Policy Brief

The New Role of Coal Fired Power Plant in the Era of Energy Transition

No.16 / November 2020

ASEAN is currently relying on fossil fuel to supply its energy demand. Alongside its growing presence, fossil fuel is also being exploited at an alarming rate both domestic use and export revenues. Despite some countries boast its reserves can last for a considerable future, most other will be left with no domestic resource if current production rates and growth continue. With the region currently imported around 40% of its primary energy supply (ACE, 2020), depleted local resources will put increasingly stronger pressure on the regional energy security especially with an expected rise of energy demand up to 2.3 fold within the next decades. Acknowledging the situation, ASEAN is applying several measures to enhance its self-supply sufficiency, diversify energy mix by relying more on local resources, and ultimately transitioning towards a cleaner energy system.

Under the ASEAN Plan of Action for Energy Cooperation (APAEC), ASEAN aiming for a transition towards cleaner and more sustainable energy the region aims to diversify its primary energy

bJapan Coal Energy Centre (JCOAL), Tokyo, Japan.1The updated ASEAN energy intensity target under APAEC phase II (2021-2025) will be launched in the 38th AMEM, November 2020, Vietnam.

aASEAN Centre for Energy (ACE), Jakarta, Indonesia.

According to the projection results, fossil fuels are projected to still dominate ASEAN energy landscape even on scenarios where there the region is achieving its energy efficiency and RE targets. On the situation on Figure 1 where the regional target is completely achieved and energy supply growth is significantly slower than the baseline condition, fossil fuel is still showing a strong presence on the region with 71% in 2040 compared to 83% in 2017. This result shows that despite the maximum effort of achieving the regional targets, in addition to other problem such as the availability of technology and readiness of policy, ASEAN will still rely on fossil fuel.

ASEAN with Effort on Energy Transition

Figure 1. ASEAN Total Primary Energy Supply under the APS. Source: (ACE, 2020)

Coal

Gas

Oil

TraditionalBiomass

RE

Other

625

2017 2020 2025 2030 2035 20400

200

400

600

800

1000

12001139

1.8x

Coal will still play a big part through the effort of the energy transition in ASEAN. However, changes are needed to ensure that coal utilisation will not impair ASEAN's energy security and deter the region's effort in achieving a cleaner and more sustainable energy sector in the future.

ASEAN is aiming 23% RE share by 2025, it is projected that achieving the target will not reduce fossil fuel significantly.ASEAN member states are adopting more policies to improve the situation on coal utilisation.Success stories from other countries and regions show that coal can still play an important role in a cleaner and more sustainable energy sector.ACE-JCOAL collaboration is initiated to investigate the process of transitioning coal into its possible new role in ASEAN energy development. mix with 23% of renewable energy (RE) share by 2025, 9.3%

more than the region’s 2017 level. Following the strategy of increasing the amount of renewable energy, ASEAN is also attempting to increase its efficiency by pursuing the targets of reducing the energy intensity by 30% (TPES/GDP) by 2025�. However, a latest study conducted under the 6th ASEAN Energy Outlook (AEO6) shows that achieving these targets will not take fossil fuel away from the region.

Iqlima Fuqohaa, Kazuyuki Murakamib, Masahiro Ozawab, M. Rizki Kresnawana, M. Oktada Hilmanb, Nadhilah Shania, Sandy Fajrianb, Silvira Ayu Rosaliaa, Tharinya Supasaa, Yamada Fumikob,Yudiandra Yuwonoa

Electricity is one of the biggest drivers on ASEAN energy demand as the region is pushing for total electrification across all member states. Each AMS is targeting to improve its electricity access and made it as one of the priorities for the next few years. On AEO6, it is projected that by 2040 most AMS will provide a 100% electrification and electricity will take 27% from ASEAN total final energy consumption. Projections from the outlook reflect two different scenarios: 1) Where each member states fulfil its power development plan with energy efficiency measures (Figure 2) and 2) a scenario that implies the acceleration of RE beyond their national power development plan mainly considering each member states RE potential (Figure 3).

Not only because of the amount of energy consumed, but the electricity sector is also where RE is showing potential improvement. In 2017, ASEAN’s installed capacity was 234 GW with 26.1% of it coming from RE, showing a promising starting situation. Due to the upscaled RE penetration on the scenario mentioned previously, Figure 4 depicts the largest share are of installed capacity in 2025 came from RE (23% of solar and wind, 19% of hydro, 10% of other RE), followed by coal (26%), and gas (23%). However, despite a significantly reduced influence, fossil fuel power plants and/or other flexible generation are still deemed to play an important role in the electricity generation sector to maintain grid stability. With achieving a sustainable future remains a top priority, despite a potential reduction coal will likely remain as a major reliable energy source for ASEAN due to that reason alongside its availability and affordability.

ASEAN Coal Policy

Policy Brief

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Figure 3. ASEAN Total Installed Capacity under the APS. Source: (ACE, 2020)

Figure 2 ASEAN Total Installed Capacity under the ATS. Source: (ACE, 2020)

Coal

Gas

Oil

Wind

Solar

Biomass,biogas,waste

Hydro

Geothermal

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

32,21

28,57

15,595,985,71

27,93

5,658,053,43

11,01

8,01

8,544,00

14,67

5,99

3,20

26,81

53,51

3,41

2017 2040 2017 2040 2017 2040 2017 2040 2017 2040 2017 2040 2017 2040 2017 2040 2017 2040 2017 2040

Coal Subcritical Coal Supercritical Coal Ultrasupercritical

Figure 4 ASEAN Total Installed Capacity of CFPP under the ATS. Source: (ACE, 2020)

Coal-fired Power Plants

Capacity, ATS (GW)

2In ASEAN countries, current subcritical efficiency ranges from 20%-34%, while supercritical and ultra-supercritical are 37% and 42% respectively.

2017 2020 2025 2030 2035 2040

2017 2020 2025 2030 2035 2040

0

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These initiatives show a strong and promising platform for ASEAN. Figure 4 shows projection from the AEO6 that indicates the clean coal transition in ASEAN from 2017 to 2040 based on full achievement of individual AMS power development plan. It is projected that there will be more than 60 GW additional capacity of SC and USC coal-fired power plants (CFPP) in the next 20 years with around US$77 billion investment needed. It is also shown in Figure 4 that Malaysia is leading the way to shift away from conventional CFPP by increasing the USC CFPP capacity from 2 GW in 2017 to 11 GW in 2040. This would be a good starting point for ASEAN to further utilise HELE technologies for new or retrofitted CFPP.

Moving towards low carbon transition pathways, the option for ASEAN to keep on working with coal is with improving the state of its technologies. The region has to actively explore options that include coal upgrading, High-Efficiency Low Emissions (HELE) technologies, co-firing systems with biomass, and most importantly Carbon Capture Utilisation and Storage (CCUS) or Carbon Capture and Storage (CCS). These options were addressed as a way to accept the persistent role of coal on the region without neglecting the responsibility of achieving a sustainable future. Last few years indicate a progressive development with most of the AMS has introduced CCT or HELE initiatives namely the Super Critical (SC) and Ultra-Super Critical (USC), which have a higher process efficiency compared to the subcritical2, in their recent power development plan.

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No.16 | November 2020

Another platform to improve the drive coal and CCT development in ASEAN is provided through the active role of the ASEAN Forum on Coal (AFOC). Adding to the individual efforts of each AMS, AFOC is facilitating the regional cooperation in promoting clean coal technology, through the implementation of the Coal and CCT programme area under the APAEC 2016-2025. Table 1 provides the latest compiled policy-related improvement taken from 17th and 18th AFOC Council Meeting in 2019 and 2020. Several AMS has put in place policies to promote CCT and to encourage higher domestic coal consumption to strengthen sustainable development and energy security. Being the major player on coal in the region, Indonesia has developed the CCT roadmap for transition towards a more efficient and advance technology, conducted feasibility studies on coal gasification as well as piloted co-firing systems with biomass in several CFPPs across the country.

As indicated throughout previous sections, through different programmes, approaches, and platforms, ASEAN is embracing coal as an important source of energy. The region is progressing with rigorous policy supports, enforcement plan, and the technology improvement pathway. Even with those positive initiatives, ASEAN is still seeking for improvement on coal utilization. The region is ultimately seeking to accelerate its energy transition and its progress towards a more sustainable energy sector. Thus, exploring new roles of coal is considered to be important for the next few years.

AMS Coal Policy

CambodiaCoal pricing is based on Newcastle IndexSubsidy mechanism: No coal subsidy, only Tax and VAT is exempted Transport fee is based on bidding, usually every 3-4 years

Lao PDR

Indonesia

Based on Order No 08, dated 02 July 2018, the Lao government promotes mining company extraction coal to supply domestic consumption (i.e. cement industry), as well as the demand for domestic coal-fired power plants

Coal pricing based on the international coal price The coal industry in Laos is in an early stage of development of its coal mining industry

Lao Government takes coal royalty with a rate of 6% of sale value/ton

Law No. 3 of 2020, revision on Law No. 4 of 2009 on Mineral and Coal MiningGovernment Regulation No. 77 of 2014, 3rd revision on Government Regulation No. 23 of 2010 on Implementation of Mineral and Coal Mining Business ActivitiesRegulation of the Minister of Energy and Mineral Resources No. 34 of 2009 on Preference of Domestic Minerals and Coal SupplyRegulation of the Minister of Energy and Mineral Resources No. 50 of 2018 on Mineral and Coal Mining Business OperationsEmission standard: Ministry of Environment Regulation 21/2008 (Attachment A & B)Supporting Policies:

- Government Regulation No. 96 of 2015 on Facilities and Incentives in Special Economic Areas- Government Regulation No. 9 of 2016 on Income Tax Facilities for Investments in Certain Business Fields and/or in Certain Regions (Tax Allowance)- Regulation of the Minister of Finance No. 188 of 2015 on The Exemption of Import Duty on the Import of Machinery and Items and Materials for Industry Development or Development in the Framework of Investment- Regulation of the Minister of Finance No. 150 of 2018 on Giving Facilities for Reducing Tax Income (Tax Holiday)

Table 1. AMS Policies on Coal

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Policy Brief

AMS Coal Policy

Malaysia Emission standard: Environmental Quality (Clean Air) Regulations 2014 for Heat and Power Generation

Myanmar

Philippines

Thailand

Foreign direct investments are allowed in large scale mineral exploration and production only, but not allowed in medium and small-scale productionTo invite more local and foreign investments on coal to promote environmental-friendly and advanced coal production technologies

Environmental and Public Acceptance is the most concernSupport the use of Clean Coal Technology together with strengthening sustainable development and energy security in parallel with expanding public acceptance and improving coal imageDomestic coal is not allowed to be exportedImported tax deduction for Clean Coal TechnologyNew Power Development Plan (PDP 2018) has launched in 2019

To focus coal production to fulfil domestic coal demand for industrial use and electricity generationTo promote CCT technology for low-grade coal (lignite and sub-bituminous) and its upgrading technology

The Philippine Conventional Energy Contracting Program (DC2017-09-0010):

Coal Mine Safety and Health Rules and Regulations (DC2018-12-0028):

- Transparent and competitive system for awarding service and operating contracts for the exploration, development, and production of the country’s coal resources

- Issued to make the coal mine safety and health rules and regulations more applicable to present local coal mining conditions, compatible with the provisions of the ILO C176, the Dept. of Energy has repealed the coal mines safety rules and regulations (BED DC No. 1 series of 1978)- To ensure the safety and health of all workers involved in the coal mining operations in the Philippines

- Nomination and publication of applied areas- Application for Coal Operating Contracts (COC) at any given time

Source: The AMS country report in the 17th AFOC Council Meeting (April 2019); Indonesia presentation (Future Policy of Coal Utilisation) in the 18th AFOC Council Meeting (July 2020)

In the traditional power systems, “load following” has been conducted as a measure to address the requirements of load balancing. In making a dynamic shift to introduce renewable energy on a massive scale in ASEAN, achieving grid flexibilisation is crucial since renewable energy is inherently variable, intermittent, and seasonal which in the case of massive introduction may cause system fluctuation if no measures are taken. In this context, the landscape in the era of Energy Transition will be different in terms of the scale of flexibilisation and the range of power plants that are required to take measures to address the requirements. It is illustrated in Figure 5 below how a combination of different power sources is needed to deployed to offset fluctuations.

New Role of Coal in bolstering Energy Transition in ASEAN

Coal

Net imports

Gas(CCGT)

Waste

Powerdemand

Wind

Nuclear

Biomass

Solar Gas(OCGT)

Hydro

Hydro pumped storage

0 24 48 720

5

10

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PV

Figure 5. Cumulative Production in High VREs by Spain in the 2020 Target Scenario, May 31- June 3

Source: (Boßmann, Fournié and Barberi, 2018)

With ASEAN a region is still on its early phase of improvement, examples from other success stories are being studied such as the case of Kyushu in southern Japan, which is known to be particularly progressing in renewable energy integration. The region is an exemplary case as it is defined by IEA to be on par with most EU economies in terms of energy transition progress. Below in Figure 6, a graph of daily load curves is quoted from the record of Kyushu Electric Power in May 2016. The graph provides an idea about how the possible fluctuation is to be addressed with multiple measures respectively taken promptly. The utility undertakes power

No.16 | November 2020

Aiming for the integration of renewable energy, there are several possible approaches of interventions: from the system, market, network, and storage to flexibilisation at existing power plants (i.e gas, coal, and hydropower). In many of AMS, coal is anticipated to constitute one of the pillars of a dedicated flexibilisation solution while in most of such countries gas power may not provide the same function to the extent they are to address the situation in absorbing the possible fluctuation to keep the grid stability. With that, coal will keep its important position in but in a new role where it enables renewable energy to thrive and pushing the progress of energy transition.

generation and transmission, and distribution to the majority of the consumers in the Kyushu region.

The level that is shown in Kyushu requires a combination of advance technologies. Several technologies are needed to be adopted to enable thermal power as a baseload to interact at will with renewable energy and demand fluctuation by

still many prerequisites for the region to fulfil. While the region is on pace with its improved policy and technology adoption target, technical solutions alongside those exemplified previously need a strong platform before it can be implemented in ASEAN. Suitability to ASEAN context has to be explored,

improving its flexibility without By lowering the minimum load, operation would continue without shutdowns even while the amount of power generated by renewable energy is large and the demand for rest of the power plants is low, it will be possible to continue operation at the minimum load, which will prevent from heat loss during start-up and stop of the plant. Also, oil as start-up fuel can be saved, thus considerable economic benefits are provided.

Although progressive improvement throughout the world is available for ASEAN to replicate, it is quite clear that there are

Figure 7 Operating Ranges with Wide Turndown Burners. Source: “Achievements of 813MW USC Tower-type Boiler”, IHI Engineering Review Vol. 54

No.1, IHI Corporation (2014)

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Figure 6 Daily load curves of production in Kyushu, May 2016. Source: Kyushu EPCO website

2 Mills

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3 Mills

4 Mills

4 Mills

3 Mills

References[1] ACE (2020) ASEAN Energy Database System. Available at: https://aeds.aseanenergy.org/.[2] ACE (2020) The 6th ASEAN Energy Outlook. ASEAN Centre for Energy.[3] Boßmann, T., Fournié, L. and Barberi, P. (2018) Effect of high shares of renewables on power systems. European Commission.[4] Cochran, J. et al. (2014) Flexibility in 21st Century Power Systems. National Renewable Energy Laboratory, University College Dublin, International Energy Agency, EPRI, Northwest Power and Conservation Council, Energinet.dk, VTT Technical research Centre of Finland, Power System Operation Corporation. Available at: https://www.nrel.gov/docs/fy14osti/61721.pdf.[5] IEA (2018) System Integration of Renewables. Paris: International Energy Agency. Available at: https://www.iea.org/reports/system-integration-of-renewables.

Suggestion 4(3): Strengthening energy security through regional cooperation and beyond

The regional APAEC document focuses on the energy security of fossil fuels. Under the ASEAN Power Grid, the HAPUA is tasked with ensuring regional energy security by promoting efficient utilisation and sharing of resources. Meanwhile, under the Trans-ASEAN Gas Pipeline, the ASCOPE is tasked with managing the transport of gas across borders to ensure greater security of gas supply, as it is the backbone of energy security.

ASEAN also initiated the ASEAN Petroleum Security Agreement (APSA), which aims to enhance petroleum security among the ASEAN member states. It does so through an emergency petroleum sharing scheme during times of critical oil and/or gas supply shortages, which are operationalised through the development of the APSA-Coordinated Emergency Response Measures (APSA/CERM). However, this is currently on hold.

The AFOC is responsible for promoting the development and utilisation of lower-emission coal technologies and facilitating intra-ASEAN coal trade towards enhancing regional energy security.

However, as most fossil fuels are global commodities, it will be difficult for the region to act on a regional basis, especially if it involves some ASEAN members states sacrificing billions of dollars of income because they have to sell their fossil fuels to other ASEAN members states rather than at higher prices on the world market. In addition, ASEAN is also facing the issues of declining domestic petroleum resources, and hence increasing dependence on supplies from outside the region.

Therefore, there are many challenges in this area, but as a group the 10 ASEAN countries could develop a common framework on energy security.

Some leaders believe that with greater financial and human resources, the ACE could play a more active role: i) as a think-tank; ii) in facilitating communication; and iii) improving data collection for the ASEAN Energy Database System (AEDS), including more up-to-date data.

In some areas, ASEAN could act as a whole rather than as a loose grouping of countries. This could strengthen the region’s economy and its ability to attract investment for infrastructure.

Formulate APAEC Phase II to make it more result-oriented.

More future-oriented planning.

Besides the philosophy of regional cooperation, co-benefits such as profits generated from regional cooperation are also important.

Other expectations for APAEC Phase II The energy leaders made numerous other suggestions:

Workshop for drafting APAEC Phase II

The majority of the energy leaders agreed with the idea of organising an additional discussion platform (workshop) to enhance the current development of the APAEC Phase II draft document. At the workshop, the design of the APAEC could be reviewed to improve its implementation. The action plans could be made more concrete, detailed, and connected to the Objective-Based Strategies. The coherence of the programme areas could be strengthened. Such a workshop could facilitate communication and exchange of views among the ASEAN member states about the opportunities and challenges related to APAEC.

Meetings with key regulators and site visits to witness success stories from developed countries would help the ASEAN member states accelerate the national and regional energy transition.

The next frontier could be the development of a big data platform that provides all countries access to live data.

ASEAN Centre for EnergySoemantri Brodjonegoro II BuildingJl. H.R. Rasuna Said Block X-02, Kav. 07-08,RT.10/RW.4, Kuningan Timur, KecamatanSetiabudi, Daerah Khusus Ibukota Jakarta 12950

+62 21 527 9332

aseanenergy.org

This policy brief is supported by the ASEAN Climate Change and Energy Project (ACCEPT), funded by the Norwegian Government under the

Norwegian-ASEAN Regional Integration Programme (NARIP) and is jointly implemented by the ASEAN Centre for Energy (ACE) and the Norwegian

Institute of International Affairs (NUPI). The project includes the active involvement of key ASEAN stakeholders, and helps enhance modelling,

analytical and regional policy planning capacities within ASEAN. https://accept.aseanenergy.org/

The views and opinions expressed in this article do not necessarily reflect those of ASEAN, any associated ASEAN Member States/Institutions/

Individuals, or partner institutions.

No. 2 / 2020

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secretariat@aseanenergy.org

Policy Brief

To address the gaps that needed to be covered alongside barriers and risks that are yet to be defined, ACE and JCOAL are collaborating on formulating a strategic report. The report will look into the process of transitioning coal into its possible new roles in ASEAN energy transition. Measures are going to be taken to make coal utilization in the ASEAN power sector economically and environmentally sustainable and viable. In addition to that, ACE and JCOAL in close cooperation with ASEAN Forum on Coal (AFOC) are going to share the views and visions with relevant stakeholders in region. The Draft Final Report of the Strategic Report will be submitted to the 19th Council Meeting of AFOC which will be held tentatively in the 2nd quarter of 2021.

While a series of analysis must be taken before formulating our recommendations, below are several initial ideas for recommendations that will be explored further on the report:

Way Forward: ACE-JCOAL Strategic Report on the New Role of Coal-Fired Power Plant in the Era of Energy Transition

Coal will undertake additional roles in the era of Energy Transition, for which environmental compliance of coal utilization as ASEAN is committed is imperative.Shedding the light on the enhanced value of coal in the foregoing context, coal is well anticipated to be conducive to Sustainable Development Goal 7: Ensure access to affordable, reliable, sustainable, and modern energy for all.Both intra-ASEAN and external collaboration for optimization will be the keys to the successful and sustainable Energy Transition.

We would be grateful to receive advice, suggestions, comments, and insights so that we will be able to furnish the Joint Strategic Report that is highly conducive to the relevant policy of AMS.

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detailed lesson learned is needed, and further details on the development progress has to be studied as a way to ease ASEAN in the energy transition process, especially on the policy side.