Coal continues its decline in the U.S. and Europe and its rise in Southeast Asia and India

Energize Weekly, December 9, 2020

Coal mining and coal-fired electricity generation in the U.S. and Europe continues to decline, but in Asia, coal-fired demand is projected to increase through 2030 thanks to national policies and Chinese financing.

In the U.S., coal mine production capacity fell in 2019 to 590 million short tons – a 28 percent decline from the peak production in 2009, according to the federal Energy Information Administration (EIA).

The mining decline is a reflection of the drop in domestic demand for coal, which dropped 46 percent between 2007 and 2019. The power sector accounts for 90 percent of domestic coal consumption.

The trend is set to continue as the utility sector is facing more closures of coal-fired capacity. In November, Columbus, Ohio-based American Electric Power said it will shut down or refuel 5.6 gigawatts of its coal-fired plants – 46 percent of its total coal-fired capacity – by 2030 to comply with environmental rules.

Colorado air quality regulators also ordered in November the move up of planned closures of three coal-fired power plants to no later than the end of 2028. The utilities – Platte River Power Authority, Tri-State Generation and Transmission Association and Colorado Springs Utilities – had all set 2030 closing dates.

On Dec. 1, Irving, Texas-based Vistra Corp. announced it would close its 622-megawatt (MW), coal-fired Coleto Creek Power Plant, near Fannin, Texas, by 2027 rather than add expensive pollution-control equipment to the 50-year-old plant to comply with environmental rules.

The story is much in the same in Europe. The German government announced Dec. 1 that its first “auction” of power plant closure subsidies netted guarantees by operators to take 4,788 MW of coal-fired generation at 11 power plants off the market by Jan. 1, 2021.

The average payment operators received to shut plants was equal to $80,300 a MW. It was the first round of seven closure subsidy auctions aimed at cutting into the country’s 23,000 MW of coal-fired units. The country’s goal is to phase out all coal plants by 2030.

While coal is on the decline in the U.S. and Europe, the International Energy Agency (IEA) projects rapid growth in coal use in India and Southeast Asia.

Southeast Asian coal demand is forecast by the IEA to more than triple its growth to 68 million tons between 2024 and 2030 and Indian demand to rise eightfold to 122 million tons.

The reasons for the sustained growth of coal-fired plants in Asia is due to a number of factors including cheap technology and financing from China, and national policies and monopoly utilities that promote coal, according to a Tufts University study.

The Tufts researchers looked at four countries, India, Indonesia, Vietnam and Bangladesh and found that they all had energy needs served by “China’s willingness to finance and export equipment and services to build new coal-fired power plants overseas.”

“Most multilateral development banks have restricted investments into coal-fired power due to concerns about their environmental impacts,” the report said.

The World Bank ceased investments in coal except in rare circumstances in 2010, and the Asian Development Bank has not funded any coal-fired power plants since 2013.

From 2000 to 2019, China’s policy banks invested $52 billion in coal projects globally.

Indonesia received $9.3 billion in Chinese financing for coal-fired plant between 2000 and 2019, India $7.7 billion, Vietnam $7 billion and Bangladesh $2.1 billion, according to the study.

“We find there to be a mutually beneficial relationship whereby Chinese financiers and equipment providers are well matched with energy ministries and power companies demanding Chinese money, equipment, and services,” the study said

Chinese financing and technology are, however, only one-half of the equation. The researchers found that national policies promoting coal, the perception that it is a less expensive and more dependable generating source and a lack of air emission standards also play a role in coal-fired generation’s growth.

These countries have used a variety of strategies to protect coal-fired generation and its jobs, including price controls, preferential taxation and traffic. Crony capitalism leads to a “lock-in” effect for coal, the study said.

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