ES #127: The IEA's Peak Demand Fallacy

Energy Shots #127:

According to the International Energy Agency’s website, the organization’s annual coal report is “the global benchmark for the medium-term forecast of coal supply, demand and trade.”

As with the IEA’s annual crude report, the organization’s self-claimed “global benchmark” has repeatedly predicted that worldwide coal consumption was on the precipice of a peak and demand for coal-fired generation would give way to “clean” energies.

Meanwhile, a look at the IEA’s trailing five years of coal demand forecasts shows the Reality Gap between the organization’s post-Paris Agreement policy recommendations and the real-world priorities of the 7 billion people living outside of the Wealthy Western World.

• IEA Coal 2020: The IEA predicted that “coal consumption will rise 2.6% to 7,432 Mt (still less than 2019)” in 2021.

• IEA Coal 2021: The IEA forecasts that “global coal demand is set to rise to 8,025 Mt in 2022, the highest level ever seen, and to remain there through 2024.”

• IEA Coal 2022: The IEA predicts that global coal demand would plateau “around the 2022 level of 8 billion [metric tons] through 2025.”

• IEA Coal 2023: “In 2022, coal demand reached a new record high of 8,415 Mt, increasing by 4%… For our forecast period until 2026 we expect to see a trend emerging of declining worldwide coal demand, starting in 2024… This would imply that coal is likely to peak in 2023.”

• IEA Coal 2024: “For 2024, global coal demand is projected to grow by 1.0%, setting a new all-time high of 8,771 Mt.”

Coal is to Asia as oil is to the Middle East

Peak demand forecasts like the IEA’s coal outlook share a common affliction. The Wealthy Western World discounts the energy required to improve socioeconomic outcomes across 7 billion people living beyond the G7’s borders—500 million of whom have zero access to electricity in 2025.

These socioeconomic incentives and broader geopolitical priorities will ensure the survival of energy-dense resources like coal until coal can be replaced by a cheaper, more secure, and more abundant alternative.

A look at coal demand growth in coal-rich regions like Asia underscores the Hierarchy of Energy Needs: security, cost, and availability supersede efficiency.

As shown below, aggregate Asia Pacific coal consumption in 2023 accounted for nearly 83% of the 45 petawatt-hours of annual global coal demand and was 379% larger than the combined coal consumption of all other regions on Earth.

The role of the non-G7 in global coal demand growth is similarly evident in coal-fired generation capacity trends.

• The G7’s operating coal-fired generation capacity dropped 44% between 2000 and 2024.

• Meanwhile, operating coal-fired generation in BRICS, the Global South’s counterweight to the G7, increased by more than 339% over the same period with the help of China’s staggering 488% growth.

Coal Construction Continues in 2025

Analyzing the status of coal-fired generation projects as of January 2025 indicates Asia’s coal demand retains upside potential.

Asia accounts for nearly 98% of the 256.8 GW of coal-fired generation capacity currently under construction worldwide, led by another 204 GW in China and 29 GW in India.

• China has nearly 5x more coal-fired generation capacity under construction than gas-fired generation capacity. China added 19 GW of gas-fired generation last year versus 30 GW of coal-fired generation.

• Another 142 GW of coal-fired generation projects are permitted and will begin construction in China (120 GW) and India (22 GW) as soon as this year.

Looking Ahead

Supply chain regulations in the EU could push Asia’s export-centric economies to adopt more gas-fired or nuclear generation capacity in place of permitted or proposed coal units. Still, energy security will dictate the viability of efforts to displace coal-fired generation from Asia’s fuel mix. 2022’s Btu crisis showed Asia’s policymakers the consequences of relying on foreign fuels and entering a bidding war for energy molecules with wealthy EU member states.

China’s strategic imperative to reduce its reliance on crude imports through the Strait of Malacca will likely be reflected in more coal, wind, solar, hydro, and nuclear.

See you next Sunday.

ES.

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