IEA says coal-fired power generation rising in 2026 as Iran war lifts gas prices

The International Energy Agency said this week that coal-fired power generation worldwide is set to rise 1.4% in 2026, reversing the declining trajectory it had projected just last year, as the ongoing war in Iran drives up natural gas costs and pushes major economies back toward the dirtiest fossil fuel.

A Forecast Reversed

The IEA's Electricity Mid-Year Update, released on Tuesday, forecast global electricity demand growth of 3.6% in 2026 and 3.8% in 2027, up from 3% in 2025. The acceleration compounds the emissions challenge posed by the return of coal. In its mid-2025 update, the agency had projected coal-fired generation would decline by 1.3% in 2026. That trajectory has now been abandoned: the agency attributed the reversal to higher gas prices encouraging fuel-switching, weather effects, and renewable curtailment.Engineering News+2

The war between the United States, Israel, and Iran, which began on February 28, has choked liquefied natural gas flows through the Strait of Hormuz, a chokepoint handling roughly 20% of global LNG trade. Asian and European benchmark gas prices surged 60% to 70% in the weeks following the conflict's onset, making coal the cheaper option for power generators across much of Asia.cnn+1

Asia's Coal Revival

Japan relaxed regulations in April to boost coal-fired generation after the war added uncertainty to LNG imports. By June, the country's gas-fired output had fallen 16% year-on-year while coal generation rose 4.6%, according to Reuters Thomson Reuters Corporation ↗ 2.92%, citing data from Japan's nine largest utilities. The Japan Times reported that coal generation across the country's main islands ran 17% above year-ago levels through much of the spring.Reuters+2

South Korea similarly ramped up coal use, and the Philippines delayed planned shutdowns of coal plants. A Reuters report in May noted that Japan and South Korea — the world's second- and third-largest LNG importers — had both increased coal-fired output as the conflict limited gas supply.Reuters+1

India's Reliance Deepens

In India, coal and lignite plants supplied 69.54% of the country's electricity during the April-to-June quarter, according to data the government presented to Parliament this week. Power Minister Manohar Lal Khattar told Parliament on Thursday that peak electricity demand surged about 12% year-on-year during that period, driven by El Niño conditions, with all-time peak demand of 270.8 GW met successfully in May.Indiatimes+2

India's coal-fired output in June reached its highest level since November 2023, rising 14% year-on-year, as an extended heatwave and below-average monsoon rainfall pushed cooling demand higher. CNBC reported in May that coal plants were generating over 70% of India's electricity, with experts expecting the share to climb further.CNBC+1

The IEA noted that despite coal's resurgence, renewables are still expected to overtake coal as the world's largest source of electricity generation in 2026, with solar and wind projected to grow from 17% to 21% of global supply by 2027. Global carbon emissions from power generation, however, are now forecast to rise about 1% this year.Electrek