Fundamental change for the coal sector lies in the belief that renewable energies cannot be swiftly, economically, and sufficiently deployed to displace fossil fuels from Asia’s energy mix.
In a surprising shift, Asia’s coal sector has transitioned from anticipating its demise in the face of global net-zero carbon ambitions to envisioning itself as a steadfast component of the energy landscape for decades to come, all while reaping substantial profits. This shift in sentiment was prominently evident at the recent Coaltrans Asia conference, the largest congregation of coal sector, held on the picturesque Indonesian island of Bali.
The fundamental change for the coal sector lies in the belief that renewable energies cannot be swiftly, economically, and sufficiently deployed to displace fossil fuels from Asia’s energy mix.
“The reality is that coal demand will continue to increase,” affirmed Septian Hario Seto, Indonesia’s Deputy of Investment at its Coordinating Ministry for Maritime and Investment Affairs, echoing a widely shared perspective among conference delegates.
While natural gas poses some competition to thermal coal, the consensus among market stakeholders, spanning miners, traders, utilities, and government officials, is that coal remains the more cost-effective and secure option. Moreover, there is a growing understanding that the energy transition holds distinct implications for different regions and nations.
In contrast to Europe, where concerns over fossil fuel prices and supply security spurred a rapid shift toward renewables, Asia’s foremost apprehension lies in energy costs.
For many Asian nations, the rapid transition to renewables is financially daunting, given the monumental investments required to overhaul electricity grids for accommodating variable wind and solar generation. The infrastructure to support renewable energies, including gas-fired peaking plants, pumped hydro, and battery storage, adds to the financial burden.
While solar panels and wind turbines may be relatively economical in comparison to constructing a coal-fired power plant, the accompanying infrastructure for renewable energy integration is a primary concern in Asia. The prevailing view is that to meet Asia’s surging energy demand in the coming decades, all available resources, including substantial coal reserves in populous countries like China, India, and Indonesia, must be utilized.
Asia’s path to net-zero is poised to differ significantly from the approaches taken in the developed world. A shared goal is the electrification of diverse sectors, encompassing transportation, industrial processes, and residential heating and cooking. However, Asia appears inclined to leverage coal-fired power to drive electrification, deeming it a superior carbon outcome compared to continued reliance on crude oil and gas.
The appeal of coal lies in its consistent affordability relative to crude oil and gas, even amidst current historically high prices. Geopolitical considerations also come into play, as Asian energy importers seek to reduce dependence on the OPEC+ group and a fuel market influenced by producing nations.
China, India, and Indonesia are collectively responsible for 89% of the coal-fired power plants currently under construction, according to data from the Global Energy Monitor. While these nations are concurrently expanding renewable energies, their emphasis on coal underscores a distinct perspective on the energy transition.
The overarching strategy appears to be augmenting electricity supply from all sources, maximizing electrification of energy demand, and gradually phasing out coal-fired power in favor of cleaner alternatives over time. This approach aligns with Asian policymakers’ aim to enhance electricity supply at a lower cost, while still advancing towards net-zero by transitioning away from oil and gas and progressively integrating renewables.
While these arguments may face opposition from climate scientists, environmentalists, and many policymakers in developed nations, they underscore the growing divide in perspectives on the energy transition.
For the Asian coal market, the current outlook points to a sustained presence in the energy mix. Forecasts anticipate robust demand for seaborne thermal coal not only from China and India, the world’s leading importers, but also from countries like Vietnam and Bangladesh, committed to coal for the foreseeable future.