In the on-going energy transition, coal use is expected to drop dramatically. Pilita Clark describes the latest developments where coal’s share of global primary energy use slumped to 29 per cent last year, the lowest since 2005.
Coal use plunges as China cuts back and US turns to gas
The world’s use of coal fell by the largest amount on record last year as the fossil fuel that powered the industrial revolution was struck by tumbling US gas prices and another year of dwindling consumption in China.
BP’s latest world energy review showed 2015 had been “an annus horribilis for coal”, said the oil and gas group’s chief economist, Spencer Dale.
Global consumption and production levels for coal plunged by the biggest amount since at least 1980, while prices fell about 20 per cent.
“I would be surprised if one can think of another period when coal has fallen by a similar amount,” said Mr Dale.
China, the world’s largest coal consumer, was not the main reason for the declines, he said, though its industrial production braked sharply and it was clearly aiming to shift to cleaner sources of energy.
The US was the larger culprit as falling natural gas prices, which plunged alongside oil, saw the country generate more electricity from gas than coal for the first time.
This year, all of the major benchmarks for coal have pushed above $50 a tonne, helped by supply cuts by major producers and more recently an increase in Chinese imports.
But coal’s share of global primary energy use slumped to 29 per cent last year, the lowest since 2005, which helped produce another notable figure in BP’s annual review: a stalling in carbon dioxide emissions from energy use.
Emissions only grew 0.1 per cent in 2015 compared with the previous year, the slowest growth BP has recorded in nearly 25 years except in the immediate aftermath of the 2008 financial crisis.
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The finding echoes similar data from the International Energy Agency, which said in March global emissions had stayed flat for two years in a row.
Renewable energy in the power sector, meanwhile, grew by more than 15 per cent last year, according to BP, as technology improved and costs fell.
Solar power in particular has experienced striking growth, with production increasing more than 60-fold in the space of 10 years, doubling capacity every 20 months.
Despite this, Mr Dale said the history of new forms of energy showed they often took decades to penetrate the global market meaningfully.
“Starting the clock at the point at which new fuels reached 1 per cent share of primary energy, it took more than 40 years for oil to expand to 10 per cent,” he said.
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Natural gas only reached an 8 per cent share after 50 years and it was possible that renewables’ current share of 3 per cent of primary energy might not reach 8 per cent for at least another 20 years.
In the oil sector, the BP review found the world’s oil reserves barely changed last year, in spite of the sharp drop in investment and exploration after the collapse in crude prices.
Repeating earlier forecasts, Mr Dale said he expected oil supply and demand to move back into balance in the second half of this year.
But he cautioned against expectations of a rapid shift in prices because there had been a “massive” accumulation of stocks that needed to be unwound before the market returned to normal.