Singapore — Germany has announced grand plans of exiting coal and the world will be watching to see if its coal phase-out will be a model for the rest of the world, including Asia, to follow.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Germany's coal commission has recommended phasing-out coal-fired power generation by 2038 and capping coal capacity at 30 GW by 2023.
In Asia, Japan and South Korea are expected to reduce their coal imports, although demand for coal imports from Vietnam and India are still firm, the Australian Resources and Energy Quarterly showed in June.
While developing countries in Asia have also been turning to renewable energy, analysts told S&P Global Platts that a similar coal exit is unlikely in the near future. This is in part due to coal being a cheap resource, and also due to the high demand of energy in Asia.
"Many of these governments are facing short-term pressures in facilitating energy access and are building more coal-fired plants...which have an average life span of 40 years," Dr Christopher Len, senior research fellow with the Energy Studies Institute at the National University of Singapore, said.
The International Energy Agency noted that coal-fired electricity generation in Asia has been on the rise since 2018, with China, India and Southeast Asia leading the climb.
Although China is battling air pollution and has been trying to reduce coal usage, market participants there said the country's use of coal is going to continue as it has an abundance of the fossil fuel.
According to the 2018 China Mineral Resources report by Ministry of Natural Resources, the country has 1,667 billion mt of coal reserve.
Karthik Ganesan, a researcher from India-based Council on Energy, Environment and Water told Platts that India is investing more in renewables, but the difficulty faced in getting these projects off the ground suggests that the country will continue to rely on coal.
"Solar and wind sectors are still struggling with major systematic challenges...including availability of finance, project allocation and land challenges," he said.
In addition, there are operational challenges such as the massive delay in payment by distribution companies.
"If this continues, we may end up with a cumulative capacity of 60-70 GW of solar and may be 45-50 GW of wind by 2022. This means that the electricity that was earlier planned to be generated from wind and solar may need to be generated from other conventional sources -- coal being the easiest," he said.
Meanwhile, with demand in Europe dwindling, traditional suppliers to the continent have been seeking new markets in Asia.
The relatively inexpensive coal makes it even more attractive as an energy resource, which is probably the unintended effect of less coal usage in Europe, market sources noted.
S&P Global Platts Analytics has forecast that the EU will import 125 million mt of coal this year, down from 136 million mt from a year ago, and will further reduce the import tonnage to 119 million mt in 2020.
Meanwhile, the world's third largest coal exporter Russia is likely to export 168 million mt in 2019, up from 160 million mt in 2018, and will further increase its coal exports to 168.5 million mt next year, according to Platts Analytics' forecast.
The Australian Resources and Energy Quarterly expect the Asian thermal coal market to remain well supplied over the next two and a half years, with coals from Australia, Russia, and Indonesia.
Amid weak demand, the spot price of thermal coal has been on a decline. The price of Newcastle 6,000 kcal/kg NAR has reached a two year low of $66.05/mt last month, Platts data showed.
While the coal phase out in Germany has been gaining momentum, observers said that should the German experience provide a good example for other countries to do the same, it may not, however, be easy to replicate.
Countries which rely on coal exports are also facing difficulties in phasing out their coal industry because of the powerful domestic coal sector in these countries, according to a recent report by researchers of Sweden's Chalmers University of Technology.
A coal phase-out is workable when there are no large-scale losses incurred by closing down newly constructed power plants or coal mines, the research noted.
Dr Martin Rice, head of research from Australia's Climate Council, told Platts that Germany has devoted a lot of money to offer retraining opportunities to the coal miners, as it restructures their economy.
"Like climate change, the exit from coal is not going to be one solution, so it's really up to the individual and circumstances of each country," Dr Rice said.
China would face a similar issue should it proceed with weaning off coal, as it needs to think of alternatives to relocate the workers, Michael Langford, from Singapore-based energy consulting firm AirGuide International, said.
However, Langford highlighted there is now a lack of investments for a coal fired power station as the regulatory risk is high.
"More so, the health and environmental cost is now better understood," he said.
Meanwhile, the progress of the coal phase-out in Germany comes amid the need to balance environmental sustainability with affordability of energy.
"If energy-intensive industries can't afford to pay for the electricity here, they will go to other places to run their businesses there," Guido Steffen, spokesman for Germany's largest power generator RWE, said.
Paul Baruya, a coal market analyst with IEA Clean Coal Centre, added that Germany might watch and see how events in the market unfold, should the UK, France, and Netherlands switch completely to a mix of entirely gas and renewables, and see how stakeholders tackle the challenge of having more "limited opportunities to arbitrage between different fuels without coal and nuclear" as backup.
-- Hui Min Lee, email@example.com
-- Edited by Norazlina Jumaat, firstname.lastname@example.org --