Coal’s future in Asia is far from bleak
The one question that I get asked every other day is “What’s the future of coal in Asia?”
Especially after the Paris Climate agreement a couple of years ago, where 196 countries signed a pact to reduce carbon emissions by 2022.
No doubt renewable energy capacity additions have picked up pace since then, but is it so easy to displace King Coal from the energy mix?
My answer is no.
Millions of people in Asia do not have access to basic electricity and several countries still subsidize electricity tariffs as a populist measure.
Coal is omnipresent in Asia, particularly in India, Indonesia, China and, to some extent, the Philippines and Vietnam. Countries that don’t have domestic production import it.
While coal-related infrastructure in several Asian countries is well developed, renewable energy infrastructure is still in its infancy. It would require billions of dollars of investment and significant time to get the infrastructure for renewable energy up and running.
These countries will have to address the pressing issue of providing electricity to their millions of citizens first and coal would be their natural choice to fuel it given its abundance, cost-effectiveness and readily available infrastructure.
Global population has more than doubled to 7.5 billion people from about 3 billion in 1950-1960 and average power consumption per capita is only likely to increase, says Dr Lars Schernikau of HMS Bergbau Group.
Coal still accounts for more than 40% of the global power supply, unchanged for many years, he notes.
A few months back, National Australia Bank announced it would no longer provide financing for new thermal coal projects.
Going forward, such news may not seem too surprising. Several countries are expressing concern over rising pollution and are thinking about ways to curb emissions.
China has been much talked about in recent years because of the heavy smog in some of its busiest cities, and India’s capital New Delhi is facing similar issues.
China tried to rein in coal consumption in 2017, restricting imports and directing utilities to shift to natural gas instead, but met with little success.
In November, China’s coal imports fell 18% year on year; but the country is now grappling with a shortage of power generation fuel amid a colder-than-expected winter and is rushing to increase coal availability to get through the next few months.
Even as coal demand in China is forecast to decline in the next five years, coal will meet more than 55% of the country’s energy demand in 2022, according to the International Energy Agency.
In India, the Supreme Court initially banned the use of petroleum coke in all industries around New Delhi in a bid to ease severe air pollution, but later allowed cement companies to use the fuel. Petcoke typically has a high sulfur content of up to 9%, much higher than thermal coal, which can have a sulfur content as low as 0.1%.
India’s government recently announced a rise in the import duty for petcoke to 10% from 2.5% earlier, catching the industry by surprise. But market participants expect the higher duty will do little to curb consumption.
On the one hand, India is trying to nearly double its coal production by 2020 and on the other, it is keen to add huge renewable capacity in the next few years. India is also setting up more washeries to improve the quality of its coal.
So, what does all this mean?
According to the International Energy Agency, coal use in India and other Asian countries is expected to offset declining demand from Europe, the US and China over the next five years.
ASEAN countries are still adding coal-fired capacity to meet their ever growing requirements for electricity. Indonesia also has its own plan to add 35 GW of electricity by the end of this decade, 70% of it coal-fired. However, the debate is still raging over whether the archipelago should shift its focus to adding cleaner energy, despite being the world’s leading coal exporter.
While most governments are serious about reducing carbon emissions and are taking steps to add cleaner energy, it would take proper planning, investment and time to even reduce the proportion of coal in the energy mix in Asia, let alone remove it completely.
As Dr Schernikau says: “Coal remains the single largest source of power for the world and will continue to do so for decades to come.”