India’s coal production to surpass a billion tonnes by 2025: IEA annual report

Russian invasion of Ukraine sharply altered the dynamics of coal trade, prices, supply and demand patterns
In 2021, coal production in India reached 800 million tonnes for the first time. Photo: iStock
In 2021, coal production in India reached 800 million tonnes for the first time. Photo: iStock

India, along with China, is the world’s largest coal producer, consumer and importer. Its own coal production will surpass a billion tonnes by 2025, the annual report of the International Energy Agency (IEA), predicted December 16, 2022.

Also, India’s coal consumption has doubled since 2007 at an annual growth rate of 6 per cent. It is set to continue to be the growth engine of global coal demand, Coal 2022: Analysis and forecast to 2025 added.

India and China, are also the only two countries globally where there has been an uptick in investment in coal mine assets. This is because domestic production has been ramped up in both countries to reduce external reliance, according to IEA.

Coal’s global phaseout is also nowhere in sight, given the demand for it.

“In last year’s annual market report, Coal 2021, we said that global coal demand might well reach a new peak in 2022 or 2023 before plateauing thereafter.

“Despite the global energy crisis, our overall outlook remains unchanged this year, as various factors are offsetting each other,” the assessment noted.

End of coal?

The Russian invasion of Ukraine February 24, 2022 was one such factor. It “sharply altered the dynamics of coal trade, price levels, and supply and demand patterns in 2022”. 

However, this was not the case globally. “In India and China, where coal is the backbone of electricity systems and gas accounts for just a fraction of power generation, the impact of steeper gas prices on coal demand has been limited,” the IEA said.

Nevertheless, increased coal use in these countries had replaced some gas, which has been purchased by other regions willing to pay more for it, it added.

Europe has been hit particularly hard by the Russian invasion of Ukraine due to its reliance on Russian gas. It sparked a surge in gas prices, which in turn pushed coal prices up to new records in March and during the summer.

The spike in the prices of gas due to the war as well as lower output from hydro and nuclear led to ‘fuel switching’ to coal in the European Union to generate power.

Still, the production of electricity from coal has not been much in most European countries with the exception of Germany.

“Only in Germany, with 10 gigawatts, is the reversal at a significant scale. This has increased coal power generation in the European Union, which is expected to remain at these higher levels for some time,” according to the report.

But EU coal generation and demand will return to a downward trajectory as soon as 2024, according to the IEA. This will be due to redoubled efforts to improve energy efficiency and expand renewables.

IEA has also forecast that coal use will maintain its downward trajectory in the United States.

But in China and India, the coal bull-run continued this year.

“In China, low hydropower output in the summer amid a big heat wave pushed coal power generation significantly higher. In August, coal power generation in China increased by around 15 per cent year-on-year to over 500 terawatt-hours (TWh),” according to IEA.

However, increase in renewable power generation in China means that growth in coal consumption is expected to remain relatively stagnant at an average of 0.7 per cent a year to 2025.

Global coal demand reached eight billion tonnes this year.

“In our forecast, global coal demand plateaus around the 2022 level of 8 billion tonnes through 2025. However, given the current energy crisis with all its uncertainties, a lurch into growth or contraction is possible,” according to the report.

It concluded that “in the absence of low-emissions alternatives that can replace coal at scale in the iron and steel sector in the near term, global coal demand is set to remain flat through our forecast period.”

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