Global electricity production from coal is on track for a record drop of 3% year-on-year in 2019 amid lower electricity demand and a rapid increase in renewables and nuclear power, a report said Monday, with even numbers in China falling.

The drop is set to be some 300 TWh below 2018 levels, according to an analysis from the Centre for Research on Energy and Clean Air (CREA), Sandbag, and the Institute for Energy Economics and Financial Analysis (IEEFA), written for the Carbon Brief website.

That would be a record fall, with global numbers dropping in only three years of the past 35.

“The global decline means an economic hit for coal plants due to reduced average running hours, which are set to reach an all-time low,” the analysts wrote.

“The record drop also raises the prospect of slowing global CO2 emissions growth in 2019. Nevertheless, global coal use and emissions remain far higher than the level required to meet the goals of the Paris Agreement.”

Coal consumption is on the retreat in all regions bar South East Asia, and while drivers vary, the trend is primarily brought around by slowing or declining electricity demand, as well as an increase in lower-emission fuel sources such as wind, solar, nuclear, and natural gas.

The report provides some sorely needed positive news for the environment as delegates from nearly 200 nations next week descend on Madrid, Spain for the annual global climate change negotiations, after a high-level summit in New York in September largely flopped.

CHINA DELIGHT

While EU and US coal use has been on the decline for a while, those numbers have usually been offset by increases in major developing nations, especially in China, which accounts for around half the world’s total coal consumption.

But this year, China looks set to achieve a 3% drop in coal use after power generation from coal grow 6.6% in each of the two previous years, according to the analysts.

That’s primarily down to a decrease in power demand after government stimulation packages in 2017 and 2018 drove rapid growth in carbon-intensive manufacturing sectors, in particular those related to construction.

This year’s halved rise in power demand has primarily been covered by more generation from solar, wind, hydro, and nuclear, the analysts said.

It remains to be seen if China can continue the trend in years ahead as Beijing continues to grapple with the prospects of a slowing economy.

The country continues to bring a large number of new coal-fired power capacity online, but China is headed for a third straight year where coal generators are running at less than half their maximum and most companies in the sector are losing money.

Coal power is the sole targeted sector for China’s national emissions trading scheme when it launches next year. As observers predict the government is likely to end up with fairly soft benchmarks, it appears questionable whether the programme will have much impact on overall energy market trends in its initial years.

ASIAN DELIGHT

Other Asian countries are also contributing to the global decline, according to the report.

India is on track for a sharp decline this year, mostly due to a slowdown in electricity demand and industrial output, and while those trends will concern the government they can at least take comfort that power generation from non-coal sources increased 12% year-on-year over the first three quarters of 2019.

Meanwhile, coal imports in both Japan and South Korea – two of the main drivers of Asian coal use in recent years – have come down sharply this year, the report said.

For South Korea, that could signal a minor relief for the country’s ETS carbon prices, which some analysts have said might climb as high as $45/tonne over the next 18 months.

KAUs keep climbing, with the 2019 contract on Monday closing at 37,850 won ($32.17) – their highest level to date.

Increased coal use has previously been pushing Korea’s GHG emissions further away from its Paris targets, but lower 2019 imports combined with a recent government decision to move forward the date for closing down six of the nation’s oldest plants could paint a somewhat brighter picture for future decarbonisation efforts.

South East Asia was the exception from the trend, both on that continent and globally, with Vietnam in particular out of tune, increasing coal consumption by 10% year-on-year in the January-October period and doubling imports.

US DELIGHT

Meanwhile, US coal use has been on the decline for years since the shale gas revolution provided a cheaper energy alternative, and that trend is continuing this year despite the Trump administration’s pledge to buck it.

The analysts said coal-fired power generation fell nearly 14% in the first eight months of the year, with nearly 6% of the US coal fleet set to retire in 2019.

The current administration is systematically undoing environmental regulations, including challenging action taken on state level, such as suing California over its link to Canadian province Quebec’s cap-and-trade programme.

But while little regulatory action is being taken on a federal level to halt emissions from fossil fuels and other sources, a number of states are actively seeking to to cut carbon output, especially from their power sector.

New Jersey is preparing to rejoin the North East Regional Greenhouse Gas Initiative (RGGI) power sector carbon market, while Nevada, New Mexico, Oregon, and Pennsylvania are all at various stages of considering carbon pricing mechanism to help bring down emissions.

EU DELIGHT

The EU is headed for an unprecedented drop in coal-fired power generation year-on-year, the analysts said, citing a 19% fall over the Jan-June period based on official data.

That decline is set to accelerate to 23% in the second half of the year.

The trend has happened partly due to a more-than-quadrupling of EU carbon prices over the past 18 months to current levels near €24, though the report warned the 28-nation bloc’s coal-to-gas switch potential is running out, potentially stymieing further decarbonisation.

“The expansion of wind and solar is increasing, however, and this will be the driving factor displacing not only coal generation, but also output from gas in the future, as long as demand growth remains tepid or negative,” they said.

While EU hard coal-burning plant emissions have tumbled in recent years, lignite-linked CO2 output has barely budged.

But for the first time this year, the bloc’s lignite-based facilities are seeing major drops in output in western EU nations, having previously been resistant to climate policy due to the fuel often being mined locally to the plants, lowering transport costs.

While several national governments plan coal power phase-out dates for before 2030, the bloc’s carbon pricing looks set to keep up the cost pressure on remaining facilities.

EU ETS prices are predicted to average close to €30 next year and climb well above that level over the next decade, according to a Carbon Pulse poll of 14 analysts, with most predicting that the carbon market’s supply-curbing MSR mechanism will more than offset the impact of falling gas prices, concerns over Brexit, and wider macroeconomic worries.

By Stian Reklev – stian@carbon-pulse.com