ASEAN region homes the youngest coal power plants in the world. Partial or complete shutdown will give financial challenge to the plant owners/investors and the utility companies who signed construction and operation contracts. The energy security and reliability of the power system would be a huge challenge for the countries and the region. Shutting a large portion of coal power generation down would require large-scale deployment of renewables to be able to supply the energy that is not served by putting coal plants offline.
According to this policy briefing by ASEAN Centre for Energy, establishment of enabling policies and step-by-step phase mechanism that allows stable grid amid high renewable energy penetration is crucial. There are several pathways that could be taken aside from retiring coal plants such as deployment of biomass co-firing, carbon capture utilization and storage (CCUS), and high-efficiency low emissions (HELE) technologies, and therefore exploring them in parallel should be an alternate solution to secure the power supply in the transition era.
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ASEAN region relies heavily on fossil fuels such as coal for power generation. In 2020, cumulative installed coal power plant capacity in ASEAN is estimated to be around 89.5 GW which constitutes about 31 per cent of the region’s installed capacity. Countries with huge coal fleet capacity include Indonesia (35.2 GW), Vietnam (21.6 GW), Malaysia (12.8 GW), the Philippines (10.9 GW), and Thailand (6.1 GW). According to the 6th ASEAN Energy Outlook (AEO6), the region will be needing an additional coal capacity of 29.3 GW from 2020 to 2025 to secure the energy supply of the region under the scenario wherein the region achieves its renewable energy and energy efficiency targets.
Around 15 per cent of these capacity additions are subcritical plants, 64 per cent are the more efficient supercritical plants, while the remaining shares are ultra-supercritical plants. This increasing share of high-efficiency, low emission (HELE) coal technologies demonstrate the commitment of AMS in making coal power generation cleaner and more sustainable. Achieving the national and regional policies led to an estimated average emission factor of 1007.9 g-CO2/kWh and 985.97 g-CO2/kWh, respectively in 2040. This emission factor is similar to that of an ultra-supercritical lignite plant in Thailand and a subcritical bituminous plant in Vietnam which is a major improvement from a currently operating subcritical lignite plant in Lao PDR at 1404.67 g-CO2/kWh. Meanwhile, the best available technology of the region has an emission factor of 782.05 g-CO2/kWh which belongs to a subcritical bituminous plant in the Philippines. However, coal still contributes to about 67 per cent of the emission from the power sector. Thus, on the surface, retiring a portion of unabated coal power plants may seem to be an ideal step for decarbonizing the power system.
Some of the oldest ASEAN coal plants that are still operating at present were built in the 1980s, meaning that these plants will be operating for about 40 years within the next years. Coal power plants have a global average lifetime of approximately 50 years, therefore if well-maintained, these plants can still operate for another 10 years. However, in the study of Cui et. al., it was found that coal operational lifetimes must be reduced to 35 years to align with the Paris 2°C goal.
This implies that coal units must be retired after 35 years of service, and this would include the region’s oldest coal plants.One of the challenges in retiring a substantial portion of the existing coal plants is that the ASEAN region homes the youngest coal power plants in the world, with about 60 per cent of the power plants today operating for only about 10 years or less.
Coal stranded assets and conversion are also other issues to be addressed in the plants afterlife. If countries retire a portion of their coal fleets, another thing to consider is to how to utilize the coal assets after its retirement. It could be by conversion to natural gas plants, biomass, or other clean energy sources. However, financial mechanism must also be put in place to improve the economic feasibility of this strategy. Immediate retirement of a large coal fleet will more likely impact the energy security of ASEAN on a wider scale. In the case where the coal plant lifetime is limited to 35 years to align with the Paris 2°C goal, the region would need to retire 7.8 GW in the next 5 years. Furthermore, if AMS would also decide to cancel the construction of the new coal power that is expected to be built from 2021-2025, that would be a total of 37.1 GW of coal capacity that must be supplemented by renewables and/or natural gas to ensure a stable electricity supply, based on the AEO6 Baseline Scenario.
The average plant age of the ASEAN coal fleet is about 11.8 years, estimated from the ASEAN coal plant profiles from internal database. This estimate agrees with the International Energy Agency (IEA) estimates for developing Asian economy, which calculated an average coal fleet age of 12 years. For comparison, the average coal plant life in United States (US) and European Union (EU) are 40 and 35 years, respectively.
Shutting a huge portion of coal fleet prematurely will incur significant financial losses to the plant owners/investors and utility companies since plant economic life is typically considered to be 25 years in sheets to return the investment. Meanwhile, for plants running past the breakeven year investment (>25 years) will be faced with loss of expected revenue, and this should be another policy gap to consider.
In the context of power sector investment, higher RE deployment would require an increase USD 86 billion from the estimated USD 281 billion investment requirement for the Baseline Scenario up to 2025 due to increased installation of solar and wind power. Aside from capital and operations costs, total investment needed on variable renewable energy (vRE) deployment also considers associated components that maintain the reliability and flexibility of the operation.
The full report can be downloaded here.