China and India – the industry leaders
Nearly 90% of capacity commissioning (12.2 GW out of 13.8 GW) was in Asia, including China (7.5 GW), India (1.8 GW), the world’s two largest emerging economies. The remaining 10% come from Pakistan (660 MW) and the African countries (850 MW), while no coal-fired plants were commissioned in North America and Europe. A slightly different geography is typical for decommissioning of coal-fired power plants: of 11.4 GW mothballed in the first half of 2022, 8.1 GW came from the United States and Canada, and the remaining 3.3 GW – from Asian countries (876 GW), Australia (500 MW), France (600 MW), Brazil (136 MW) and the United Arab Emirates (1.2 GW).
Slowdown of capacity growth in Asia
The dominance of Asia in commissioning the new coal-fired power plants is by and large not new to the market. Developing countries, in need of cheap energy for economic growth, were the leaders in the pace of construction of coal-fired power plants during the previous decade and a half. For example, in Asia between 2004 and 2009, 414 GW of the coal-fired power plants were commissioned, while in North America – 8 GW, and in the UK and the current 27 EU countries – 3 GW. However, the construction pace of new capacities in Asia is gradually slowing down:. 478 GW of coal-fired power plants were commissioned in the region between 2010-2015, but it was 352 GW between 2016-2021.
Coal faces an increasing competition from the renewable energy sources not only in the developed countries but also in the developing ones. China accounted for 40% of the global commissioning of solar panels in 2021 (53 GW out of 133 GW) and just over 50% of the global commissioning of wind turbines (47 GW out of 93 GW). Therefore, in China itself, the construction pace of coal-fired power plants has also started to slow down: 367 GW of coal-fired capacity was commissioned between 2009-2004, but it was 335 GW between 2010-2015, and only 238 GW between 2016-2021.
Coal phase-out in Europe and North America
Unlike most Asian countries, Europe and North America have rapidly been moving away from coal-fired generation in the recent years. Between 2004-2009, 9 GW of coal-fired power plants were mothballed in the USA and Canada, but between 2010-2015 – 56 GW and between 2016-2021 – 81 GW. A similar trend is also characteristic for the UK and 27 EU countries where decommissioning of coal-fired power plants accelerated over the same period from 6 GW to 38 GW and 58 GW, respectively. At the same time, the reason for the coal phase-out in the United States was Shale Revolution thanks to which gas production increased by 44% (from 649 billion to 934 billion cubic meters according to the BP World Energy Review) between 2012 to 2021, and the share of gas in the generation mix increased from 30% to 38%.
High availability of raw materials ensured relatively low gas prices: the average gas cost at the Henry Hub between 2016 to 2021 was two and a half times lower than at the European key TTF hub ($101 per thousand cubic meters against $251 per thousand cubic meters, according to the World Bank). Moreover, in the US gas-producing states (Texas, New Mexico), the phenomenon of negative prices sometimes developed due to unavailability of pipeline capacities when producers were ready to pay buyers for the very possibility of raw materials supply. As far as the EU countries are concerned, an important role in the coal phase-outwas played by the carbon legislation rigidity forcing the operators of coal-fired power plants to purchase CO2 emission quotas.
Growing interest in coal in Africa
Against this background, the fact of growing interest in coal-fired generation in Africa draws our attention. Between 2004-2009, 125 MW of coal-fired power plants were commissioned in the region, but between 2010-2015, it was 2.3 GW, and 8.5 GW between 2016-2021. The largest contributors to this increase are South Africa and Morocco which put in operation 1.5 GW between 2010-2015 and 8.1 GW between 2016-2021. As for the countries in the other world regions, there are several beacons: Turkey which accounted for 70% of the non-EU coal-fired power plants commissioning in Europe (4.2 GW of 6.1 GW); Pakistan which commissioned 5 GW between 2016-2021 (vs. zero between 2010-2015); Chile and Brazil, which accounted for just over 70% (4.4 GW of 5.9 GW) of the coal-fired power plants commissioning in South America between 2010-2015 and 40% (1.3 GW of 5.9 GW) between 2016-2021.
New growth points
Are these trends going to change in the near future? In total, by July 2022, there were 178 GW of coal-fired power plants under construction worldwide: 70% of them (125 GW) were, as expected, in China and India. The remaining 30% was almost entirely distributed among the Asian countries, including Indonesia (19 GW), Vietnam (7 GW), Bangladesh (7 GW), as well as Japan (5 GW) and South Korea (4 GW). Turkey was the only country outside the region maintaining a high rate of coal-fired power plant construction, with 1.5 GW of capacity in the construction phase. This is another piece of evidence that the demand for thermal coal will continue to shift to the East.