Asian utilities pull coal back into the stack as LNG doubles on Iran disruption

Asian utilities pull coal back into the stack as LNG doubles on Iran disruption Spot LNG prices roughly doubled and Asia's top importers are running more coal, even as the IEA forecasts coal's share of global generation falling this decade. Asia's biggest LNG importers are burning more coal to keep the lights on after the U.S.-Israeli conflict with Iran disrupted Middle East energy routes and choked global LNG supply, energynewsbeat.com reported on Tuesday (2026-05-19). Spot LNG prices have roughly doubled, and Asian LNG imports have fallen sharply in the steepest drop the report identified.⁶ That matters because it sets the direction of global coal demand against an official forecast pointing the other way. Coal still supplies roughly 35 percent of the world's electricity and remains the single largest generation source despite the renewables build-out, according to globalelectricity.org. When LNG becomes scarce and expensive, the marginal Asian electron comes from coal, not gas.^4,6 Japan has already moved. In late March 2026, the Ministry of Economy, Trade and Industry suspended for one year, from April 2026 to March 2027, the 50 percent capacity-factor cap on inefficient coal plants running below 42 percent design efficiency, energynewsbeat.com reported. Utilities are now free to run older units harder.⁶ The numbers behind that decision are modest but telling. Coal already accounts for about 29 percent of Japan's power mix, and METI expects the relaxed cap to save roughly 0.7 billion cubic metres of LNG while supplying reliable baseload, according to the same report. For a country that imports nearly all its gas, displacing even that volume matters when JKM-linked spot cargoes are trading at double.⁶ This is the awkward backdrop to the IEA's latest message. The agency's Electricity 2026 report, covered by Argus on Tuesday (2026-05-20), forecasts global power demand growing more than 3 percent a year on average for the rest of the decade while coal's share of the mix erodes, squeezed by nuclear, renewables and gas. The IEA sees renewables and nuclear together reaching 50 percent of generation by the end of this decade.¹ That clean-energy growth is real in absolute terms. The IEA expects renewable output to rise by about 1,000 TWh a year through 2030, with solar PV alone adding more than 600 TWh annually, Argus reported. The dispute is not about whether renewables grow. It is about what fills the gap when they fall short and gas is unaffordable.¹ In Southeast Asia, that gap is widening fast. Power demand from data centres, electric vehicles and green industrial parks is forecast to grow by more than 100 TWh over the next three to four years, according to the 2026 Southeast Asia Green Economy Report from Bain & Company and Standard Chartered, cited by esgnews.com and magazine.emgghana.com on Tuesday (2026-05-20). Meeting it will need more than $200 billion of investment, with over half flowing to data centres chasing fast grid access.^3,2 But the clean-energy pipeline that is meant to serve that demand is leaking. Only about 60 percent of the $540 billion in announced green investment across power and EV supply chains is judged likely to proceed under current conditions, the Bain and Standard Chartered report found. Renewable projects in Vietnam, Thailand and Indonesia have fared worse, with 50 to 60 percent cancelled over the past five years on regulatory uncertainty, permitting delays and limited grid capacity.² That cancellation rate is the crux of the trade. If half of Southeast Asia's renewable projects keep falling over while demand climbs by 100 TWh, the region's power systems lean harder on dispatchable thermal capacity. Coal is the cheapest such option across most of developing Asia, and the gas alternative is precisely the fuel now priced out by the Iran disruption.^2,6 The gas side looks structural, not seasonal. Asian buyers paid record LNG prices in recent weeks as the global crunch sent spot rates skyrocketing, oilprice.com reported on Monday (2026-05-19), and the squeeze may outlast this winter. Local gas production is falling everywhere in the region except China in the near term, Wood Mackenzie said, warning that Asia needs incentives and investment in domestic supply to avert the next crisis.⁵ So two forecasts now run in opposite directions. The IEA sees coal's share sliding as a cleaner mix takes hold; the near-term reality across Asia's biggest importers is more coal burn, driven by an LNG market that has doubled and a renewables pipeline that keeps stalling. Both can be true at once, since share can fall while absolute coal generation holds or rises on a bigger demand base.^1,4⁶ Watch whether METI extends the capacity-factor suspension past March 2027, and whether the next round of Southeast Asian renewable cancellations widens the thermal gap. The cleaner the official forecast, the more it depends on projects that are being scrapped at a 50 to 60 percent rate.^6,2