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Soaring prices of natural gas, in tightened supply since the start of the war in Ukraine, are forcing governments to plan to turn on polluting coal-fired power plants to keep factories working and homes warm later this year.

The world’s consumption of coal is set to rise “slightly” in 2022, taking it back to the record level it reached nearly a decade ago, warned the International Energy Agency (IEA).

“European natural gas (prices) eased lower (on 29 July) as Russian gas flow stabilised,” ANZ’s senior commodity analyst Daniel Hynes told clients on Friday.  

Shipments through Nord Stream, the 1,224km twin pipeline that originates in Vyborg, Russia, and terminates at Lubmin, a coastal resort in Germany hovered “at around 33mcm/d, equivalent to 20% of its total capacity... However, the risk of further disruptions is still hanging over the market.”

Meanwhile in Asia, importers “continue(d) to look for shipments” to fill storage facilities, in the run up to the winter heating season, Hynes added.

Europe is managing with alternatives, for now. “Liquefied natural gas (LNG) has been the most prominent, alternative pipeline flows a second, while fuel switching to coal and oil has also contributed,” according to analysts at ING. “Renewables play a role when compared to the longer-term historical average use too,” they wrote in a 28 July note.

But costly gas has propped up coal demand this year, intensifying gas-to-coal switching in many countries, the IEA said this week. Economic growth in India, the second-biggest coal importer behind China, has also boosted demand.

Based on economic and market trends, global coal consumption is ‘forecast to rise by 0.7% in 2022 to 8 billion tonnes, assuming the Chinese economy recovers as expected in the second-half of 2022’, per the energy watchdog’s latest Coal Market Update. ‘This global total would match the annual record set in 2013’.

And, coal demand is expected to increase further in 2023 to a fresh record high, the IEA predicted.

Coal consumption in the European Union (EU) is expected to rise 7% in 2022, over last year’s 14% jump, on demand from the electricity sector where coal is increasingly being used to replace gas.

China and India together consume double the amount of coal as the rest of the world combined. Demand in India, strong since the start of 2022, is also expected to rise 7% this year. Coal produces over 50% of India's electricity.

Meanwhile, coronavirus lockdowns hit Chinese demand by an estimated 3% in the first six months of 2022. But an expected recovery in activity in the second-half could drive coal consumption back to last year’s levels.

Globally, coal generated 10,244 terawatt-hours of electricity in 2021, drubbing the previous record of 10,098 set in 2018, according to BP’s annual Statistical Review of World Energy.

The United Nations has asked countries to cut fossil fuel production by 6% every year to avoid the worst of global warming, Instead, governments continue to plan to produce coal, oil, and gas far in excess of the levels consistent with the ‘Paris Agreement’ temperature limits, it said in a 2020 report.

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