fuels and reduce CO2 emissions, countries in Asia—especially China—are increasingly turning to coal to meet their growing energy needs. This surge in coal consumption is not only a response to immediate energy shortages but also a reflection of long-term infrastructure development and economic expansion in the region.

According to a report from CNBC, citing data from the Global Energy Monitor, the global coal power capacity reached an unprecedented 2,175 gigawatts (GW) last year, marking a historic high. Dorothy May, project manager at Global Energy Monitor, explained that while coal consumption has significantly decreased in Europe and the United States, the increasing demand in Asia, particularly in China, has made the global transition away from coal much more challenging. This trend, highlighted during a recent speech by U.S. President Donald Trump at the World Economic Forum (WEF), underlines the enduring significance of coal in global energy markets. Trump emphasized that nothing, not even bombs or extreme weather, can destroy the importance of coal.

In 2023, the International Energy Agency (IEA) reported that global coal demand surpassed 8.77 billion tons, setting yet another record. The IEA forecasts that this level of demand will persist until at least 2027, driven largely by Asian countries like China and India, which have become major consumers of coal.

China's Role in the Rising Demand for Coal

China, in particular, stands out as the world’s largest consumer of coal, accounting for more than 56% of global coal consumption in 2023. Last year, China’s coal imports surged by 14.4%, reaching a record-breaking 542.7 million tons. In response to severe power shortages exacerbated by extreme weather conditions, the Chinese government has been increasing its coal stockpiles as a precautionary measure. This has been a significant driver of the country's growing coal demand. While renewable energy sources such as wind, solar, and hydropower account for about 30% of China's electricity generation, a reduction in hydropower due to droughts has pushed the government to rely more heavily on coal-fired power plants for energy security.

In addition, despite rapid growth in renewable energy infrastructure, China's ability to distribute this energy efficiently through its national power grid remains a challenge. This limitation in grid capacity further fuels reliance on coal, which continues to provide a reliable and readily available energy source.

India and Other Asian Nations Follow Suit

In India, coal consumption has also risen due to extreme heat waves that have driven up demand for cooling energy. The country’s industrial sector, especially cement and steel production, remains highly dependent on coal. According to market research firm Crisil, India's demand for steel is expected to increase by 8-9% this year, marking the fastest growth rate globally. Other countries across Asia, including Bangladesh, Indonesia, and Vietnam, are also constructing new coal-fired power plants to meet rising energy demands.

Vietnam, in particular, saw a sharp increase in coal imports last year, likely to make it the world’s fifth-largest coal importer, surpassing Taiwan. Indonesia set a record for coal production in 2023, with 831 million tons, while the Philippines saw the highest proportion of coal-fired power generation in Southeast Asia, surpassing even China in 2023.

Economic Factors Behind the Growing Dependence on Coal

The low cost of coal is another factor contributing to its sustained popularity, despite growing awareness of its environmental impact. Dave Jones, a power analyst at Ember Energy, pointed out that coal’s affordability means that both governments and businesses are less inclined to invest in energy efficiency measures or transition to renewable energy sources. With the rising cost of natural gas following Russia's invasion of Ukraine, many countries in Asia have reduced their plans for gas-fired power plants and opted for more coal-based energy solutions instead.

In addition, the rapid growth of artificial intelligence (AI) technology is set to drive up energy demand, especially for data centers, which are major consumers of electricity. According to Moody's, power consumption by data centers is expected to more than double by 2030, reaching over 35 GW, further increasing long-term coal demand.

The Future of Coal in a Changing Energy Landscape

Despite the growing demand for coal, experts continue to argue that the energy transition is not entirely out of reach. While global coal consumption is likely to remain high in the short term, the expansion of renewable energy sources and the growth of global liquefied natural gas (LNG) supplies could help reduce coal imports in some countries. According to Ian Looper, a commodities strategist at Tris Advisory, countries in Europe and East Asia are already seeing a decline in coal consumption, and if nations honor their pledges to triple renewable energy production by 2030, significant reductions in coal usage could occur over the next decade.

As the world’s energy consumption continues to climb, it is clear that the reliance on coal will persist in the near future. Experts warn that as long as energy demands remain high and affordable, reliable energy sources like coal will continue to be integral to global energy security, particularly in rapidly developing regions like Asia.