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Coal to remain 'king' in Southeast Asia power market for years to come

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Coal to remain 'king' in Southeast Asia power market for years to come

Southeast Asia's strong coal demand will likely continue over the next two decades before solar and wind power takes over in 2040, according to a new report from Wood Mackenzie.

Coal's contribution to the area's energy mix will peak in 2027 before slowing down and making up about 36% of power generation by 2040, according to a Sept. 25 report titled "Coal is still king in Southeast Asia's power market." By then, the research and consultancy firm expects total Southeast Asian power demand to double from 2018 levels.

The region will need to invest an average of US$17 billion annually to meet this demand, the bulk of which will go toward coal generation in the medium term until it is surpassed by natural gas investments. Expenditures in solar and wind power plants are then projected to exceed spending on gas plants by 2034.

Coal use will decrease as the cost of renewable energy resources drops and environmental pressures mount, resulting in solar and wind plants leading with 35% of the region's power capacity mix by 2040.

Jacqueline Tao, a research associate with Wood Mackenzie, said in the report that the world's negative view of coal will result in a gradual slowdown of new coal-fired capacity in the region.

"However, the reality of rising power demand and affordability issues in the region mean that we will only start to see coal's declining power post 2030," Tao said.

Gas's share of the Southeast Asia energy market is forecast to remain flat at about 30% to 2040, though gas demand will grow from the current 14 Bcf/d to more than 23 Bcf/d by 2040 due to infrastructure growth in Thailand, Vietnam and Indonesia, the report said. Gas supply is largely constrained in the region, and many mature fields will decline. While three large gas discoveries in the first six months of the year might spur exploration and investment interest in the region, it is "unlikely to arrest the decline from mature fields."

Wood Mackenzie expects Southeast Asian countries to import more than 100 million tons per annum of LNG by 2036, 10 times more than they imported in 2018, and require substantial investments in regasification infrastructure.

Economic growth, a growing population and a developing middle class could drive power demand in Indonesia and Vietnam to triple by 2040, Tao said. Those two nations will account for nearly 60% of the region's power demand.