Download pdf - South African Coal Exports Outlook · Simon Nicholas, Energy Finance Analyst Tim Buckley, Director of Energy Finance Studies September 2019 1 South African Coal Exports Outlook Approaching

Simon Nicholas, Energy Finance Analyst Tim Buckley, Director of Energy Finance Studies September 2019

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South African Coal Exports Outlook Approaching Long-Term Decline

Executive Summary SouthAfrica’sthermalcoalexportindustryisfacinglong-term,permanentdecline.

AsidefromthedomesticissuesthattheSouthAfricancoalindustryfaces,thesectorwillalsoneedtocometotermswiththeprospectoffadingdemandfromitsmajorexportdestinations.

SouthAfricaismoreheavilydependentononenationforitsexportvolumesthanothermajorthermalcoalexporterslikeIndonesiaandAustralia.In2018,48%ofallSouthAfricanexportsoutofRichardsBayCoalTerminal(RBCT)wenttoIndia,anationwithaclearlystatedpolicyofreducingrelianceoncoalimports.Inthefirsthalfof2019,thatroseto60%.

Thisexportindustrydeclinewillnothappenovernightoreveninthenextfewyears–thereistimeforpolicymakerstoprepareforthecomingtransitioninordertoplanfortheinevitablesocialandeconomicconsequences.

ATITSHEART,THISISATECHNOLOGYTRANSITIONANDISHENCEUNAVOIDABLE–itwillhappenwhetherpolicymakerswantitornot.AlackofplanningwillresultinachaotictransitionwithnegativesocialandeconomicimpactsofthetypeSouthAfricacanill-afford.

Astendstohappenintechnologicaltransitions,newenergytechnologywillreplacecoal-firedpowerfasterthanmostpredict.AccordingtoBloombergNewEnergyFinance(BNEF),two-thirdsoftheworld’spopulationalreadyliveincountrieswherewindorsolar(orboth)arethecheapestsourceofnewpowergeneration.By2030,newwindandsolarwillbecheaperthanrunningexistingcoal-orgas-firedplantsvirtuallyeverywhere.ThisisalreadythecaseinIndia.

By2032,BNEFforeseestherewillbemoresolarandwindpowercapacityinstalledgloballythancoal-firedpower.Coal-firedpowergenerationwilldecline51%by2050bywhichtimeitwillsupplyjust12%oftheworld’selectricity.

GlobalmininggiantssuchasRioTinto,BHP,AngloAmericanandSouth32haveeitherwithdrawnfromtheseabornethermalcoalmarketalreadyorarenowconsideringit.

FINANCIALINSTITUTIONSARENOWABANDONINGTHETHERMALCOALINDUSTRYatasignificantandincreasingrate.Since2018,afinancialinstitutionhasannouncedarestrictiononcoalfinancingeverytwoweeksonaverage.Inthefirsthalfof2019,thatrateincreasedtooneperweekandwellover100financialinstitutionsaroundtheworld,includingSouthAfricanbanks,haveformalcoal


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exclusionpoliciesnowinplace.Accesstocoaldebtandequityfinancingisbecomingincreasinglyproblematic.

SouthAfrica’smajorexportmarketsarealreadyshowingsignsoftransitionawayfromcoalorlimitedgrowthpotentialwhichwilldisappointtheindustry:

• ThelastfiscalyearsawtheexpansionofthermalpowercapacityinIndiaslowtothelowestlevelinadecadeasamajorrenewableenergyexpansioncontinued.India’scoalministryisnowpreparinganewplantocutcoalimportsbyone-third,oraround85milliontonnes(Mt),by2024.

Figure i: Indian Thermal Coal Imports by Source

Note: 2019 data is up to May Source: IHS (2019) India coal data tables, Office of the Chief Economist – Australian Government

• InJanuary2019,animportedcoal-firedpowerprojectinPakistanwascancelledoverfearsofover-capacityandtheeconomicburdenofcoalimports.Newlybuiltimportedcoal-firedplantsinPakistanarealreadyreportedlyunderseverefinancialstress,inpartduetothehighcostofimportingcoal.

• Meanwhile,thePakistangovernmenthasdraftedanewrenewableenergypolicywhichwillsetnationaltargetsforrenewables(excludinghydro)toreach30%ofinstalledcapacityby2030,upfromthecurrentlevelof4%.

• InSouthKorea,drivenbyairpollutionaswellascarbonemissionsconcerns,thegovernmenthasstateditwill“drastically”cutpowergenerationfromcoalbybanningnewcoal-firedpowerplantsandclosingoldones.SouthKoreaisnowconsideringtheprogressiveretirementofupto20coal-firedpowerplantsandplacingoutputcapsonanumberofothers.


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• TheoutlookforthermalcoaldemandinEuropeisdireforexporters.TheCEOofCerrejónCoalprojectsthatthermalcoaldemandfromsomenationswithintheAtlanticmarketmayfallanother50%to60%overthenextfivetosevenyears.

• DelaystocoalpowerprojectsintherestofAfricaareallowingrenewablestomakesubstantialprogress.Kenya’sLakeTurkanawindfarm,thelargestinAfrica,isalreadyreplacingdieselinthegenerationmix–beatingthenowdelayedLamucoalpowerprojecttoit.

SouthAfricancoalexportersarelikelytoseekalternativemarketsgoingforwardasopportunitiesforgrowthinthemainexportdestinationsdryup.However,thelongtermoutlookforcoalexportstootherdestinationsisalsolikelytodisappoint.

FURTHERMORE,WITHTHEGLOBALSEABORNECOALTRADESETTOGOINTOPERMANENTDECLINE,SouthAfricawillseeincreasedcompetitioninthesemarketsfromothermajorthermalcoalexporterssuchasIndonesia,AustraliaandRussia.

RichardsBayCoalTerminalmayhavetogetusedtotheideathatanincreasingproportionofitsannualcapacitywillbecomestranded.Withacapacityof91milliontonnesperannum(Mtpa),RichardsBayoperatedwithalmost20%sparecapacityin2018.

RichardsBayisnotaloneinthis.ThecoalterminalsatthePortofNewcastleinAustralia–theworld’slargestcoalexportport–operatedwith25%surpluscapacityin2018anditsproposedT4expansionprojecthasbeencancelled.Concernoverthermalcoal’slong-termsustainabilityhasledthechairmanofthePortofNewcastletorecognisean“urgentneed”fortheporttodiversifyawayfromarelianceoncoal,furtherstating,"Whiletheworld'sdemandforourcoalisbeyondourcontrol,ourabilitytoinvestinnewsourcesofgrowthandinnovationisnot.”

PartofthatstatementwasechoedbyRBCTchairNosiphoSiwisa-Damasaneuponthereleaseoflower2018exportfigureswhostated,“Themarketsareareality,theyareoutsideRBCT’scontrol”.

AsRichardsBayfacesdecliningexportvolumesinthelongrun,ittoowillneedtoplanforanalternativefuture.Thatplanningshouldhavebegunalready.

“The markets are a reality, they are outside RBCT’s control”


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Table of Contents

EXECUTIVESUMMARY...................................................................................................................................................1INTRODUCTION................................................................................................................................................................5HISTORICALEXPORTS...................................................................................................................................................6GLOBALMOMENTUMLEAVINGCOALBEHIND......................................................................................................7THREATFROMGASASWELLASRENEWABLEENERGY..................................................................................................................7RENEWABLEENERGYGETTINGEVERCHEAPER.............................................................................................................................8

THERMALCOALTRADEFORECASTS.........................................................................................................................9INTERNATIONALENERGYAGENCY.....................................................................................................................................................9BLOOMBERGNEWENERGYFINANCE..............................................................................................................................................10

SOUTHAFRICA’SMAJORCOALEXPORTMARKETS...........................................................................................10INDIA................................................................................................................................................................................11NATIONALELECTRICITYPLAN..........................................................................................................................................................12INDIANTHERMALPOWERSECTORINFINANCIALSTRESS..........................................................................................................13INDIATOOVERACHIEVEPARISAGREEMENTRENEWABLESTARGETBYALMOST60%.......................................................14ENERGYSECURITYANDFOSSILFUELIMPORTS.............................................................................................................................14

PAKISTAN........................................................................................................................................................................17RENEWABLEENERGYTOGROWSIGNIFICANTLY...........................................................................................................................19

SOUTHKOREA...............................................................................................................................................................20SOUTHKOREAWASALREADYMOVINGAWAYFROMCOAL.......................................................................................................21IEAFORESEESPLUMMETINGSOUTHKOREANCOALIMPORTS..................................................................................................23

EUROPE............................................................................................................................................................................23AFRICA.............................................................................................................................................................................25KENYA....................................................................................................................................................................................................25EGYPT.....................................................................................................................................................................................................26

OTHERMARKETS.........................................................................................................................................................27CHINA.....................................................................................................................................................................................................27TAIWAN.................................................................................................................................................................................................30BANGLADESH........................................................................................................................................................................................31VIETNAM................................................................................................................................................................................................33THAILAND..............................................................................................................................................................................................34PHILIPPINES..........................................................................................................................................................................................35MALAYSIA..............................................................................................................................................................................................36JAPAN......................................................................................................................................................................................................36

INCREASINGCOMPETITIONINADECLININGMARKET....................................................................................37STRANDEDASSETRISK..............................................................................................................................................40


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Introduction AsidefromdomesticissuesthattheSouthAfricancoalindustryfaces,thesectorwillalsoneedtocometotermswith,andplanfor,aninevitabletechnologydrivenlongtermdeclineinthermalcoalexports.

Thecurrentlyover-suppliedglobalseabornethermalcoalmarketisfacedwithslowingdemandinthelongerterm,evenintheAsianmarket,asmajorcoalproducingnationslikeChinaandIndiaseektosqueezeoutcoalimports.NationssuchasJapanandSouthKoreathatarecurrentlydependentonthermalcoalimportswillincreasinglyturntowardsrenewableenergyforreasonsofcost,energysecurity,airpollutionandcarbonemissions.

Elsewhere,thegrowthofthermalcoaldemandinplaceslikePakistanandVietnamislikelytodisappointthermalcoalproducersastheeconomicandenergysecuritybenefitsofnewertechnologysuchaswindandsolarpowerbecomeevermoreapparent.

Globalmininggiantshavestartedtopreparethemselvesfortheseabornethermalcoalmarket’spermanentdecline.RioTintohasalreadyleftthecoalminingbusinessaltogetherwhilstBHPisnowconsideringitsfinalexitofthermalcoal.1Glencorehasmadeitclearitsthermalcoalproductioncapacitywillbelimitedgoingforward.

South32isapproachingthefinalstagesofthesaleofitsSouthAfricanthermalcoalassetsandhasrecognisedanimpairmentofUS$502mbasedonSeritiResources’offerandtheoutlookforthermalcoaldemand.2HavingalreadysolditscoalminesthatsupplyEskom,AngloAmericanisnowconsideringthefutureofitsremainingSouthAfricancoalminesgiventhermalcoalhasalimitedfuture.3

ExxaroResourcesisplanning“structuralchanges”inresponsetoaclimate-constrainedfuture,includingincreasinginvestmentincleanenergyasitcontinuestodiversifyitsbusinessawayfromthermalcoal.CEOMxolisiMgojohasalreadynotedtheincreasingcostofinsuringcoalminesasclimateconcernsrise.4

Meanwhile,theChiefExecutiveOfficer(CEO)ofthe26milliontonnesperannum(Mtpa)CerrejónexportcoalmineinColumbia,itselfjointlyownedbyAngloAmerican,BHPandGlencore,hasstatedtheindustryisinterminaldecline.5AngloandBHParebothconsideringdivestmentplansfortheirshareholdings.

AlthoughSouthAfrica’scoalexportstonationssuchasIndiaandSouthKoreaarenotgoingtodryupovernightoreveninthenextfewyears,itwillbeimportantfortheindustryandgovernmenttothinklong-terminordertoproperlyprepareforthecomingdecline.InexplainingAngloAmerican’sconsiderationofitsfutureinthermalcoal,CEOMarkCutifanistated,“It’sreallyimportanttoworkwith

1Bloomberg,BHPisLatestGiantMinertoPlanExitFromThermalCoal,11July2019 2South32,SouthAfricaEnergyCoalDivestmentUpdateandImpairment,22August20193BusinessDay,AngloplotsSAcoalexitandwarnsonlatestMiningCharter,29July20194Bloomberg,SouthAfricanCoalMinerPlansNewClimateChangeStrategy,22August20195Bloomberg,OneCoalCEOSeesWritingonWall,SaysMakeMoneyWhileYouCan,9August2019


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employees,localcommunities,customersandgovernmentbeforeyoumakethosesortofcalls".There’snorushbutweareconsciousaboutdeliveringajusttransition.”6

Ajusttransitionrequiresaplannedtransition.Failingtoplanforthecoming,longer-termdeclineincoalexportswillonlyleadtoachaotictransition.

Historical Exports Asidefromraillogisticsimprovements,theriseinSouthAfrica’scoalexportscantoalargeextentbeexplainedbytherisingimportsofitslargestexportdestination.Indianthermalcoalimportsroseupto2015asthenationsoughttomeetpowerdemandinitsfast-growingeconomy.SouthAfricanexportslevelledoffafterthisasIndiasawtwoyearsofdecliningthermalcoalimports.

Theyear2018sawabounce-backinIndianthermalcoalimportsasstate-ownedCoalIndia–theworld’slargestcoalminerbyvolume–wasunabletomeetdeliverytargetsduetocoaltransportbottlenecksandlower-than-targetedcoalproduction.SouthAfricawasunabletobenefitfromtheuptickinIndianimports,withRichardsBayCoalTerminal(RBCT)reportinglower2018exports.

Figure 1: Richards Bay Coal Terminal Coal Exports 2010-2018 (Mt)

Source: Richards Bay Coal Terminal

6BusinessDay,AngloplotsSAcoalexitandwarnsonlatestMiningCharter,29July2019.


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Global Momentum Leaving Coal Behind Financialinstitutionsarenowabandoningthecoalindustryatasignificantandincreasingrate.Since2018,abank,insurerorotherfinancialinstitutionhasannouncedarestrictiononcoalfinancingonaverageeverytwoweeks.7

Inthefirsthalfof2019,thatrateincreasedtooneperweekandnowover100financialinstitutionsaroundtheworld,includingSouthAfricanbanks,havemadeamoveawayfromcoalalready.8

Majorglobalinvestorsareincreasinglyabandoningasineffectivethetacticofengagingwithfossilfuelcompaniesonclimaterisk,andinsteadaresimplydivestingtheirfossilfuelholdings.9

ThecoalindustryisnoticingtheincreaseddifficultyinfindingfinancefornewprojectsbothinSouthAfricaandabroad.10SeritiResourcesmayturntoequipmentsuppliersforfinanceastraditionalfundingsourcesabandonthermalcoal.11

Threat from Gas as well as Renewable Energy HowrelativethermalcoalandLNGpricesstackupintothefutureishardtopredict,howeveritispossiblethatLNGpricingcouldbehighlycompetitivewiththermalcoalinthelongrunasLNGsupplycontinuestoexpand.12

TherehavealreadybeensomeindicationsofcoaltoLNGswitchingintheshorterterminEurope.Despitelowerrecentthermalcoalpricesduetomarketover-supply,LNGpriceshavealsodippedenoughtofallbelowthermalcoalonanenergyequivalentbasis.ThishasconvincedsomeJapaneseutilitiestoconsideropportunisticcoal-to-LNGswitchingwhichcouldseeLNG-firedplantutilisationincreaseandcoal-firedpowerutilisationdecline.13Japanistheworld’slargestLNGimporter.

CoaltogasswitchinghasbeenevidentinEuropein2019duetoacombinationoflowergaspricesandhighercarbonprices.TheEuropeanUnion(EU)carbonpricehasdoubledoverthepastyearandquadrupledoverthelasttwoyears.IncreasedLNGsupplyfromAustraliaandtheU.S.hashelpedpushpricesdownandallowedthehigherlevelofswitchingtogas.TheheadofgenerationatItalianutilityEnel

7IEEFA,Over100GlobalFinancialInstitutionsAreExitingCoal,WithMoretoCome,26February2019.8IEEFA,Asianbanksaddtogrowingnumberofmajorfinancialinstitutionsexitingcoal–now112andcounting,14May2019.9Bloomberg,BigMoneyStartstoDumpStocksThatPoseClimateRisks,7August2019.10Reuters,Futuretense:Fastest-growingmarketAsiarethink’scoalprospects,4July2019.11Bloomberg,SeritiMayTurntoEquipmentMakersasCoalIPOsshunned,27August2019.12Reuters,Asia’sthermalcoaltradefacesthreats,withLNGthesilentassassin:Russell,26June2019.13Bloomberg,DivingGasCostsSparkPotentialRareSwitchAwayFromCoalinJapan,5June2019.


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stated,“Wehaveanalignmentofeconomics,ofsayingswitchtogasandmostimportantlyswitchtorenewablesbecauseit’scheaper,saferandeasier.”14

InApril2019,TokyoGassignedalong-termLNGsupplydealwithRoyalDutchShellwhichpartlyusesacoal-linkedpricingformula–believedtobethefirsttimethishasbeendonebyaJapaneseLNGbuyer.WithLNGsupplyontherise,moremovesawayfromoil-linkedpricingofLNGandgreaterinfluenceofU.S.HenryHubgaspricingcouldhelpitincreasecompetitionwiththermalcoalintheAsianmarket.

Renewable Energy Getting Ever Cheaper Thedramaticdeclineinthecostofrenewableenergytechnologyhascaughtmany,includingthefossilfuelindustries,bysurprise.Thereisnosignthesecostreductionsaregoingtoceaseanytimeintothefuture.

AccordingtoBloombergNewEnergyFinance(BNEF),two-thirdsoftheworld’spopulationliveincountrieswherewindorsolar(orboth)arethecheapestsourceofnewpowergeneration.By2030,newwindandsolarwillbecheaperthanrunningexistingcoal-orgas-firedplantsvirtuallyeverywhere.InChina,BNEFexpectsthistippingpointtobereachedassoonas2027.15InIndia,thistippingpointhasalreadybeenpassed.

InJuly2019,the1.18gigawatt(GW)SweihansolarplantintheUnitedArabEmiratesbeganoperations.In2016,thisprojectmadeheadlineswhenitbroketheworldrecordforsolarphotovoltaic(PV)powertariffswithanewlowofUS$24.20/megawatt-hour(MWh).TheprojectisownedbyaconsortiumofAbuDhabiPowerCorporation,ChinesesolarPVmanufacturerJinkoSolarandJapanesetradinghouseMarubeni.Thelatterhashistoricallybeenoneofthemostsignificantconstructersofcoal-firedpowerinAsiauntilitputdistancebetweenitselfandfurthercoalprojectswithanewcoalpolicyannouncedinSeptember2018.16

In2019,theUS$24.20tarifffortheSweihanprojecthasbeenwellbeaten.July2019sawthelowestbidinaPortuguesesolarauctionatUS$16.44/MWh.17

Evenmoresignificantarethemostrecenttariffsforsolarwithbatterystorage;installationsthatcannotonlypushcoaloutofthesupplymixduringthemiddleoftheday,butwhichcanalsosupplypowerduringpeakeveningperiodsaswell.

InJune2019,LosAngelesPowerandWaterstruckadealonthelargestsolarandbatterystorageprojectintheworld.Aswellasbeingthelargestsuchprojectglobally,itisalsothecheapestwithtariffsofUS$19.97/MWhforsolarpowerwithonlyanadditionalUS$13/MWhforfirmingfromthebatteries,18withtheprojectexpectedtoqualifyfortheU.S.federalsolarinvestmenttaxcredit.

14Bloomberg,Coal’sDemiseQuickensinEuropeasMarketShiftIdlesPlants,22July2019.15BNEF,NewEnergyOutlook2019.16Marubeni,NotificationRegardingBusinessPoliciesPertainingtoSustainability,18September2018.17PV-Tech,Portugalclaimsspotinsolarhistorywithrecord-lowauctionprices,30July2019.18Forbes,NewSolar+BatteryPriceCrushesFossilFuels,BuriesNuclear,1July2019.


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Thermal Coal Trade Forecasts Longtermforecastsfortheseabornethermalcoaltradepaintagrimoutlookforanynationsorregionswherecoalexportsmakeupasignificantpartoftheireconomy.

International Energy Agency TheInternationalEnergyAgency(IEA),whichpublishesitsinfluentialWorldEnergyOutlook(WEO)onayearlybasis,reportsadeclininglong-termglobalthermalcoalmarketinitslatestprojections.

UndertheIEA’sSustainableDevelopmentScenario(SDS)whichassumesnationstakeapathtowardachievingclimatestabilisation,reducedairpollution,anduniversalaccesstomodernenergy,19globalthermalcoaltradevolumesdrop65%by2040.

UndertheNewPoliciesScenario(NPS),whichisbasedoncurrentglobalannouncedpolicysettings,andhenceisnotalignedtotheParisAgreementtargetoflimitingglobalwarmingtoless2degrees,theglobalcoaltradedeclines6%by2040.

ToassumetheNPSisthemoreaccurateprojectionofthedirectionofenergymarketsgoingforwardistoassumetheworldwillnottakesignificantactiontoactonclimatechangeinlinewithlimitingwarmingtobelow2degrees,eventhoughmostoftheworldhassignedontodojustthat.IEEFAexpectsthecurrentreluctancebytheU.S.tocooperateislikelytobetemporary.Internationalpressuretoactoncarbonemissionsisgrowing20andwillcontinuetodosointothefuture.

TheNPSdoesnottakeintoaccountfutureincreasesinclimatepolicyambitionandfurthercontinuedtechnologychangethatIEEFAseesasvirtuallycertaintohappen.IEEFAisnotaloneinbelievingtheSDSisamoreaccuratereflectionofthepaththeworldwilltakegoingforward.GlobalcreditratingagencyMoody’shasstatedthat,“WeseesignsthattheSDSisbecomingincreasinglylikely”.21

AccordingtoMoody’s,theutilisationofAsia’scoalplantswilldecline,evenundertheNPS.22HoweverthedeclinewillbeevengreaterundertheSDS.AcrossAsia-Pacific,averagecoalpowerplantutilisationdropsundertheNPSfromaround55%toaround37%by2030(Figure2).

19IEA,“Commentary:Anewapproachtoenergyandsustainabledevelopment-theSustainableDevelopmentScenario”,13November2017.20Bloomberg,ClimateCrisisSpursUNCallfor$2.4TrillionFossilFuelShift,8October2018.21Moody’s,ClimateGoals,decliningcostsofrenewablessignaldecreasingrelianceoncoalpower,8May2019.22Moody’s,ClimateGoals,decliningcostsofrenewablessignaldecreasingrelianceoncoalpower,8May2019.

“We see signs that the Sustainable Development

Scenario is becoming increasingly likely”: Moody’s


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Figure 2: Asian Coal Plant Utilisation Rates Under IEA’s New Policies Scenario (NPS) (Left Chart) and Sustainable Development Scenario (SDS) (Right Chart)

Bloomberg New Energy Finance InitslatestNewEnergyOutlookreport,BNEFforecastsadirefutureforcoal-firedpowerglobally.23

By2032,BNEFforeseestherewillbemoresolarandwindpowercapacityinstalledgloballythancoal-firedpower.Coal-firedpowergenerationwilldecline51%by2050bywhichtimeitwillsupplyjust12%oftheworld’selectricity.

China,theworld’slargestimporterofthermalcoal,willpassthroughpeakcoal-firedpowergenerationassoonas2027accordingtoBNEF’sforecast.Meanwhile,inJapan,renewableenergywillsupplymorethan75%oftotalelectricitygenerationby2050.SouthKorea’spowergenerationmixmovesfrom68%coalandnuclearin2018to71%gasandrenewablesby2050.

EventhepartsofAsiathatareexpectedbythecoalindustrytoreplacelostdemandelsewherewillundergoatransformationinthelongtermaccordingtoBNEF.InIndia,zero-carbonpowertechnologiesareforecasttosupply67%ofpowerby2050,whilstinSoutheastAsiathepowergenerationmixwillhaveswitchedfrom84%fossilfuelsto58%renewablesbythattime.

AccordingtoBNEF,Europewilltransitionawayfromcoalthefastest.Initsforecast,BNEFseesrenewablesmakingup90%ofthepowergenerationmixassoonas2040.

South Africa’s Major Coal Export Markets In2018,SouthAfricancoalexportscontinuedtobedominatedbyIndiawhichwasthedestinationfor48%ofallexports,leavingSouthAfrica’sexportindustryhighlyexposedtojustonenation.Inthefirsthalfof2019,thatfigurewentupto60%.24By

23BNEF,NewEnergyOutlook2019.24Argus,IndonesiaandIndialiftglobalthermalcoaltradein2019,September2019


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comparison,Australia’slargestthermalcoalexportdestinationisJapanwhichrepresented39%ofallexportsin2018.Indonesia,theworld’slargestthermalcoalexporter,saw31%ofits2018exportsheadtoChina–itslargestexportdestination–followedinsecondplacebyIndiawith27%.25

FollowingIndia,PakistanandSouthKoreawerethesecondandthirdlargestexportdestinationsforSouthAfricancoalexportsin2018.

Figure 3: 2018 Coal Exports Out of Richards Bay Coal Terminal (million tonnes)

Source: Richards Bay Coal Terminal

India SouthAfrica’slargestcoalexportdestinationistransformingitsnationalelectricitysystemviaamajorroll-outofrenewableenergy.Indoingso,itisimprovingenergysecurity,reducingrelianceonimportedfossilfuels,addressingairandwaterpollution,andloweringemissionsintensity.

TherewerelargereductionsinthecostofIndiansolarPVandwindpowerin2017,totheextentthatrenewablesinIndiaarenowcheaperthanexistingdomesticcoal-firedpower.TheIndianfiscalyearendinginMarch2017wasthefirstyearthat

25S&PPlatts,IndonesiacoalfacesuphillstruggletodiversifyexportsawayfromChina,7March2019.


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combinedrenewableinstallationsoutpacedcoal-firedpowerconstruction(withnetthermalinstallsfalling65%year-on-yeartoadecadelowof7.7GW)(Figure4).

InthefollowingfiscalyeartoMarch2018,Indiainstalledanet4.2GWofcoal-firedpower(downanother46%year-on-year)andmoresolarPVcapacitythanallothertechnologiescombined,withatotalof10.4GWadded.

Thelastfiscalyear(toMarch2019)sawIndia’srenewablesambitionincreaseevenfurther.Thegovernmentisalreadylookingbeyonditsinitialtargetofinstalling175GWofrenewableenergyby2022,atargetmanythoughthighlyambitiousatthetimeitwasset,andwhichwasfollowedbyafurthertargetof275GWby2027andanevenmoreambitious523GWby2030(thislatertargetincludeshydro).India’sMinistryofNewandRenewableEnergy(MNRE)isnowtargeting40GWofrenewableenergyauctionseachyearuntil2028,comprising30GWofsolarand10GWofwindpower.26

Since2010,Indiahascancelledorshelved510GWofplannedcoal-firedpowerplants.

Figure 4: India Renewable and Thermal Power Capacity Additions (MW)

Source: Central Electricity Authority of India (CEA), MNRE India, IEEFA estimates.

National Electricity Plan India’selectricitysectorblueprint-NationalElectricityPlan(NEP)2018-releasedinJanuary2018,retainedthecoretargetof275GWofrenewablesby2027fromitsdraftin2016.

26EconomicTimesEnergyworld,Indiatoauction40GWrenewableseveryyeartill2028,1July2018.

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2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 (est.) 2020/21 (est.) 2021/22 (est.)

Thermal Large Hydro Solar Wind Other RE


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TheNEP2018includesatargetforclosing48.3GWofend-of-lifecoalplants.Specifically,theplanforecasts22.7GWofcoalpowerplantclosuresoverfiveyearsfromFY2017-FY2022.Thiswouldinclude5.9GWofnormalend-of-liferetirementsand16.8GWofclosuresduetoinadequatespaceforfluegasdesulfurization(FGD)equipment.Anadditional25.6GWofcoalcapacityisslatedforretirementinthefiveyearstoFY2027.27OverthedecadetoFY2027,closureswillaverage4.8GWperannum.

Takingtheretirementsintoaccount,andplannednewconstructiontotalling94.3GW,theNEP2018seesIndia’scoalpowercapacityreaching238GWin2027,11GWlowerthanthe2016draftforecast,withthegreatmajorityoffuturecapacityadditionsbasedonwindandsolarenergy.

Inreality,theexpansionofIndia’sthermalpowercapacityduringFY2018-19hasslowedmuchfasterthanpreviouslyanticipated,suggestingpeakcoalcapacityinIndiamaybecloserthanmanypredicted.Netthermalpoweradditionsthatyearwerejust3.4GW,thelowestlevelinadecade.28

ThedeepfinancialstressofIndia’sthermalpowersectorisamajorcontributortothisslowdown,andwithrenewableenergytariffssittingsome20%belowdomesticcoal-firedpowerplanttariffs,IEEFAseesnosignoffinancingconstraintsfornewthermalpowercapacitybeingresolved.

Indian Thermal Power Sector in Financial Stress AlthoughtheGlobalEnergyMonitor(GEM)estimates94GWofthermalpowerplantsinthedevelopmentpipelineinIndia(including36GWunderconstruction),thecancellationof239GWofplannedprojectssinceJanuary2015putsthisintocontext.New,non-minemouthandimportedcoal-firedpowerplantsarebothunbankableandunviableinIndia,andmostnewplansarestalledorlongdelayed.

India’sthermalpowersectorissufferingclearstrandedassetrisk,makingaccesstocapitalincreasinglyproblematic.

Strandedassetscommonlyreflectamyriadofproblemsincludingoutdatedtechnologies,legalissuesaroundlandacquisition,promoterfinancialdistress,ageographicalmismatchbetweenproposedplantlocationsandthedistancecoalsuppliesmusttravel,andunviabletariffrequirements.

ThermalpowerproposalsinIndiaaregenerallyrequiringtariffsatincreasinglyhighrates.AsperIndia’sCEAestimates,thetariffforanewemissioncontrols-compliantpit-headsupercriticalcoal-firedpowerplantshouldbeRs4.39/kilowatthour(kWh)–aroundUSc6.2/kWh-foraplantloadfactorof60%.Withcompetitiverenewableenergypowerpurchaseagreements(PPAs)nowregularlypricedintheRs2.50-

27India’sNationalElectricityPlanAnnexure5.4,5.5,5.6.28IEEFA,India’selectricitysectortransitionstillontrackdespiteaweakFY2018/19,25April2019.


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3.00/kWh(USc3.5to4.2/kWh)range,newnon-minemouthcoalpowerplantsarestrugglingforviabilityacrossIndia.

Theimpactofstalledprojectsisfarreaching.Rightnow,US$100bnofdistressedpowersectorloansarecloggingtheIndianbankingsystem.Thegovernmentestimatesthereareabout40.1GWofstrandedcoal-firedpowerprojectsofwhich15.7GWareyettobecommissioned,29and25GWofgas-firedpowerprojectsthatarelikewisestranded.30

India to Overachieve Paris Agreement Renewables Target by Almost 60% IndiaisnowoncoursetosignificantlyexceedtherenewableenergytargetthatmadeupitsNationallyDeterminedContributionundertheParisAgreementasaresultofitspolicycommitmenttorenewableenergyandthedramaticslowdownincoal-firedpowerbuild-outacrossthecountry.

AccordingtotheCEA,Indiaisoncourseforrenewablestoreach63%ofinstalledpowercapacityby2029-30.ThecommittedParisAgreementtargetwas40%.Renewableenergyisexpectedtoprovide44%ofallpowergeneratedbythesamedate.31

Althoughrenewableenergycapacityisexpandingrapidly,coal-firedpowerinIndiaisnotgoingtobedisappearinginthenearfuture.Inthelongerterm,India’spowerdemandwillbemetlargelybyacombinationofrenewableenergyandcoal-firedpower,withsomehydroandnuclearpower.However,financialandenergysecurityconcernsmeanthatIndia’scoalpowerdemandwillincreasinglybemetbydomesticIndiancoal.

Energy Security and Fossil Fuel Imports Indiaishighlydependentonfossilfuelimports,aclearenergysecurityissueforthenation.32

TheconcernisclearlydemonstratedbyIndia’sdeterminationtorolloutelectricvehicles(EVs)despitebeinginanearlyphaseofeconomicadvancementrelativetodevelopednationsandwithapressingneedtoalleviatepoverty.Indiaisamajoroilimporter,withimportdependencereaching84%inJune2019,33andthegovernmentseesEVsasanopportunitytoreducethisstrategicvulnerability.Inthe

29MinistryofPower/StandingCommitteeonEnergy,Stressed/Non-performingAssetsinElectricitySector,March2018.30EconomicTimes:Energyworld,SBIChairmansaysnofutureforgas-basedpowerplantsinthecountry,4January2019.31IEEFA,IndiaEnergyTransitionFuelsGrowthPathforSustainableDevelopment,19July2019.32IRENA,ANewWorld:TheGeopoliticsoftheEnergyTransformation,January2019.33EconomicTimes:Energyworld,India’scrudeoilproductionfalls7%;pushesimportdependenceto85%inJune,24July2019.


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latestnationalbudget,theIndiangovernmentofferedanumberofincentivesdesignedtoincreasetheuptakeofEVs.34

ReducingthermalcoalimportshaslongbeenastatedaimoftheIndiangovernment.RelianceonimportsofthermalcoaladdstoenergysecurityissuesandplacesadditionalburdenonIndianpowerplantoperatorsthatarealreadyunderfinancialstress.InJuly2019theIndiancoalministerstated,“ReductioninimportofcoalinthecountryisalwaysapriorityareaoftheGovernment".35

Figure 5: Share of Fossil Fuel Imports in All Merchandise Imports (Average 2007-16)

Source: World Bank, IRENA

Recently,India’simportsofthermalcoalhaverisenasstate-ownedCoalIndiaLimitedhasbeenunabletoincreasedomesticcoalproductioninlinewithdemandgrowth,whilstalsodealingwithcoaltransportlogisticsissues.

However,Indiaisnowtakingstepstofurtherboostproductionandimprovetransportlogisticsfordomesticcoal.Reformsthatwillallowprivatecompaniestocommerciallyminecoal,(currentlyabout94%ofcoalinIndiaisminedbystate-ownedcompanies,mainlyCoalIndia,SingareniCollieriesandNLCIndia),maybethebiggestreformtotheIndiancoalsectorsincenationalisationin1973.Thisgame-changingmovewillincreasecompetitionanddriveefficiencyinthedomestic

34LiveMint,GovtstepsonthegastoputIndia’sEVmissioninfastlane,5July2019.35EconomicTimes:Energyworld,India’scokingcoalimportsat51.84MTin2018-19,16July2019.


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coalsectorandisexpectedtoleadtoareducedneedtoimportthermalcoal.36IndiancreditratingagencyCRISIL,ownedbyStandardandPoor’s,expectsthisreformalonewillcutIndia’scurrentaccountdeficitbyUS$4.4bnannuallyduetoreducedcoalimports.37

Figure 6: Indian Thermal Coal Imports by Source

Note: 2019 data is up to May Source: IHS (2019) India coal data tables, Office of the Chief Economist – Australian Government

Inaddition,newdedicatedrailwaysarebeingbuilttotransportcoalwhileCoalIndiaisinvestinginitsowncoalrakestogetaroundtheshortagesholdingupdelivery.ArecentlyapprovednewrailwayinChhattisgarhcouldincreasecoalproductionby100Mtpainthatstatealone.38Coalsupplyreformhasalreadyreducedtheaveragerailtripandhencerailcostsforcoaldeliveriesby25%since2012.TheAdaniGroup,India’slargestcoalimporter,hasstatedthatitexpectscoalimportstostagnatefromtheIndianfiscalyear2022asthelogisticalissueswithdomesticcoalareresolved.39

Toincreaseself-sufficiency,thecoalministerhasalsonotedthatstate-runenterprisesNTPCandBharatHeavyElectricalswillconvertcoal-firedpowerstationsdesignedforimportedcoaltoensuretheycanusedomesticsupply.40

36EconomicTimes:Energyworld,Approvalforauctionmethodologyforcommercialcoalminingagamechanger:Experts,20February2018.37CRISIL,CommercialcoalminingcancutimportbillbyRs30,000cr,6March2018.38EconomicTimes:Energyworld,Cabinetapprovesnewbroad-gaugeraillineinChhattisgarh,26September2018.39Reuters,India’sAdaniseessix-foldriseincoalminingvolumedespitechallengesinAustralia,24July2018.40EconomicTimes:Energyworld,BHEL-NTPCrecalibratingturbinestoreducedependenceonimportedcoal:PiyushGoyal,4April2018.


17

Assuch,therecentincreaseinIndianthermalcoalimportsislikelytoproveshort-lived.TheAustraliangovernment’sOfficeoftheChiefEconomist(OCE)seesIndia’sthermalcoalimportspeakingin2020initsmostrecentmedium-termprojection.TheOCEprojectsthatIndianthermalcoalimportswilldeclineatanaveragerateof1.5%perannumoutto2024.41

India’scoalministryisnowpreparinganewplantogowellbeyondthisforecast,bycuttingcoalimportsbyone-third,orabout85mt,by2024.42InAugust2019,thegovernmentalsoapprovedforeigninvestmentindomesticcoalmininginordertoimprovesupply.43

Pakistan WithafleetofnewcoalplantsonthedrawingboardsupportedbyChinesefinanceundertheChina-PakistanEconomicCorridor(CPEC)program,coalexportershavehopesthatPakistanwillbeamajorgrowthdestinationasmoreestablishedmarketssag.PakistanisalreadySouthAfrica’ssecondbiggestcoalexportdestination.

Unfortunatelyforcoalexporters,therearealreadysignsthePakistanopportunitywillbemorelimitedthanhoped.

InJanuary2019,the1,320megawatt(MW)RahimYarKhanimportedcoal-firedpowerproject,aCPECproposal,wascancelled.ThereasonsgivenforthiswasthatPakistanalreadyhasenoughpowercapacityonthedrawingboard,aswellasthegrowingburdenoffossilfuelimports,giventhemajordepreciationoftherupeeoverthelast12-18months.44

ConcernsabouttheburdenthatfossilfuelimportsplaceonPakistanhavegrownsubstantiallyasthenation’seconomyhasdeteriorated.Thecountry’seconomyhasrecentlybeencharacterisedbydeclininggrossdomesticproduct(GDP)growth,fallingforeigncurrencyreserves,anincreasingcurrentaccountdeficit,andasignificantdepreciationoftherupee(Figure7).TheweaknessoftherupeemakesimportstradedinU.S.dollars,suchascoal,increasinglyexpensive.

Thescaleoftheeconomy’sproblemsledtotheneedforanotherbailoutbytheInternationalMonetaryFund(IMF),ontheconditionthatPakistantakestepstoaddressitslargedebts.Pakistan’sbiggestcreditorisChina,thanksinlargeparttoChinesefinancingoftheCPECprogramme.Althoughunclearatthemoment,itis

41OfficeoftheChiefEconomist,ResourcesandEnergyQuarterlyMarch2019.42Bloomberg,India,World’sNo.2CoalBuyer,PlanstoCutImportsbyaThird,1August2019.43EconomicTimesEnergyworld,Cabinetapprovesforeigninvestmentincoalmining;EasesFDIrulesforsinglebrandretail,28August2019.44Dawn,GovtputsmajorCPECpowerprojectonhold,14January2019.

India’s coal ministry is now preparing a new plan to cut coal imports by one-third, or about

85mt, by 2024


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possiblethatIMFconditionsmayimpactthescaleoffurtherCPECpowerprojectlendingandconstruction.45

Figure 7: The Pakistan Rupee’s Significant Devaluation Has Made Coal Imports More Expensive

TheweakenedrupeeandconsequentcostofcoalimportsisalreadyimpactingtheCPECcoal-firedpowerplantsthatarealreadyoperational.ThePortQasimcoalplantnearKarachiisreportedlyhavingfinancialdifficultiespartlycausedbytheexpenseofcoalimports.46Meanwhile,theSahiwalcoalplantinPunjabprovinceisalsoapparentlyhavingseverefinancialdifficulties.47Thisplantisusingimportedcoaldespitethefactitismanyhundredsofkilometresfromthenearestport,leadingtomajorcoallogisticsissues.

Withtherecentcompletionofthe1,320MWHubcoalpowerstation,themajorityoftheplannedcapacitythatwilluseimportedcoalhasalreadybeencompletedsuggestingthereislimitedupsidetocomeforSouthAfrica.Around7GWofimportedcoal-firedpowerstationsareplannedintotalwith4GWnowoperational.

Lower-than-expectedpowerdemandgrowthmayalsoimpactcoalplantsthatarebothplannedoralreadyoperating.Stagnatingeconomicgrowthcouldslowtherateofelectricitydemandgrowthgoingforwardandincreasethechanceofexcesspowercapacitystandingidle.

45Dawn,WillCPECsurvivetheIMFbailout,15July2019.46ExpressTribune,CPEC’sfirstpowerprojectmiredinfinancialdifficulties,10May2019.47TheNews,Sahiwalcoal-firedpowerplantsfearedclosureonnon-paymentofdues,3April2018.


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Renewable Energy to Grow Significantly Pakistan’sinauspiciousstarttoitscoal-firedpowerdevelopmentcomeswithinthecontextoftherapidlydecliningcostofrenewableenergyinthecountry.PowertariffsapprovedbyPakistan’sNationalElectricPowerRegulatoryAuthority(NEPRA)acrossallgenerationsourcesin2018showedthatwindandsolararenowthecheapestformsofnewpower(Figure8).

Thistariffdeclinehasoccurreddespitelimitedpolicysupportforrenewablestodate.Somesolarhasbeeninstalled,aswellassomewindpowerwithinSindhprovince’sidentifiedwindresourcecorridors.

However,policysupportforrenewablesinPakistanlookslikeitisabouttoreceiveasignificantboost.Thenationalgovernmenthasdraftedanewrenewableenergypolicywhichsetsnationaltargetsforrenewablescapacity(excludinghydro)toreach20%ofcapacityby202548,and30%by2030,upfromthecurrentlevelof4%.49

Figure 8: Wind and Solar Are Now the Cheapest Sources of Power in Pakistan

Source: National Electric Power Regulatory Authority (NEPRA), IEEFA calculations

Furthermore,China,themajorenablerofcoal-firedpowerinPakistan,appearstobeonboardwiththepowerministry’splan.TheChineseambassadortoPakistanhasstated,“ChineseinvestorsarecloselyfollowingPakistan’spower-sectorpoliciesandarekeentoinvestinrenewableenergy”.50

48Bloomberg,PakistanPlansCleanEnergyWavetoMakeUp20%ofItsCapacity,23July2019.49AlternativeEnergyDevelopmentBoard,DraftAREPolicy2019version2,21July2019.50ExpressTribune,Powerministrystrivestoraiserenewableenergyshareto30%,18January2019.


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Pakistan’ssignificantlyincreasedenthusiasmforrenewableenergyislikelydrivennotonlybythedecliningcostofthetechnology,butalsobecausewindandsolardonotrequiretheexpensivefossilfuelimportsthatareplacingitseconomyundersuchpressure.

ImportpressurealsohelpsexplainPakistan’scontinuedbeliefintheneedforittoexploititsdomesticligniteresources;domesticcoal-firedpowerplantsarealsofavouredforimprovedenergysecurityoutcomes.Inaddition,Pakistancontinuestodevelopfurthernuclearpowerstationsandhydropower,despitethehugecostanddelays,becausetheyenhanceenergysecurityand,inthelattercase,potentiallyhelptoalleviatewatersecurityandflooding.

Assuch,withhydro,nuclear,anddomesticcoal-firedpowerdevelopmentcontinuing,andanintentionnowtosignificantlyincreasewindandsolarpower,itseemsthatimportedcoalandLNGprojectsarethemostlikelytoloseout.SuchanapproachwouldappeartomakethemostsensegivenPakistan’seconomicsituationandtheusualenergysecurityconcernsthatanynationstatehas.

AlthoughtherewillbesomegrowthinPakistan’sthermalcoalimportsgoingforward,thisgrowthislikelytoprovedisappointingtomanycoalexportersincludingthoseinSouthAfrica.

South Korea SouthAfrica’sthirdlargestexportdestinationhasrecentlyturnedacornerwhichwillseeitsdependenceoncoalimportsbegintodecline.

DuringapublichearingforSouthKorea’snewenergymasterplanon19thApril2019,theSouthKoreanMinistryofTrade,IndustryandEnergyannouncedthatitwouldseektosignificantlycutrelianceoncoal-firedpowergenerationwhilstshiftingevenmoretowardsrenewableenergy.Drivenbyairpollutionconcernsaswellascarbonemissions,thegovernmentwill“drastically”cutpowergenerationfromcoalbybanningnewcoal-firedpowerplantsandclosingoldones.51

SouthKorea’senergymasterplansetslong-termenergypolicyandisrenewedeveryfiveyears.

Underthenewplan,thegovernmentintendstoincreasetheshareofpoweroutputfromrenewableenergysourcesbyupto35%by2040,upfromaround8%currently.52Thepreviousrenewableenergytarget,setin2017,wastoreach20%by

51TheKoreaBizwire,S.KoreatoCutDependencyonFossilFuel,ShifttoRenewableEnergy,19April2019.52Reuters,SouthKoreastepsupshifttocleanerenergy,setslong-termrenewablepowertargets,19April2019.

“Chinese investors are closely following Pakistan’s power-

sector policies and are keen to invest in renewable energy”


21

2030.In2018,coalaccountedfor41.9%ofSouthKorea'spowergeneration,followedbyLNGwith26.8%andnuclearenergywith23.4%.

SouthKoreaisnowconsideringretiring20coal-firedpowerplantsandplacingoutputcapsonanumberofothersasitpreparestoincreaseitsrateofenergytransitionyetagain.53

South Korea Was Already Moving Away From Coal TheannouncementofthenewenergymasterplancomesontopofpreviousannouncementsthatsawSouthKoreaalreadymakingitsmoveawayfromcoal-firedandnuclearpowerandtowardsrenewableenergyandLNG.Therehasbeenasignificantchangeinthelong-termthermalcoaldemandoutlookinSouthKoreasincePresidentMoonJae-inwaselectedin2017.

Thegovernment’s2017planfortheSouthKoreanelectricitysystemcalledforadramaticallyreducedrelianceoncoalandnuclearandaboosttorenewableenergyandLNG-firedpowergeneration.

Thismovehasbeendrivenbyairpollutionconcernsinadditiontotheneedtoreducecarbonemissions.InApril2018,theOrganisationforEconomicCooperationandDevelopment(OECD)reportedthatSouthKoreahastheworstairqualityofanyeconomicallyadvancednation.54

InApril2019,SouthKorea’scoaltaxincreasedbyanother28%toKRW46/kg(US$40/t).Atthesametime,thetaxonLNGimportshasbeencutby75%.55Thisfollowsa20%increaseinthecoaltaxinApril2018.TheSouthKoreangovernmentisclearlyattemptingtodriveashiftawayfromcoaluseinpowergeneration.

ThecoaltaxisinadditiontoSouthKorea’scarbonprice,whichwasintroducedin2015viaacap-and-tradesystemthatcurrentlypricescarbonataroundUS$20/t.

Inadditiontothenationalgovernment,provincialgovernmentsinSouthKoreaarealsotakingmeasurestoreducerelianceoncoal.SouthChungcheongprovince,alsoknownasChungnam,ishometoaroundhalfofSouthKorea’scoal-firedpowerplants,yettheprovincehasdeclaredavisiontocutrelianceoncoaltozeroby2050whilerapidlyscalinguprenewableenergycapacity.TheprovincejoinedtheglobalPoweringPastCoalAllianceinOctober2018.56

53Reuters,SouthKoreafiresuponrenewables,toclosemorecoalplants,18June2019.54TheKoreaTimes,Koreahastheworstairofadvancedeconomies,reportshows,19September2017.55S&PPlatts,SouthKoreatocutLNGtaxesby74%inApril,raisethermalcoaltaxby27%,1February2019.56PoweringPastCoalAlliance,TennewPoweringPastCoalAlliancemembersannouncedatGlobalClimateActionSummit,13September2018.

The government will “drastically” cut power generation from coal by

banning new coal-fired power plants and closing old ones.


22

SouthKorea’sbuild-outofrenewableenergycapacityisunderway.Thecountry’ssolarpowerbuild-outissetforanotherrecordyearin2019afterreachinganewrecordin2018withover2GWinstalled.Forthefirstsevenmonthsof2019,1.64GWofsolarhasalreadybeeninstalledaccordingtotheMinistryofTrade,IndustryandEnergy,surpassingthegovernmenttargetforthewholeyear.Cumulativesolarinstallationsareapproaching10GW.57

Withitslongcoastline,offshorewindwillalsoplayanimportantroleinSouthKorea’senergyfuture.Asoffshorewindcostscontinuetodrop,SouthKoreahasinaugurateditsfirstoffshorewindfarmoffthecoastofJejuIsland.58InJune2018,theEnergyMinistryannouncedplanstobuild12GWofoffshorewindby2030.59SouthKoreaalreadyhas16GWofoffshorewindinthepipeline.60

Thestate-ownedpowerutilityKoreaElectricPowerCorp.(KEPCO),hashistoricallybaseditspowergenerationonnuclearandfossilfueltechnology.However,itisnowrampingupinvestmentinrenewablesbothinSouthKoreaandoverseas.61ThesizeofitsrenewableinfrastructureinvestmentsupportsIEEFA’sviewofastep-changeinambitionandstrategicshift.

Thepreviousgovernmentannouncedinlate2016thatKEPCOwouldinvestUS$3bnindomesticrenewableenergyacross2017and2018aspartofaplantoboostrenewableenergygeneration,aplanthathassincebeenreplacedwithanevenmoreambitiousonebythecurrentgovernment.62

KEPCOisalreadyinvestingintherapidlygrowingenergystoragesector,andSouthKoreaissettobeakeygrowthmarketinthissegment,withpoliciesmandatingthatcertaincommercialandindustrialcompaniesinstallenergystoragecapacity.ThismovesuitsSouthKorea,givenitisamajormanufacturerofbatteriesforenergystoragebycompaniessuchasLGChemandSamsungSDI.63

InFebruary2018itwasannouncedthatKEPCOhadcommissionedGEtobuildanew4GWhigh-voltagetransmissionlinkbetweenSeoulandtheeastofthecountry.64Enhancedtransmissionlinksarerequiredtoconnectrenewablegenerationhotspotswithloadcentresinmajorcities.

57PVMagazine,SouthKoreahasadded1.64GWofsolarsofarthisyear,9August2019.58Offshorewindbiz,SouthKorea’sFirstCommercialOffshoreWindFarmGoesLive,17November2017.59YonhapNews,S.Koreatoadd12GWofwindcapacityby2030,26June2018.60S&PPlatts,Europe’soffshorewindindustryexpandingintoAsia:event,25June2019.61YonhapNews,KEPCObuysinterestsin3solarprojectsinU.S.,30March2018.62PulseNews,Korea’s6powerfirmsunderKEPCOtoinvesttotal$3bninrenewableenergyovernext2years,27December2016.63EnergyStorageNews,IHSMarkit:40%ofenergystoragepipelineisco-locatedwithsolarPV,18April2018.64GreentechMedia,SouthKoreaStrengthensGridtoTakeOnMoreRenewables,20February2018.


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IEA Foresees Plummeting South Korean Coal Imports EvenbeforethelatestannouncementfromtheMinistryofTrade,IndustryandEnergy,theIEAhadseenenoughmovesfromtheSouthKoreangovernmentforittoforeseeSouthKoreancoalimportscollapsingby2040.

Inits2017WorldEnergyOutlook,theIEAstated,“WeseeKoreancoalimportsdroppingbynearly50%tolessthan60Mtcein2040”.65Importantly,thiswasundertheIEA’sNewPoliciesScenario–ascenarioinwhichtheworldfailstolimitglobalwarmingbelowdangerouslevels(+2°Corbelow).

Underascenarioinwhichtheworldtakesfurtherattemptstolimitclimatechange—ascenariothatIEEFAbelievesrepresentsthefuturemoreaccuratelythantheNewPoliciesScenario—thedeclineinSouthKoreancoalimportswillhappenevenfaster.

Europe Thermalcoal’soutlookinEuropelookspoor,evenintheshortterm.Currentlowgasprices,continuingrenewableenergyinvestment,andthehigherEuropeancarbonpricehasseenEuropeannationsreducecoal-firedpowergenerationbeyondexpectationsthisyear.CoalpoweroutputacrossBritain,Germany,France,Spain,PortugalandItalyinthesecondquarterof2019was40%lowerthanthesameperiodin2018.66

EvenTurkey,whichatonepointwasexpectedtobeoneofthebrightspotsoftheAtlanticthermalcoalmarket,isgoingtodisappointthecoalminingindustry.LikePakistan,Turkeyhasseensignificantdepreciationofitscurrencyandisconsequentlyscalingbackplansforplantsthatrunonimportedcoal.Since2009,70GWofplannedcoalplantsinTurkeyhavebeenshelved.67

InMay2019,thermalcoalimportsintotheEUhitalandmarklow.Netthermalcoalimportswerejust6.6Mt–thelowestnetimportfiguresinceAugust2002.68

IncreasedLNGsupplyfromtheU.S.andAustraliaispartlyresponsiblefortheincreasedabundanceandreducedpriceofgas,resultinginmorecompetitionforcoal.Meanwhile,increasedrenewableenergygenerationcouldseeGermancoal

65IEA:WorldEnergyOutlook2017,p.226.66Bloomberg,Coal’sDemiseQuickensinEuropeasMarketShiftIdlesPlants,22July2019.67S&PPlatts,Turkishcoal-firedplantexpansionstalls,with70GWshelvedsince2009,23August2019.68Argus,EUthermalcoalimportsatalandmarklow,16July2019.

“We see Korean coal imports dropping by nearly 50% to less

than 60 Mtce in 2040.”


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importsdropbyaround10%in2019.Thatwouldmake2019thefourthyearinarowthatEurope’slargestcoalimporterhasseenlowervolumesarrive.69

AsustainedincreaseinthecarbonpricewithintheEUemissionstradingsystem(EUETS)hasallowedgas-firedpowertocompeteoncostwithcoal(Figure9).TheEUcarbonpricehasbeenontherisesincemid-2017whenthenumberofavailablecarboncreditswasreducedsignificantly.Thepricehasbeeninthe€25-30pertonneofcarbonemittedrangeto-datein2019.

Analystspredictthecarbonpricewillrisefurther,tocoal’sdisadvantage,asthesupplyofcarboncreditsisfurtherrestrictedgoingforward.70Ontopofthis,thereareindicationsofincreasedpolicysupportforfurthercarbonemissionsreductionswiththenewlyelectedPresidentoftheEuropeanCommissionpromisingfurtherenvironmentalaction.71

Figure 9: EU Carbon Emissions Allowances Are Near an All-Time High

Source: ICE Futures Europe, Wall Street Journal

Inthelongerterm,theoutlookforthermalcoaldemandinEuropeisevenmoredireforexporters.GuillermoFonseca,theCEOofCerrejónCoalwhichisownedbyBHP,AngloAmericanandGlencore,projectsthatthermalcoaldemandfromsomenationswithintheAtlanticmarketmayfallanother50%to60%overthenextfivetosevenyears.CerrejónexportsalargeproportionofitscoalproductiontoEuropeandisnowconsideringreducingcoalproduction.

69Reuters,Germancoalimportscouldfall10%in2019infaceofrisingrenewablepower,18July2019.70WallStreetJournal,Once-UnpopularCarbonCreditsEmergeasOneoftheWorld’sBestInvestments,11August2019.71FinancialTimes,CarboncreditcostssoarasEUtoughensstanceonenvironment,18July2019.


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Fonsecahasstated,“Thelargeimpactweforesawfromthemarketdisappearing,wealwayssawasoutthereinthefuture.Well,thefutureisnow.”72

IthasbeenreportedthatBHPhashiredJPMorgantofindabuyerforitsstakeinCerrejónasitconsidersleavingthethermalcoalsectoraltogether.

Africa AnyexpectationthattherestofAfricawillprovideamajorcoalexportopportunityforSouthAfricaasthecontinentdevelopsarelikelytomeetdisappointment.Withrenewableenergyincreasinglythetechnologythatisreplacingexpensivediesel-firedgeneration,orbringingpowertooff-gridareas,theopportunityforamajorcoalcapacityexpansionacrossAfricaseemstohavegone.Plannedcoal-firedpowerbuild-outsinnationssuchasKenyaandEgyptarebehindscheduleandlikelytobeincreasinglylimited.

Kenya Theonecoal-firedpowerproposalthathasmadesignificantprogressinKenyaisthe1,050MWLamuproject.ThisproposalreceivedasetbackinJune2019whenatribunalcancelledtheenvironmentallicencefortheproject.73Thedeveloperswillneedtocompleteanewenvironmentalimpactstudywithcommunityinvolvementiftheywishtoproceed.

Inthemeantime,renewableenergyisstartingtomakesubstantialprogressinKenyaandisalreadyoutclassingfossilfuelpowergeneration.AlreadyAfrica’sgeothermalpowerleader,Kenyaiscontinuingtoexpanditsgeothermalpowercapacity.However,thenation’sexcellentwindandsolarresourcesmeansithasthepotentialtobecomeanAfricanrenewablesleaderacrossothertechnologies.

Kenyasawitsrenewablepowercapacityincreaseby22%in2018,ledbyawindpowerexpansionthathasmadeitanAfricanwindenergyleader.Kenya’sLakeTurkanawindfarmisthelargestinAfricaat310MW.Sincecomingintooperation,ithasbeenreplacingageingandexpensivedieselgeneration.

ReplacementofdieselhasbeencitedasakeyreasondeterminingtheneedfortheLamuproject.However,newerandever-cheapertechnologyhasbeatencoaltoit.ArecentIEEFAreportfoundtheproposedLamucoalplantwillhinderKenya’seconomicgrowth,notsupportit.74

72Bloomberg,OneCoalCEOSeesWritingonWall,SaysMakeMoneyWhileYouCan,9August2019.73Bloomberg,KenyaCancelsEnvironmentalLicenseof$2BillionCoal-PowerPlant,27June2019.74IEEFA,TheLamuCoalPlantwillhinder,notspur,economicgrowthinKenya,10June2019.

“The large impact we foresaw from the market disappearing, we

always saw as out there in the future. Well, the future is now”


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IEEFAfoundthat,underthe25-yearpowerpurchaseagreement,KenyawouldberequiredtopayUS$360minannualcapacitychargeseveniftheplantgeneratednoelectricity.Furthermore,theplantproponent’sclaimsoverthecostofelectricityproducedareunrealisticallylow,andtheactualcostcouldbeuptotentimeshigher.

Another100MWwindfarminKenyahasrecentlyreachedfinancialclose.Inaddition,asuccessionofnewutility-scalesolarplantsisunderdevelopmentinKenyafollowingtheimplementationoftheGarissasolarplant,andasthecostofsolarpowerdropsacrossAfrica.

ThefurtherdelaytotheLamuprojectontopofthelongdevelopmenttimessuchproposalsrequire,meansthattherapiddevelopmentpaceofrenewabletechnologyhasovertakencoalandisunderminingtherationaleforcoalprojects.Assuch,theprospectoffindingmarketsinKenyaforSouthAfricancoalexportsislimited.

Egypt UnderEgypt’s‘alloftheabove’approachtoitspowergenerationcapacitybuildout,whichalsoincludesplansfornuclear,gas,windandsolarpower,thenationintendstoinstallanumberofcoal-firedpowerstations.Theseplans,however,areincreasinglyatriskofbeingleftbehindbyEgypt’srenewableenergyprogress.

Indeed,arecentanalysisbyGEMfoundthatdespitesubstantialplannedandproposedGWs,Egypthasnotimplementedanyoftheproposedprojectsandhasaneffectiveconversionrateofplannedtocommissionedcoalplantsofzero.75

Untilrecently,Egypthadplansforfourlargecoal-firedpowerstations.However,thereappearstohavebeennorecentprogresswiththe2GWSafagaproposalanditisconsideredshelved.The4GWMarsaMatruhalsoappearstohavestalled,especiallysincethehuge6.6GWHamaraweincoalpowerproposalbecameapparent.Thelatterisintheearlystagesofdevelopmentwithnoguaranteethatitwillproceedinitspresentform.

TheotherEgyptiancoalprojectinthepipelineisthe2.6GWAyounMoussaproposalwhichnowappearstohavebeendelayed.Theprojecthasbeenpushedbackduetoovercapacityconcerns,especiallysincenewwindandsolarprojectshavecomeonline.Therearealsoconcernstheprojectmaycostmorethanoriginallyenvisaged.76

Meanwhile,Egypt’srenewableenergyprogressiscontinuing.Itslatestwindpowerdevelopment,a250MWprojectbeingbuiltbyaconsortiumofOrascom,EngieandToyotaTsusho,isnearingcompletion.77FinanciersoftheprojectincludetheJapanBankforInternationalCooperation,historicallyamajorsupporterofcoal-firedpowerdevelopmentinemergingeconomies.

75CarbonBrief,Howplansfornewcoalarechangingaroundtheworld,13August2019.76DailyNewsEgypt,EEHCdelayscoal-firedplantduetoproductionsurplus,15July2019.77DailyNewsEgypt,Toyota-Orascom-GDFalliancetocompleteGulfofSuezwindfarmbyOctober,16July2019.


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InAugust2019,WorldBankGroupmembers-theInternationalFinanceCorporation(IFC)andtheMultilateralInvestmentGuaranteeAgency(MIGA),agreedtofinancethe252MWWestBakrWindprojectatEgypt’sGulfofSuez.TheprojectisexpectedtoproduceelectricityatwellbelowtheaveragecostofgenerationinEgypt.78

Seekingtocapitaliseonitsexcellentrenewableenergyresources,Egyptistargeting20%ofelectricityfromrenewablesby2022and42%by2035.79Solarpowerdevelopmentisnowcontinuingviacompetitivebiddingtodiscovereverlowertariffs.

Giventhespeedofrenewableenergytechnologydevelopmentandcostreductions,aswellasincreasingglobalconcernaboutcarbonemissions,thepowercontributionfromrenewablesismorelikelytoout-performexpectationsgoingforward.Conversely,despiteEgypt’scurrenttechnologyneutralapproach,technologiessuchascoal-firedandnuclearpowerarelikelytounderperformexpectationsoffuturecontributiontopowergenerationduetoincreasingconcernsovercost,buildtime,carbonemissionsandairpollution.

Other Markets SouthAfricancoalexportersarelikelytoseekalternativemarketsgoingforwardasopportunitiesforgrowthinthemainexportdestinationsdryup.However,thelongtermoutlookforcoalexportstotheseotherdestinationsisalsolikelytodisappointSouthAfricanexporters.Furthermore,withtheglobalseabornecoaltradesettogointopermanentdecline,SouthAfricawillseeincreasedcompetitionfromothermajorthermalcoalexporterssuchasIndonesiaandAustralia,especiallyinmarketswheretheseexportersaredominant.

China Chinaislikelytomoveawayfromthermalcoalimportsinthelongertermasdomesticcoal,renewables,gas,hydroandnuclearpowerfulfilgrowingpowerdemand.Thegovernmentseemsdeterminedtobecomemoreself-reliantoncoalandtoreducetheneedforcoalimportsasmuchaspossibleinthelongrun.80

TheAustraliangovernment’sOfficeoftheChiefEconomistseesChina’sthermalcoalimportsdecliningatanaverageannualrateof5.2%peryearoutto2024initsmostrecentmediumtermprojection.81

Significantly,importsofthermalcoalmakeuponlyasmallproportionofoverallChinesethermalcoalconsumption,whichisdominatedbydomesticsupply.Chinaisintheprocessofrationalisingitsdomesticcoalmarketandimprovingmining

78IFC,IFCandMIGAToSupportLandmarkWindFarmonEgypt’sGulfofSuez,8August2019.79IRENA,RenewableEnergyOutlook:Egypt,2018.80Bloomberg,China’sSlumping,SoWhat’sUpWithCoal?14August2019.81OfficeoftheChiefEconomist,ResourcesandEnergyQuarterly,March2019.


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efficiencywhichislikelytoseereplacementofimportedcoalwithdomesticcoalinthelongrun.

Chinaadded194Mtofnewdomesticcoalminingcapacityin2018,82notfaroffthetotalthermalcoalimportedintoChinain2018(216Mt).Newdomesticcoalmineapprovalshavecontinuedinto2019with141Mtofannualcapacitygiventhego-aheadinthefirstsixmonthsoftheyear.83Asitexpandsdomesticproduction,Chinaisalsoincreasingcoalrailtransportconnectivitywiththeaimofincreasingcapacityby650Mt,or30%,by2020.84

Chinaisalsobuildingpowertransmissioncapacitytobetterutilisedomesticcoal.Theworld’slongestultra-highvoltagetransmissionlineisunderconstructiontolinkcoal-richXinjiangprovinceinthewesttothecountry’shighlypopulatedeast.CoaltransportationoutofXinjianghasproveddifficultandthenewtransmissionlineisexpectedtoreducethermalcoalimportsintoeasternChinabyabout30Mtperannum.85

AirPollutionConcernsinChina

Althoughoverallcoalconsumptioninthepowersystemisincreasingaselectricitydemandcontinuestorise,theproportionofpowergeneratedbycoalisdeclining.In2018,coal’sshareinChina’spowermixdroppedto59%fromthe2012peakof68.5%.

Thisshiftisdriveninpartbythetechnologicaltransitionthatincreasinglymeansrenewablesarethemoreeconomicoption,inadditiontotheneedtoactoncarbonemissions.However,muchofthedrivingforcebehindChineseplanstoincreaseitsrelianceonrenewables,nuclearandgasislinkedtoitsongoingcommitmenttoreduceairpollution.

Chinaisnowinitssixthyearofits“waronpollution”andinJuly2018releasedits2018-20airpollutionactionplan.Theplanaimstotakemeasurestoreducesmog,includingcuttingcoalconsumption.86Theexpandedplannowappliesto82ChinesecitiesandthemajorcoalproducingprovincesofShanxiandShaanxi.

Renewableenergyandcoal-to-gasswitchingisbeingprioritisedasChinagrappleswithitsairpollutioncrisis.Chinarecentlyincreaseditsrenewableenergyconsumptiontargetsfrom20%to35%by2030.87Chinahasbeenrollingoutrenewableenergyatarapidpace,with2017alandmarkyearforcleanenergy

82Reuters,Chinaboostscoalminingcapacitydespiteclimatepledges,26March2019.83Reuters,Chinacoalmineapprovalssurgedespiteclimatepledges,6August2019.84Bloomberg,China’sMammothCoalIndustryGetsBigger,CrowdingOutImports,9April2019.85S&PPlatts,Chinesethermalcoaldemandtofallwithlaunchofnewpowertransmissionline,4July2019.86Reuters,“Chinatocutcoaluse,curbsteelin2018-2020pollutionplan”,4July2018.87Bloomberg,ChinaStepsUpItsPushIntoCleanEnergy,26September2018.

The Australian government’s Office of the Chief Economist

sees China’s thermal coal imports declining at an

average annual rate of 5.2% per year out to 2024


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includingaworld-leading53GWofsolarpowerinstalled.Although2018’s45GWdidnotmatchthatworldrecordrateofinstalls,Chinacontinuestoaddtoitsenormousrenewableenergycapacity.

ForthesixmonthstoJune2019,China’srenewablepowercapacitywasup9.5%year-on-yearafteradding9GWofwindcapacityandmorethan11GWofsolarcapacity.Renewablecapacityincreasesandcontinuingactiontopreventcurtailmentofwindandsolarledtoa14%increaseinrenewablepowergenerationinthefirsthalfof2019comparedtotheprioryear.88

Thegovernmentisaimingfor210GWofwindpowerby2020,peritsfive-yearplanforwindpower,andisontracktobeatthistargetaccordingtoa2018reportfromWoodMackenzie.CumulativeChinesewindcapacitywillexceed400GWby2027,includingasignificantuptakeofoffshorewind,accordingtothereport.89

Figure 10: China’s 2018 Thermal Coal Imports by Source (Mt)

Source: Office of the Chief Economist, Australian Government

TheIEAprojectsasignificantincreaseinChina’sgasimportsgoingforwardunderits“BlueSkies”anti-pollutionpolicy.By2023,Chinaisexpectedtobeimporting171billioncubicmetres(bcm)ofnaturalgas,up82%from94bcmin2017.Thiswillinclude93bcmofLNGin2023,upfrom51bcmin2017.China’soverallgasdemandisexpectedtoincrease59%to376bcmby2023.90

Withdomesticcoal,renewablesandgascombiningwithhydroandnuclearpowerallsettosqueezeoutChina’sthermalcoalimportsgoingforward,IndonesiaandAustraliawillbethecoalexportersmostimpacted(Figure10).

88Reuters,China’srenewablepowercapacityup9.5%year-on-yearinJune,25July2019.89AsianPower,China’swindpowercapacitycouldreach400GWafter2027:report,3August2018.90IEA,GasMarketReport2018.

0

20

40

60

80

100

120

140

Indonesia Australia Russia Mongolia Other


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However,giventhatChinaistheworld’slargestthermalcoalexportdestination,thedeclinewillhavemajorknock-oneffectsontheglobalmarket.IndonesianandAustraliancoalexporterstoChinawillneedtofindothermarketstoreplaceitgoingforwardandarelikelytohavetheireyesoncountriesinSouthandSoutheastAsia.

AstheAsianseabornecoalmarketshrinks,competitiontosupplytheremainingdemandwillintensify.

Taiwan Overthelastfouryearsthepipelineofproposedcoal-firedpowerplantsinTaiwanhasshrunkfrom2.4GWtozeroafteraseriesofprojectcancellations(Figure11).Mostrecently,the1,200MWShenaopowerproposalwascancelledinOctober2018.91Thiswasthelastmajorcoal-firedpowerplantinTaiwan’spipeline.

Taiwan’selectricitygenerationfromcoalpeakedin2007accordingtoBPdata.92Coal’sshareofgenerationisexpectedtodropfrom46%to30%by2025asrenewableenergyisincreasedfrom6%to20%ofgenerationoverthesametimeframe.

Taiwan’srenewableenergytargetrequiresaroll-outof25GWofrenewablesby2025andsolarwillbeamajorcontributor.AsolardevelopmentzonewasdeclaredinChanghuainJuly2018—fastbecomingarenewableshubwithinTaiwan—forthedevelopmentofTaiwan’slargestsolarfarm(320MW).93

Figure 11: Taiwan’s Coal-Fired Power Pipeline Has Shrunk to Zero (MW)

Source: Global Energy Monitor *Plants announced or in the pre-permit or permitted stages of development

91TaiwanNews,GovernmenttoscrapShenaopowerplantproject:Taiwanpremier,12October2018.92BP-StatisticalReviewofWorldEnergy2019.93TaipeiTimes,SpecialzoneforsolarpowersetupinChanghua,18July2018.


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OffshoreWind

MuchofTaiwan’srenewablesdevelopmentwillbedrivenbyoffshorewind.ThissectorhasbeenspearheadedbynorthernEurope,butnowothercountriesaroundtheworldaresettobenefitfromtheexperienceandcostreductionsdiscovered,includingChina,Japan,India,VietnamandSouthKorea.TheTaiwanesegovernmentisacceleratingplansforoffshorewinddeployment,aimingtoinstallatotalcapacityof5.5GWby2025.94MajorglobaloffshorewindplayersarealreadypresentintheTaiwanmarketincludingDanishpowerutilityØrsted,andoffshorewindturbinemanufacturersMHIVestasandSiemensGamesa.

Taiwanlookslikebecomingamajorhubforoffshorewind,astheindustrybuildsitsAsiafocusaspartofthenextstageofglobaloffshorewinddevelopmentbeyondEurope.

OffshorewindacrossAsiahasthepotentialtodisplaceasignificantproportionofglobalseabornethermalcoalvolumes.TheIEAexpectsglobaloffshorewindinstallationstomorethantripletoover60GWby202595andAsiannationshavethepotentialtobuildacombined100GWofoffshorewindby2030.Chinahasatargetof10GWby2020andWoodMackenziePower&RenewablessuggestsChinacouldreach30GWby2030.Indiahasaninitialtargetof5GWby2022andthen30GWby2030.Indiaiscurrentlypreparingitsfirst1GWoffshorewindtenderforprojectsoffthecoastofGujaratstate.SouthKoreahasan18GWtargetby2030whileJapanandTaiwanhavetargetsof10GWand5.5GW,respectively.

ThesetargetsareambitiousgiventhatAsiaisintheearlystagesofitsoffshorebuild-out.However,withutilisationratesofoffshorewindhavingthepotentialtoreach55%,ifonly70%ofthis100GWtargetisinstalled,thisstillcoulddisplace300m-350mtonnesofthermalcoalannually—about35%-40%oftheglobalseabornethermalcoaltrade.96

Withnomorecoal-firedpowerplantsintheplanningphaseandTaiwanincreasinglyturningtowardsalternativesincludingrenewableenergy,itwouldappearthereislittlehopeofTaiwanprovidinganylong-termgrowthforthermalcoalexportersinthelongrun.

Bangladesh LikePakistan,BangladeshisnationreceivingsignificantconstructionandfinancingsupportfromChinatobuildcoal-firedpowerplantsasitseekstomoveawayfromrelianceondecliningreservesofdomesticgasandexpensiveoil-anddiesel-firedgeneration.Chinesesupportamountstoaround14GWofcoalplantsandsomeUS$7bnofproposedfinance,butthemajorityoftheseproposalsaredelayedwith

94Reuters,OffshorewindpowerfirmsseeTaiwanasabattlegroundtoexpandinAsia,1May2018.95IEEFA,“IEA:Offshorewindcapacitycouldtop200GWby2040”,26September2018.96IEEFA,“Offshorewindpower:theunderexploredopportunitytoreplacecoalinAsia”,30August2018.


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fundingyettobecommitted.97Bangladeshhasacoalpowerplantimplementationsuccessrate-thepercentageofplannedcoalpowercapacitythathasbeencompletedorbegunconstructionversustheamountthathasbeencancelledorshelved–ofjust22%.98

Theonecoal-firedpowerplantthatisnearingcompletionhasrecentlysignedacoalsupplyagreementwithIndonesiainamovethatseemstosignallimitedupsideforSouthAfricanandAustralianthermalcoalexportersinBangladesh.PTBayanResourcesofIndonesiawillsupplylower-energycontentcoaltothefirstunitofthePayracoal-firedpowerplantexpectedtocomeonlineinlate2019.99

Thisappearstobeanothermovesuggestingthatcoalpriceisamoreimportantfactorindeterminingcoalsupplythanenergycontent.WithAsiancoalpowertariffsunderpressurefromtheriseofrenewablesandLNG,securinglowercostcoalistakingprecedenceovercoalwithahigherenergycontentthatcanslightlyreduceemissions(see‘IncreasingCompetitioninaDecliningMarket’section).

Meanwhile,ascoal-firedprojectslanguish,LNG-fuelledpowerplantshavebeengainingmomentuminBangladesh.InJuly2018,agreementsvaluedatUS$7.4bntobuild6GWofLNG-basedpowergenerationandrelatedinfrastructurewereannounced.100InJune2018,theAsianDevelopmentBankapprovedaUS$500mloanforan800MWgas-firedplantinKhulna101andinSeptember2018anagreementwassignedwithSiemenstodevelopa3.6GWLNG-firedplant.102InJune2019itwasrevealedthatmultipleinternationalcompanieshaveexpressedaninterestinbuildingBangladesh’sfirstonshoreLNGterminal.103

Inaddition,renewableenergyisnowgainingmomentuminBangladeshafterhavingpreviouslyfallenbehindtheprogressachievedacrosstherestofAsia.InOctober2018thenation’sfirsttrulyutility-scalesolarplantwascommissioned.Theimpetushascontinuedsincethenwithmultipleagreementssignedforthebuildingoffurthersolarpowercapacity.

WindpowerisalsomakingsomeprogressinBangladeshfollowinga2018U.S.NationalRenewableEnergyLabstudythatdemonstratedsignificantlymorewindpowerpotentialthanpreviouslythought.Bangladesh’sPowerDevelopmentBoardhasconsequentlyinvitedbiddersforwindpowerprojectstotallingaround150MW.

ThelongdevelopmenttimesofcoalproposalsandtheriseofrenewablesandLNGarelikelytolimitopportunitiesforcoalexportersinBangladeshbelowexpectations.Furthermore,thereisalreadyevidencethatcheaperIndonesiancoalwillbe

97IEEFA,ChinaataCrossroads:ContinuedSupportforCoalPowerErodesChina’sCleanEnergyLeadership,22January2019.98CarbonBrief,Howplansfornewcoalarechangingaroundtheworld,13August2019.99JakartaPost,IndonesianfirmtoexportcoaltoBangladesh,19June2019.100DailyStar,$7.4bdealsinkedtoproduce6,000MW,12July2018.101DailyStar,ADBgives$500mfor800MWplant,27June2018.102DhakaTribune,Bangladeshsealsdealforanother3,600MWpowerplant,8September2018.103Reuters,Bangladeshreceivesinterestfrom12companiestobuildLNGterminal,20June2019.


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favoured,especiallygivenIndonesiafacestheprospectdecliningexportstoChina,itsbiggestmarket.

Vietnam LikeotheremergingAsiannations,planstobuildexpensivecoal-firedpowerstationsinVietnamarereliantonheavilyconcessionalgovernmentfinancefromtheexportcreditagencies(ECAs)ofJapan,ChinaandSouthKorea.ButwithincreasinginternationalpressureontheseECAstoceaseinternationalcoalfinancingonclimategrounds,andtheagenciesinsteadstartingtofinancerenewableenergyprojects,thereisaseriouslikelihoodthatthisconcessionalcoalfinancewilldryupinthefuture.

Withoutfinancialsubsidises,thehighcostofnewimportedcoal-firedpowerplantswillthenmeanthattheexpectedbuild-outofsuchplantsinplaceslikeVietnam,BangladeshandthePhilippineswillneverhappentotheextentpredictedbymajorcoalexporters.

JapaneseandSouthKoreancoalplantbuildersappeartobemovingawayfromnewcoalprojectsbeyondthosetheyarealreadycommittedto.AsuccessionofJapanesetradinghouseshaveannouncednewpoliciesthatmovethemawayfromcoal-firedpowerandcoalmining.104

KoreaninvolvementinVietnam’scoalbuild-outmayalsobeslowing.Ata2018KoreanNationalAssemblyhearing,theCEOofKoreanWesternPower,asubsidiaryofKoreanelectricityutilityKEPCO,disclosedthatitwasconsideringturningitsQuangTri3coal-firedpowerprojectinVietnamintoarenewableenergyproject.105

DifficultiesinfinancingpowerprojectshavebeenidentifiedasanissueinaJune2019reportfromVietnam’sMinistryofIndustryandTrade.Thereportalsonotesthesignificantdevelopmentdelaysbeingexperiencedatmanyofthenation’scoal-firedpowerprojects.106WithVietnam’spowerdemandrisingfast,thesedelaysriskleavingthecountryshortofpowerinthenearfuture.107

Meanwhile,coalisfacingincreasingcompetitionfromLNG108andrenewablesinVietnam.InJune2018,Vietnamannouncedasignificantlyincreasedambitionforrenewableenergy,aimingtotripleelectricityoutputfromrenewablesourcesandfor26%ofhouseholdstousesolarby2030.109

104IEEFA,JapaneseThermalCoalConsumptionApproachingLongTermDecline:Australia’sBiggestExportDestinationtoTransitionAwayFromCoal,9July2019.105SFOC,중부발전사장,국감에서찌레본3호기중단하였다고밝혀-중부발전/서부발전

국정감사질의응답,19October2018.106MinistryofIndustryandTrade,OntheImplementationProgressofPowerProjectsintheRevisedPowerDevelopmentPlan7,4June2019.107Reuters,Vietnamwillfaceseverepowershortagesfrom2021:ministry,31July2019.108VNExpress,PMtalksupMekongDeltapotentialforgas-firedpowerplants,27July2018.109Reuters,Vietnamsetsoutgreenambitionswithboldtargetsforsolar,rareearth,4June2018.


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Therateofsolarinstallationsinparticularhasexplodedinrecentmonthsasprojectsrushedtofinishintimetoqualifyfor20-yearfeed-in-tariffs.Vietnam’ssolarpowercapacityhasincreasedover400timeswithin12months–from10MWinJune2018to4.5GWbyJune2019.TherateofinstallationwassuchthatVietnamhasnowovertakenAustraliaintotalutility-scalesolarcapacity.110

IncontrasttothedelaysbeingexperiencedbyVietnamesecoalpowerprojects,theaveragebuildtimeforVietnam’ssolarpowerprojectscompletedoverthelast12monthswasjust275days.

AlthoughtherateofVietnam’ssolarinstallationcannotbemaintainedatthisextraordinarylevel,futurecostdeclineswillsupportcontinuedinstallation.Inaddition,Vietnamislookingtoexploititslongcoastlinewhichmakesitanidealplacetodevelopoffshorewind.111

AlthoughrenewableenergywillcontinuetomakesignificantinroadsintotheVietnamesepowersystemasitwillalloverAsia,itwillremainacoalgrowthmarket,althoughthegrowthmayendupdisappointingcoalexporters.Inaddition,SouthAfricanexportershopingtocapitaliseonrisingVietnameseimportswillfindincreasingcompetitionfromIndonesiaandAustralia,astheirbiggestexportdestinations–China,India,JapanandSouthKorea–reduceimportsinthelongerterm.

Thailand ThailandlookslikeitwillalsodisappointthermalcoalproducersseekingtoreplacelostexportmarketswithgrowthinSouth-EastAsia.

InApril2019theThaigovernmentapprovedanewnationalenergyplanthatwillseeThailand’spowergenerationcapacityreach77GWby2037,upfrom40GWcurrently.Coal-firedpowerisplannedtocontribute12%tooverallcapacity,downfrom25%inthepreviousenergyplan.112

ReducedrelianceoncoalwillbecompensatedforwithincreasedemphasisonLNGandrenewables.ThenewenergyplancallsforThailandtoachieve20%powercapacityfromrenewableenergyby2037.However,aJuly2019amendmenttoThailand’sAlternativeEnergyDevelopmentPlansuggeststhenationcouldtarget33%renewableenergycapacityby2037.113Thecapacityofthegridtointegratesucharapidexpansionofintermittentvariablerenewableenergycapacityisaconstrainingfactor,butinAugust2019Thailandreferenceditsambitiontobea

110PVMagazine,VietnamovertakesAustraliaforcommissionedutilityscalesolarfollowingJuneFITrush,5July2019.111IEEFA,Vietnamlookstotaphugeoffshorewindpotential,16April2019.112Reuters,Thailandapprovespowerplan,expectscapacitytoreach77GWby2037,30April2019.113NationalNewsBureauofThailand,EnergyMinistryincreasesRenewableEnergyratio,4July2019.

Vietnam’s solar power capacity has increased 400 times within

12 months – from 10MW in June 2018 to 4.5GW by June 2019


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regionalhubforinternationalelectricitygridconnectivity,providingsignificantrenewableandhydroelectricityexportrevenuepotential,amajorthreattoregionalimportsofthermalcoal.

LargeThaicompaniesareembracingrenewables.Thailand’slargestcompany,theenergyconglomeratePTTisboostinginvestmentinelectricitygenerationwithanemphasisonrenewables,citingasubduedoiloutlook,energysecurityandclimatechangeasjustification.114MeanwhileGulfEnergyDevelopmentisseekingtoelectrifySouthEastAsiawithouttheuseofcoal-firedpower.115

Philippines AJuly2019directivefromthePresidentofthePhilippinesrequiresthenationtoreducedependenceoncoal.116

InthePhilippines,highelectricityprices,partlydrivenbyrelianceonexpensivecoal,dieselandoilimports,meansthatrenewableenergyalternativescanalreadyoutcompetefossil-fuelbasedgenerationacrossmanyislandsofthePhilippinesarchipelago.117Meanwhile,anover-commitmenttocoal-firedpowerhasledtodecliningutilisationratesandtheprospectofstrandedassets.

Coal-firedpowerplantownersinthePhilippinesarealreadyactingtoavoidthisstrandedassetrisk.InMay2018,AyalaGroup,oneofthePhilippineslargestlistedcompanies,announcedthatitsACEnergypowergenerationarmwillseektosell50%ofitscoal-firedpowerassets.118Coal-firedpowercurrentlyaccountsforabout80%ofAyala’spowerportfoliowiththerestcomingfromwind,solarandgeothermalsources.Thecompanyisnowseekingtochangedirectionsbymovingawayfromcoalwithitscloudedoutlook,whileraisingcapitaltoinvestinmoresustainablepowerprojects.

AyalaisinvestinginrenewableenergyprojectsinAustraliaandVietnamand,alongwithothercompanies,willincreasinglyinvestinrenewablesinthePhilippinesasthetechnologicalandeconomicadvantagesofcleanenergybecomeevermoreapparent.InAugust2018,PhilippineutilityMeralcoreceivedbidsinasolarpower

114Bloomberg,ThaiOilGiantBoostsRenewablesFundingOver‘Uncertain’CrudeOutlook,2July2019.115Bloomberg,TycoonDeclaresCoalDoomedinLastBastionofBigBankAid,18May2019.116Reuters,Philippinesreadiesnewrenewableenergypoliciestocurbcoaldependence,25July2019.117EcoBusiness,ElectricityinthePhilippinesdoesnottobesoexpensive–ordirty,16May2018.118ManilaStandard,Ayalaselling$1-billioncoalplants,20May2018.

A July 2019 directive from the President of the Philippines

requires the nation to reduce dependence on coal


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tenderaslowasUS$44/MWh–thelowestbidforlargescalesolarinSoutheastAsiaatthatdate.119

ThePhilippinesisnowpreparingtwonewrenewableenergypoliciestocomplywiththePresident’sJuly2019coaldirective.Onepolicywillmandateaminimumproportionofrenewableenergythatpowerdistributorswillhavetosource,withtheminimumtoincreaseeachyear.Theotherisbelievedtobeaimedatmakingiteasierforretailpowercustomerstodemandmorerenewableenergy.

Asanarchipelagodependentonfossilfuelimports,energysecurityisamajorconcernforthePhilippines.Motivationtoreducecoaldependenceislikelytobeasmuchaboutenergysecurityasitisabouteconomicorclimateconcerns.

Malaysia Followingprojectcancellations,Malaysiadoesnothaveanynewcoal-firedpowerplantsunderdevelopmentbeyondwhatisalreadyoperatingorunderconstruction.Itseemslikelythattheopportunityforamajorbuild-outofnewcoal-firedpowercapacityisnowinthepastandthatnewer,renewableenergytechnologywilldominatecapacityadditionsinthecomingdecades.

Theenergyministerstatedina2018speechthatrenewablesarethekeytoMalaysianenergysecurityandaffordability.TheMinisterspecificallycalledoutthenation’srelianceonimportedcoalasanenergysecurityriskandstatedthatmorerenewableswillhelpaddressthisissue.120ThegovernmenthascommittedtoraiseMalaysia’srenewableenergycapacity(excludinglargehydro)from2%to20%by2025.121

Japan AlthoughnotamajormarketforSouthAfrica,JapanisthefourthlargestimporterofthermalcoalgloballybehindChina,theEUandIndia.ThereislikelytobelittleopportunityforSouthAfricatoboostexportstoJapanasothermarketsdeclineasJapan’scoal-firedpowercapacityisalsosettodeclineinthelongtermeveniftheJapanesegovernmentmakesnofurtherefforttoreducecarbonemissions.122

Thepipelineofcoal-firedpowerplantsunderdevelopmentinJapanisshrinkingprecipitouslyasprojectsgetcancelled.Thepipelinehascollapsed64%inthelastfouryears.Fromalmost12.7GWofprojectsinthepipelineatJanuary2015,thelatestfiguresputthepipelineatunder4.6GW.Oftheremainingcapacity,2.5GWisnowindoubt;the1.3GWAkitacoalpowerproposalofMarubeniandKansaiElectricPowerCorp.wassupposedtobeginconstructioninAugust2019buthasnowbeenpushedback.IthasbeenreportedthatMarubeniandKansaiElectrichavegivenup

119PVMagazine,PhilippineutilityMeralcoreceivesSoutheastAsia’slowestsolarbid,13August2018.120TheStar,MinistrytoreviewIPPcontracts,fourcancelled,12July2018.121MalayMail,Yeo:Malaysiaaimingfor20pcrenewableenergyuseby2025,3September2019122IEEFA,JapaneseThermalCoalConsumptionApproachingLongTermDecline,9July2019.


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gridaccessrightsfortheproject–possiblyindicatingtheproponentshaveeffectivelycancelledtheproject.123

ItnowseemsclearthatnonewcoalplantproposalswillbemadeinJapan.

Figure 12: Japan’s Business-As-Usual Coal-Fire Power Capacity (MW)

Source: Global Energy Monitor, IEEFA calculations

The8.7GWofplantsalreadyunderconstructioninJapanwillquicklybeoffsetbyclosuresofexistingplantsastheyreachtheendoftheiroperatinglife,assumingtheydonothavetheiroperatinglivesextended.By2024,8.2GWofcoal-firedpowercapacityisdueforretirementaccordingtoGlobalEnergyMonitordata.

Withnonewcoalplantsscheduledtocomeonlineafter2025,coal-firedpowercapacitywillpeakin2023andthenprogressivelydeclineoutto2050asexistingplantsreachtheendoftheiroperatinglife(Figure12).

Increasing Competition in a Declining Market AslongtermdemandintheAsianseabornethermalcoalmarketfades,SouthAfricawillnotbetheonlyexporterimpacted.TheothermajorexportersinAsiawillalsoneedtoseekalternativesastheirprimarymarketsdecline.

Astheworld’slargestthermalcoalimporter,thefutureofChina’sthermalcoalimportswillhavemajorknock-oneffectsaroundtheAsianmarket.AdeclineinChina’sthermalcoalexporterswillimpactIndonesiaaboveallasitisChina’smajoroverseassupplier.Indonesiawillseekothermarketstofillthegap,verypossiblyat

123Reuters,KansaiElectric,Marubenidelayconstructionofcoal-firedpowerplant,15August2019.


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theexpenseofAustraliaandSouthAfrica.TheimpactcouldbecompoundedifIndonesia’snumbertwoexportdestination–India–alsobeginstoreduceimports.

Meanwhile,aswellasbeingoneofSouthAfrica’slargestexportdestinations,SouthKoreaisalsoamajordestinationforbothIndonesianandAustralianthermalcoal.Inaddition,Australiaisalsosettoseedecliningdemandfromitsbiggestoff-taker–Japan–inthelongrun.

ThelossofthemajordestinationsislikelytoseesignificantlyincreasedcompetitionbetweenSouthAfrica,AustraliaandIndonesiaforAsiangrowthmarketssuchasVietnam.OtherexportersintotheAsianmarket,suchasRussiaandtheU.S.,willalsobeeyeingsuchmarkets.VietnamisalreadyconsideringthermalcoalimportsfromtheU.S.asAmericandomesticcoaldemandcontinuestodecline.124

SouthAfricawillhaveageographicaldisadvantageinSoutheastAsianmarketsasbothIndonesiaandtheAustralianeastcoastarecloser,offeringlowerfreightcosts.Conversely,SouthAfricamayhaveanadvantageinSouthAsiaforthesamereason,particularlyoverAustraliancoalwhereIndianimportersimportsomehigherenergycoaltoblendwithhigherquantitiesoflowerqualityproduct.

SouthAfricaandAustraliamaybehopingthatthehigherenergycontentoftheirexportedcoalmaygivethemanadvantageoverlowerenergyIndonesiancoal.However,thereislittleevidencethatnationswillfavourhigherenergycoalinthelongtermunlesstheenergy-adjustedpriceisfavourable.

Figure 13: Relative Energy and Ash Content of Coal by Source

Source: Aurizon Holdings Ltd

124Reuters,VietnammullsimportingU.S.coalforpowergeneration,6August2019.


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Nowthatrenewableenergyisincreasinglycheaperthannewcoal-firedpowerplantsacrossanincreasingshareoftheAsianmarket(Chinaissettoreachgridparityforbothsolarandwindby2020withzerosubsidysupport125,whileIndianrenewablesarewellbelowgridparity,whichwasreachedbackin2017),anynationconcernedwithloweringcarbonemissionsandstrandedassetriskwillsimplyturnawayfromnewcoalplantsaltogetherandusecheaper,zero-emissiontechnology.

Furthermore,anynationthatislessconcernedaboutloweringemissionswilllikelystickwithcheaper,lowerenergycoal.

EvenJapan,whichhashistoricallyfavouredhigh-energythermalcoal,isnowbeginningtoturnmoretowardsthecheaper,lowerenergy5,500kcal/kgNARbenchmark.AnumberofJapanesepowerutilitieshavereportedlybeenexperimentingwithablendofhigherandlowergradecoalsinordertobenefitfromthelowerpriceofthe5,500kcalproduct.126

Meanwhile,newentrantstoimportedcoal-firedpowerareunlikelytowanttobecomedependentonhigherpriced,higherenergycoal.BangladeshsignedanagreementinJune2019forthesupplyofIndonesiancoalforitsnearlycomplete,Chinese-fundedPayracoalpowerplant.127

CoalpriceappearstohaveahigherpriorityforAsiancoalpowerplantoperatorsthanenergycontent.Withever-cheaperrenewableenergyontherisearoundAsiaandeffectivelypullingdownpowerpurchaseagreement(PPA)tariffs,somecoal-firedpowergeneratorsthatuseimportedcoalarefindingitdifficulttooperateprofitably.

AtMundrainthestateofGujarat,India,almost10GWofrelativelynewcoal-firedpowergenerationhasoperatedatasignificantlossoverthelastdecadeduetothehigher-than-expectedcostofimportedcoal.Thesethreepowerstations,ownedbyTataPower,AdaniPowerandEssarPower,arenowhopingthatastategovernmentbailoutwillhelpreducetheirlosses,whileplacingadditionalburdenonconsumersviaanincreasedtariff.TataPower’sManagingDirectorPraveerSinhahasstatedthePPAupliftswouldonlyhalveitsMundraplant’slossesfromthecurrentlevelofUS$-225mtoUS$-240mperyear.128

TataPower’sloss-makingMundraplantreportedthatitsaveragecoalcostforthe2017-18fiscalyearrose24%toUS$61.50/t.Thisincreaseinfuelcostcausedthepowerplanttomakeanafter-taxlossofUS$-241m,higherthantheUS$-119mlossfromtheprioryear.129Asaresult,TataPowerhasincreasedtheconsumptionof

125Bloomberg,ChinaUnveilsFirstBatchofSolar,WindFarmsThatWon’tBeSupportedbySubsidies,22May2019.126Platts,JapanesethermalcoalbuyerstryoutNewcastleHAblendinpowerplants,27June2019.127JakartaPost,IndonesianfirmtoexportcoaltoBangladesh,19June2019.128EconomicTimes,Aftertariffrelief,ourMundralosseswouldcomedownby50%:PraveerSinha,TataPower,6December2018.129TataPower,AnalystPresentationQ4FY18,2May2018.


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cheaper,lowerenergycoalinordertoaddressitsgrowingfuelcost.TheproportionoflowerenergycoalblendedinatitsMundraplantrosefrom20%to42%infiscalyear2018-19,althoughtheplantstillmadeasubstantialloss.130

ItseemsunlikelythatcoalplantoperatorsinAsiacanbeconvincedtoswitchtohigherenergy,moreexpensivecoal.ThismaybeespeciallytruewhereIndonesianeedstofindnewmarketsforitslowerenergycoalifitsbiggestexportdestination-China–reducesthermalcoalimportsrelativelyquicklyasitisthreateningtodo.

Stranded Asset Risk WithopportunitiesforSouthAfricanexportssettodwindleinthelongterm,minescurrentlyshippingtooverseasmarketsmaybeabletoreorienttothedomesticmarkettosomeextentasreservesatexistingEskom-supplyingoperationsareminedout.

Meanwhile,RichardsBayCoalTerminalmayhavetogetusedtotheideathatanincreasingproportionofitsannualcapacitywillbecomestranded.Withacapacityof91Mtpa,RichardsBayoperatedwithalmost20%sparecapacityin2018,alongtermstructuralunder-utilisationdrivenbylimitedrailcapacityandtransportinefficiencies.Increasinglylowersupplyasinvestmentdriesup,combinedwithapproachinglongtermoverseasdemanddecline,willexacerbatethis.

RichardsBayisnotaloneinthis.ThecoalterminalsatthePortofNewcastleinAustralia–theworld’slargestcoalexportterminal–operatedat25%sparecapacityin2018anditsproposedT4expansionprojecthasbeencancelled.Concernovercoal’slong-termsustainabilityhasledthechairmanofthePortofNewcastletorecognisean“urgentneed”fortheporttodiversifyawayfromarelianceoncoal.131

ThePortofNewcastlechairmanfurtherstated,"Clearlythelong-termoutlookforcoalisathreattotheportandHunterregion,butitisalsoahugeopportunity.Whiletheworld'sdemandforourcoalisbeyondourcontrol,ourabilitytoinvestinnewsourcesofgrowthandinnovationisnot.”

PartofthatstatementwasechoedbyRichardsBayCoalTerminalchairNosiphoSiwisa-Damasaneuponthereleaseoflower2018exportfigureswhostated,“Themarketsareareality,theyareoutsideRBCT’scontrol”.132

AsRichardsBayfacesdecliningexportvolumesinthelongrun,ittoowillneedtoplanforthecomingtransition.Thatplanningshouldhavebegunalready.

130TataPower,AnalystPresentationQ4FY19,2May2019.131SydneyMorningHerald,“World’slargestcoalexportportNewcastlehas‘urgentneed’todiversify”,17December2017.132Reuters,SouthAfrica’sRBCTsays2018coalexportsfall,24January2019.

“The markets are a reality, they are outside RBCT’s control”


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About IEEFA TheInstituteforEnergyEconomicsandFinancialAnalysisconductsresearchandanalysesonfinancialandeconomicissuesrelatedtoenergyandtheenvironment.TheInstitute’smissionistoacceleratethetransitiontoadiverse,sustainableandprofitableenergy.http://ieefa.org

About the Authors Simon Nicholas ([email protected]) SimonNicholasisaresearchanalystwithIEEFAinAustralia.SimonholdsanhonoursdegreefromImperialCollege,LondonandisaFellowoftheInstituteofCharteredAccountantsofEnglandandWales.Hehas16years’experienceworkingwithinthefinancesectorinbothLondonandSydneyatABNAmro,MacquarieBankandCommonwealthBankofAustralia

Tim Buckley ([email protected]) TimBuckley,IEEFA’sdirectorofenergyfinancestudies,SouthAsia/Australia,has30yearsoffinancialmarketexperiencecoveringtheAustralian,Asianandglobalequitymarketsfromboththebuyandsellside.Timwasatop-ratedEquityResearchAnalystandhascoveredmostsectorsoftheAustralianeconomy.TimwasaManagingDirector,HeadofEquityResearchatCitigroupformanyyears,aswellasco-ManagingDirectorofArkxInvestmentManagementP/L,agloballistedcleanenergyinvestmentfirmthatwasjointlyownedbymanagementandWestpacBankingGroup.