IEA suggests countries could turn to coal amid soaring gas prices
European gas demand could decline this year, as continued high prices make coal more competitive for power generation, according to the International Energy Agency (IEA).
In its latest quarterly market report, the group predicted that gas consumption will fall around 4.5 per cent to 527 cubic metres (bcm) in 2022, after rising to 552bn cbm last year.
It believes the decline will driven by reduced burning of gas in the power sector, which could fall by six per cent from 2021.
“Gas-fired power generation is expected to decline amid the strong expansion of renewables, while high gas prices continue to weigh on its competitiveness vis-à-vis coal-fired generation,” the report said.
The group further predicts that Asian demand growth could slow, after rebounding vigorously following easing pandemic restrictions.
European and Asian gas prices climbed to record highs last year, while US prices rose to the highest in a decade.
The price rises were driven by reduced supply, low storage levels, infrastructure outages and competition for liquefied natural gas (LNG) cargoes.
Europe has suffered from shortening supplies via pipelines from Russia, coupled with concerns about supply disruption in the event of sanctions against Russia if it invades Ukraine.
This has helped keep prices high into the new year, and has incentivised coal use in countries that can use both fuels.
This report also confirms European gas and Asian LNG prices are expected to average $26 per metric million British thermal units (mmBtu) and $27/mmBtu respectively – both all-time high annual averages – due to continued low stock levels and reduced supply.