Developing Countries Also Moving Away... Is It the End of the Coal Era?

Southeast Asia and Other Asian Countries Cancel Coal-Fired Power Plant Plans One After Another
Impact of COVID-19 Economic Recession and Project Funding Pressure
South Korea Also Moves to Reduce Investment in Coal-Fired Power Generation

[Asia Economy Reporter Naju-seok] As climate change emerges as a global issue, attention is focused on whether developing countries can follow advanced nations in reducing coal-fired power generation. Observations suggest that changes have begun as coal-fired power plant plans are being withdrawn one after another among Asian developing countries following advanced countries.

According to the 'South Asia and Southeast Asia Coal Power Plant Status' report by the environmental NGO Global Energy Monitor (GEM) on the 29th, South Asian and Southeast Asian countries are accelerating their move away from coal-fired power generation.

The Bangladesh Ministry of Energy has decided to cancel coal-fired power plant projects totaling 22.9GW and is awaiting the Prime Minister's final approval. The Philippine Department of Energy has decided to halt approvals for new coal-fired power plants, and it is expected that the previously planned 9.6GW coal-fired power plant construction projects will be canceled. Vietnam has also decided to reduce or cancel about half of its currently planned coal-fired power plant construction projects.

If these plans are finalized early next year, coal-fired power plant construction plans totaling 17.1GW will be reduced. The Indonesian Ministry of Energy also announced that it is considering postponing or reducing coal-fired power plant plans totaling 15GW included in next year's business plans. If all these moves materialize, these four countries will be left with only about 25.2GW of coal power plans.

◆80% Reduction in Southeast Asian Coal Power= Considering that these four countries had coal-fired power plant construction plans totaling 125.5GW as of 2015, the project scale has decreased by about 80% in five years. Moreover, the progress of coal-fired power plant projects that have not been canceled is also uncertain. Currently, projects with secured funding for power plant construction amount to about 10.1GW. Without additional financial plans, the project scale could shrink further.

Coal-fired power generation in South Asia and Southeast Asia has been a focus for both the coal industry and environmental groups. This is because the region was expected to become the center of global coal-fired power generation after China.

According to End Coal, an environmental group related to coal, the global coal-fired power generation scale is led by China (63.9%) and India (11.6%), followed by Indonesia (3.8%), Malaysia (2.6%), Pakistan (2.7%), Poland (2.4%), South Africa (2.1%), the Philippines (2%), Japan (1.6%), and Vietnam (1.6%). The coal-fired power generation scale of major South Asian and Southeast Asian countries alone accounts for 14.9%. It is no exaggeration to say that the future of coal-fired power generation depends on South Asian and Southeast Asian countries.

For this reason, the consecutive cancellations of coal-fired power plant plans centered on these Asian countries could be a fatal blow to the coal industry.

[Image source=Reuters Yonhap News]

In May this year, the World Economic Forum (WEF) pointed out that it is difficult for developing countries that have relied on coal-fired power generation to switch to renewable energy. WEF diagnosed, "Despite dramatic advancements in renewable energy technologies improving production costs and improvements in power transmission and storage technologies, low-income countries face both financial constraints and technical difficulties in transitioning to renewable energy." Developing countries recognize the importance of the renewable energy industry but have no choice but to rely on coal-fired power generation for some time due to technical and financial reasons.

◆Coal Power Funding Also Decreasing= However, changes have begun despite these difficulties. GEM pointed out the issue of funding for coal-fired power generation investment as one of the main causes. In the past, South Korea, Japan, and Singapore played the role of funding sources supporting coal-fired power plant construction projects in South Asia and Southeast Asia. In Vietnam, Indonesia, the Philippines, and Bangladesh, half of the $52 billion invested in coal-fired power projects since 2015 came from these three countries, including South Korea. However, as negative public opinion toward coal-fired power generation grew, these three countries became more reluctant to invest in coal-fired power projects. Investor concerns and pressure from environmental groups also drove this change. For this reason, 16 major Japanese banks and three large Singaporean banks have successively declared their withdrawal from coal-fired power generation.

Domestically, last month, Samsung Life Insurance, Samsung Fire & Marine Insurance, and other Samsung-affiliated financial companies also declared that they would stop coal-related investments and would not underwrite insurance. The Export-Import Bank of Korea and Korea Trade Insurance Corporation are also reducing investments related to coal power. Nevertheless, criticisms remain that there are still gaps, leading to the proposal of related legislation to exclude overseas coal power from the Export-Import Bank of Korea's funding support. GEM said, "It is uncertain whether the related law will pass, but at least it will signal that South Korea does not view coal-related projects as promising businesses."

Additionally, the impact of the novel coronavirus disease (COVID-19) was significant in enabling these four countries to move away from coal-fired power generation. Industrial production halted, creating room to change the power supply system. For example, in Bangladesh, opposition protests against coal power plant construction resulted in four deaths, and due to COVID-19, even completed power plants were idled, changing power demand conditions and leading to a reduction in existing project plans. In Indonesia, the issue of subsidies for coal-fired power generation is involved. Indonesia faces $6.5 billion (about 7.13 trillion KRW) in power subsidies this year and $11.4 billion in 2022. For this reason, Indonesia is considering expanding solar power generation instead of coal-fired power generation, which has a lower subsidy burden.

In Vietnam, besides citizen resistance to coal-fired power plants, the rapid surge in power demand is also a problem. The slowly constructed coal-fired power plants cannot meet Vietnam's power demand.

This content was produced with the assistance of AI translation services.