Worldwide coal generation will fall 5% in 2020 to 2012 levels, marking the largest annual decrease on record, the International Energy Agency estimated in a new report.

Coal use will likely bounce back in 2021, but growth in renewables will remain the lead story in electricity generation, the agency said in its first-ever "Electricity Market Report" published Dec. 14. The drop in coal generation came against the backdrop of a 2% decline in global electricity demand due to the historic shock created by the COVID-19 pandemic.

Coal-fired capacity will be flat in 2020 at 2,125 GW, the International Energy Agency said. However, if developers delay new plants or if power generators move retirements forward in 2020, it could be the first year with a coal capacity decline in this century.

"As with most coal-related issues, the story of coal capacity varies considerably between advanced economies and those which are emerging and developing," the report noted.

Europe and the United States are generally not making plans for new coal capacity and are retiring existing fleets, while Austria and Sweden recently joined Belgium as European countries that are completely closing out their coal fleets, the group wrote.

In the emerging and developing world, decommissioning coal plants is unusual, the International Energy Agency said. On the other hand, the construction of new coal plants has slowed due to both headwinds facing the coal sector and the pandemic. China leads the way on coal additions with 30 GW of capacity expected to be commissioned in 2020, in line with its 2019 total.

Still, the agency said coal's prospects in the developing world are shifting as well.

"Lower electricity demand driven by the COVID-19 crisis, lower costs for renewables and low gas prices — as well as the reduction in air pollution that came with lower coal-based electricity generation in 2020 — have changed the perception in many countries that coal is the only way to have affordable, dispatchable and secure electricity," the report stated. "Difficulties in financing and growing international pressure against coal are also playing a role."

Coal still dominates the energy mix in China and India. In both countries, its share of power generation decreased to the benefit of renewables in the face of declining electricity demand.

Coal generation is "by far the largest contributor" to carbon dioxide emissions and accounts for about 72% of the sector's global emissions, the International Energy Agency wrote. It expects coal-fired generation to increase by about 3% in 2021, while estimating an increase of roughly 1% in output from gas-fired plants. Together, those increases would boost CO2 emissions from the global power sector by around 2% in 2021.

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