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Asian coal demand to offset EU and US decline

Demand for coal in developing Asian countries will offset a decline in Europe and the U.S., enabling the industry to continue growing, according to the head of the World Coal Association.

A number of Asian countries, including China, the world’s largest coal consumer, are increasingly turning to gas and renewables. But coal will remain a major energy source in the region due to its cost competitiveness and efficiency, said Benjamin Sporton, chief executive of the association.

The association, whose members include global producers such as as Glencore and Anglo American, estimates that Asia will account for 77% of global installed capacity of coal power plants in 2040, up from 66% in 2016 and 38% in 2000.

China will continue to account for nearly half of the total, while India’s capacity is projected to rise considerably. The Association of Southeast Asian Nations is also set for growth as countries like Malaysia and Thailand diversify their fuel mix after years of relying on natural gas reserves.

“The center of the coal world is shifting toward Asia,” said Sporton, adding that this would help keep global demand on a growth track for several decades, albeit by “marginal” amounts.

Global coal demand dropped in 2015 and 2016, according to the International Energy Agency, due to lower demand in China, the U.S. and Europe.

Figures for 2017 are yet to be announced, but Sporton expects demand to have picked up after a rebalancing of supply and demand in China.

Coal prices are rising again after a decline that began in 2013. The benchmark Australian spot thermal coal price on Globalcoal’s Newcastle index currently stands at around $100 per ton. That is a significant rise on the $50 it hit in 2016, but still only half of its historical high.

As part of a drive to lower emissions, China is switching from coal to gas for use in industrial heaters and boilers. But the amount of electricity generated from coal is increasing and numerous high-efficiency plants are being built, Sporton said.

He also argued that although the cost of producing renewable energy is falling, coal retains a competitive edge given that it is not subject to seasonal or climatic factors, and that advanced technologies have improved efficiency and lowered emissions.

According to analysis published by the association in 2016, coal power generation in ASEAN economies could cost 20% less than wind power if these clean-coal technologies were adopted. In China, it will be possible to generate electricity from coal at half the price of renewables in 2035, the report claimed.

Nevertheless, the industry faces a challenge from both governments and financial institutions in the West. In recent years, environmental concerns have prompted several banks and insurance companies to impose restrictions on or even a complete stop to financing coal plant development or mine projects.

The World Bank, for example, will finance coal-fired power plants “only in rare circumstances,” such as when there is no alternative.

“We would like to see more sensible policies from the World Bank,” Sporton said, pointing out that renewables and gas alone cannot meet Asia’s rapidly growing energy demands.

“If you are a developing economy and don’t have much money, then you might just say we need electricity with coal but the cheapest way to do that is by building a [low-efficiency] subcritical plant with low capital cost.”

A better approach, he argued, would be to make financing available to help the adoption of clean-coal technology.

According to a report published by energy sector research company Wood Mackenzie, investment in Asia’s coal power capacity expansion will top $250 billion over the next decade.

“Coal will continue to dominate the region’s power generation in the medium term,” especially in Southeast Asia, where installed power capacity is set to more than double by 2035, said the report.

However, opposition to coal has begun to emerge in many parts of developing Asia.

In Thailand, there have recently been protests against two planned coal-fired power plants in the south of the country, with demonstrators gathering in front of Government House and the UN’s Bangkok office, with some even going on hunger strike.

The protests came to an end on Tuesday when the energy minister promised to undertake a new environmental impact assessment and reconsider construction depending on the outcome within the next nine months.

Energy expert Manoon Siriwan said plans to use coal as a key power generation source had gone nowhere and would probably end after failing to gain social acceptance.

“In contrast, the protests against coal are getting stronger and stronger,” said Manoon. “I don’t expect Thailand to create any new coal-fired power plant projects, or even go on with the delayed project.”

“People are getting more concerned about potential air pollution but it is important to understand that technologies exist today that can reduce and almost eliminate emission from coals,” Sporton said. “It is my job to deliver this message to the government and the people.”
Source: Nikkei

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