Fossil Fuels Remain Significant to Asia’s Energy Future

By Dave Lew

Coal and gas will contribute to at least one-third of global power generation in 2050, while oil is still required – that is even if it peaks at all by then.

These were the scenarios presented by Ms Yukari Yamashita, Board Member & Director of Energy Data and Modelling Centre, the Institute of Energy Economics, Japan (IEEJ), during a roundtable at SIEW 2017.

In a separate joint study by the International Energy Agency (IEA) and the International Renewable Energy Agency (IRENA) presented by Dr Sun Xiansheng, Secretary General, International Energy Forum (IEF), fossil fuels are projected to make up 38 percent of the world’s primary energy supply in 2050.

“Rapid growth in electricity demand in developing countries calls for a balanced generation portfolio. It is risky to put all your eggs in one basket,” said Mr Kiah Wei Giam, Principal Analyst, Coal/Gas Markets, Wood Mackenzie.

Ms Yamashita added that amid the ongoing energy transition, all options need to be considered to balance trade-offs in the areas of economic competitiveness, energy security and environmental sustainability.

The Case for Coal

Population growth, economic growth and power generation needs will be the demand drivers for coal in growing Asia, said Mr Kiah.

Mr Benjamin Sporton, Chief Executive, World Coal Association, added that despite the reduced share of coal in the long-term energy mix, absolute demand is on an upward trend due to growing electricity demand.

The cost competitiveness of coal makes it viable. In Asia, the infrastructure cost of a 1GW coal power plant is one-fifth that of a gas plant. Even against the declining cost of renewables, coal remains competitive.

Mr Kiah said that the cost competiveness of solar deployment could be attributed more to policy decision (e.g. feed-in tariffs) than economics and may not be sustainable. This is especially so, he added, when critical ancillary services such as battery storage technologies are not cost-effective yet to be widely deployed to manage intermittency issues.

With regards to CO₂ emissions, Mr Sporton said that the Paris Agreement factors in low-emission coal and that there are strong environmental and economic imperatives for countries to advance carbon capture storage (CCS) solutions.

The Case for Gas

Dr Sun said that that in terms of supply chain considerations, liquefied natural gas (LNG) boosts the attractiveness of natural gas as a seaborne supply, circumventing the rigidity of pipeline infrastructure for cross-border gas flows.

LNG provides an edge in terms of storage, especially for countries which experience seasonal needs for power and heating, he added. Greater flexibility in LNG contracts, especially with the removal of the destination clause, will enhance the LNG market.

For China, the push for better air quality is significantly driving gas demand. Being the regional giant, China’s move will have a considerable effect on Asia’s future energy mix.

Mr Kiah provided an alternative view. He cited current low gas prices, high project costs and long development time for liquefaction projects as challenging factors for final investment decision of new LNG projects.

If this trend were to continue, the oversupply of gas today could turn into an unmatched demand situation in the coming years, he warned.