Energy demand drives growth of coal-based power-

Countries across the world are moving away from coal, but the Southeast Asian region’s dependence on coal is set to increase. This is mainly driven by the region’s growing electricity requirement, arising from increasing population, urbanisation and economic growth. Nearly 29 GW of coal-based capacity is under construction in Southeast Asia as of end-2016 while another 19 GW of capacity had the requisite clearances for development. While gas has historically been the fuel of choice for power generation in the region, declining reserves and higher prices have made it look for alternatives. As per the International Energy Agency (IEA), coal will overtake gas as the primary fuel supplying electricity by 2020 and be responsible for 50 per cent of electricity generation by 2040 in the Association of South East Asian Nations (ASEAN).

The Institute of Energy Economics, Japan, makes a similar projection in AsiaEnergy Outlook 2016. It estimates ASEAN’s primary energy consumption will reach 1,352 million tonnes of oil equivalent (mtoe) by 2040 and that coal will record the largest growth among fossil fuels led by power generation demand. It projects that coal will account for 34 per cent of overall primary energy consumption growth, with total consumption expected to touch 356 million tonnes of coal equivalent (mtce) – accounting for 40 per cent of global coal consumption growth.

Growth of coal-based power

The SEA region’s dependence on coal has been rising since 2010. In the past few years, the share of coal in electricity generation has increased significantly while that of natural gas has declined, though the latter still has the major share. As per a report published by the Oxford Institute of Energy on the role of coal in Southeast Asia, natural gas and coal accounted for 44 per cent and 34 per cent respectively of total electricity generation of 843 TWh (2014) while renewables (including hydro) and oil followed next with shares of 17 per cent and 5 per cent respectively. Notably, the share of coal in electricity generation increased by 7 percentage points from 27 per cent in 2010 to 34 per cent in 2014 while that of gas decreased by 5 percentage points (from 49 per cent in 2010 to 44 per cent in 2014).

Coal is a key source of power in Indonesia, Malaysia and the Philippines with a share of 40 per cent to 50 per cent in electricity generation while its share in Vietnam and Thailand is about 20-25 per cent.

In terms of installed capacity, coal-based power accounted for one-third (or 62 GW) of the total installed capacity of 205 GW at the end of 2015. Interestingly, nearly 25 GW of additional coal capacity came up between 2010 and 2015, accounting for 42 per cent of total capacity additions in the period. Gas-based capacity stood at 77 GW and hydropower capacity at 41 GW in the region.

As per the IEA, ASEAN’s installed coal-based capacity is forecast to increase to 163 GW by 2035. The World Coal Association (WCA) projects that coal would overtake natural gas by 2030 to become the largest source of power capacity as natural gas will be affected by the removal of subsidies, price volatility and international competition leading to relatively high cost of generation.

Need for clean coal technologies

Given Southeast Asia’s booming energy needs and increasing dependence on coal, it is imperative for the region to focus on clean coal technologies to ensure sustainable development and meet international commitments on reducing carbon emissions. Advanced technologies such as supercritical and ultra-supercritical thermal plants offer enhanced efficiency and lower emissions vis-à-vis subcritical plants. Cost, however, is a deterrent. The capital cost of supercritical plants is estimated at $1.46 billion per GW, about 20 per cent higher than that of subcritical plants. The capital cost of ultra-supercritical plants works out to around $1.7 billion per GW, which is about 40 per cent higher than that of subcritical ones. But the long-term benefits of these technologies outweigh the initial higher capital costs. Supercritical and ultra-supercritical technologies provide operational efficiencies of 37 per cent and 40 per cent respectively while subcritical technology has an efficiency of only 32 per cent. In terms of emissions, subcritical technology has an emission rate of 1.04 tonnes per MWh while emissions for super critical and ultra-supercritical stand at 0.87 tonne per MWh and 0.8 tonnes per MWh respectively. As per the WCA’s report titled ASEAN’s Energy Equation, Promoting high efficiency low emission (HELE) deployment across ASEAN would result in significant carbon reduction emissions to global benefit. Shifting the region’s forecast coal capacity in 2035 from the current mix to ultra-supercritical would reduce cumulative emissions by 1.3 billion tonnes”.

Realising the potential gains of advanced technology, the SEA region is gradually introducing it. The report states that of the 80 GW of under-construction and planned coal-based capacity in ASEAN, about 36 per cent is based on supercritical technology and 12 per cent on ultra-supercritical technology. Twenty-three per cent is based on subcritical technology while the technology choice of the remaining capacity is undefined at present.

Further, the role of pollution control technologies in new and existing coal-based plants can provide additional gains in terms of emission reduction. This is especially important given the increasing levels of air pollution in the region. According to the IEA’s Energy and Air Pollution Report 2016, coal-based power generation and industrial processes are the largest sources of energy-related sulphur dioxide (SO2) emissions in SEA, together accounting for around three-fourths of the total 3.9 million tonnes (mt) of SO2 emissions. Almost half of these emissions are from coal-fired capacity in Indonesia alone.

The report further states that SOx, NOx and particulate matter levels in ASEAN can nearly double by 2040, based on the current pipeline of coal-based power projects under construction. Therefore, policymakers need to notify stringent standards for pollutants emitted from coal plants while generation companies need to invest in pollution control equipment such as flue gas desulphurisation units.

The way forward

HELE technologies are bound to play a significant role in meeting ASEAN’s energy demand. The WCA projects that the region’s increment energy demand of 800 TWh between 2020 and 2035 can be met through different pathways such as a mix of subcritical and renewables, entirely from subcritical, entirely from renewables, or entirely from ultra-supercritical. While generation entirely from subcritical is the lowest-cost pathway requiring an upfront capital investment of $180 billion, it is not the most sustainable one from an emissions point of view as it would result in emission of 800 mt of carbon dioxide (baseline). A mix of subcritical and renewables (wind/solar) would result in a capex of $253 billion and an emission reduction of 100 mt over the baseline scenario. Meeting the incremental energy demand entirely through solar or wind would significantly escalate the capex to $598-$773 billion (due to the low capacity utilisation factor of renewable energy plants) but lead to zero emissions. On the other hand, a shift to ultra-supercritical would result in a capex of $253 billion and result in emission reduction to the tune of 200 mt over the baseline scenario. Therefore, a shift to ultra-supercritical provides a balance between emission reduction as well as costs.

The idea is not to shift away from renewables but to ensure that the upcoming fleet of coal-based plants is efficient and follows low carbon technologies to the extent possible. Going forward, a healthy mix of advanced coal technologies and renewables can help ASEAN meet its energy needs in a sustainable way.