(Picture credit: EMA)
Asia's energy future is at a crossroads. Will coal retain its status as the major fuel for power generation in Asia, or will natural gas overtake coal"Asia's Fuel of the Future: Gas or Coal" organised by the Energy Studies Institute (ESI) at the Singapore International Energy Week 2011.
Case for gas
The case for natural gas to emerge as Asia's fuel of the future was outlined by Mr Andrew Flower, an independent natural gas and LNG consultant, and Professor Peter Hartley, professor of Economics at Rice University. Prof Hartley argued that due to greater efficiency (in terms of a lower heat rate) and lower capital costs, generating electricity using natural gas meant slightly lower lifetime costs than coal. Moreover, the recent advent of unconventional gas sources has radically boosted the supply of natural gas, with reserves expected to last for well over 100 years. Future natural gas prices can thus be expected to remain relatively modest.
Much of Asia's gas needs will be met by LNG ,imports and the process of liquefying and transporting natural gas adds to the costs. However, natural gas is cleaner than other fossil fuels both in terms of CO2 emissions and its contribution to air pollution. Natural gas in Asia could thus function as a "destination fuel" for a low-carbon future, according to Mr Flower. Due to natural gas' greater flexibility, it can also function as a "transition fuel" supporting intermittent wind and solar energy sources.
Natural gas market share in Asia to rise
Prof Hartley presented forecasts from the Rice World Gas Trade Model supporting the hypothesis that natural gas' market share in Asia is set to rise. In particular, Asian natural gas demand is expected to increase rapidly, matched by increased supply from Australia, China, as well as outside exporters. With a low or medium carbon price, natural gas share in Asia will increase even further due to its status as a cleaner fuel than coal or oil. Thus, natural gas can "hedge" against a potential future carbon price.
Nuclear may have a prominent place
Dr Ferdinand E Banks, Energy Economist at Uppsala University, believes that there is a strong likelihood nuclear power will in the long run secure the most prominent role in the energy mix, driven by its vast potential power generation capacity. He cited the example of Sweden where nuclear reactors were constructed in record-breaking time, and nuclear power helped secure energy supply, reduce electricity price (among the lowest in the world), create jobs and boost productivity, and promote social welfare.
Energy security goals also made the case for nuclear power, which is less subject to international energy price uncertainty. Dr Banks pointed to the example of Finland which had the option of importing Norwegian gas and Russian gas and coal, but decided to buy the world's largest nuclear reactor from France.
Safety first
Other panelists highlighted safety concerns with nuclear power, in the aftermath of the Fukushima crisis, and high capital costs, leading to greater risk and thus a higher expected rate of return from investors' viewpoints. According to Dr Banks, though, the anti-nuclear backlash may be influenced more by political than economic and safety reasons, as with Germany's decision to phase out nuclear power.
Replacing nuclear power with renewable energy sources such as wind and solar will pose a great challenge with a likely spike in energy prices.
The case for coal
Mr Paul Baruya, Energy Analyst at the International Energy Agency's (IEA) Clean Coal Centre, discussed the prospects for coal in Asia. According to IEA's projections, although coal will remain the second-largest energy source in the global energy mix (after oil) up until 2035, the rate of growth in coal use will gradually slow down and, starting 2020, level off and cede its position to other sources of energy.
Nonetheless, in the short and medium term and in the context of Asian economies, coal is either a fuel that will continue to dominate (China and India) or one that more economies are placing greater faith in due to problems associated with oil, gas and hydroelectricity (Indonesia, Malaysia and Vietnam), as the low and stable price of coal is a key advantage compared with other fuels.
Even at a price of US$100/tonne, given the cost of production at US$30-50/tonne, the price of coal has plenty of room for downward movement in the event of a global carbon price. Coal could also enhance existing generation technologies through co-firing with biomass, whose potential is high in Malaysia and Indonesia.
Finally, coal could aid electrification of the energy poor in Asia.
Still no a clean fuel
The main disadvantage of coal is its uncontrolled burning that can release a variety of pollutants, including carbon dioxide, nitrogen oxide, particulate matter, and mercury. However, retrofitted technologies such as Carbon Capture and Sequestration (CCS) can reduce emissions up to 90-100 percent, and will be critical to achieving the global goal of 450ppm of GHG emissions by 2050, accounting for as much as 26 percent of global abatement.
Increasing efficiency in coal-fired stations is another approach to reducing emissions that has been tried in China, which now has a more efficient fleet of coal-fired stations than the US.
Dr Jeremy Leggett, Founder and Executive Chairman of Solarcentury & SolarAid, argued in favour of a greater role for renewable energy. Concerns over both climate change (with only 565 GTCO2 left of the global carbon budget aiming at restricting global warming to 2°C above pre-industrial levels) and energy security (given the threat of peak oil) support a concerted shift towards renewable energy, he said.
Dr Leggett believed that a modern economy could indeed be operated on renewable energy alone, citing a national experiment conducted in Germany that demonstrated the possibility. He highlighted Japan and Germany as "litmus tests" for the future of renewable energy worldwide.
Arguments against renewables include the high capital cost, difficulty of scaling up, intermittency issues and the additional transmission cost due to their remote location. However, Dr Leggett argued that the economics of renewable energy could improve in the future if a global carbon price was implemented and because of the systematic cost reduction curve of renewables that has been observed most prominently in the solar PV industry.
Ernst & Young findings on grid parity
He mentioned a study by Ernst & Young that found that grid parity for solar PV might be reached in most countries, including Italy, Germany and the UK, within this decade. However, given that technological improvements will be experienced in both conventional and renewable technologies, grid parity is a moving target.
The possibility of using natural gas to fuel transport was also brought up during the debate, but Prof Hartley and Mr Flower concurred that such prospects are limited. According to Prof Hartley, with energy density the key requirement for transport fuels, liquid fuels is "hard to beat", particularly given that oil reserves have also received a boost from unconventional oil.
One thing the speakers did agree upon, collectively, is that we are not running out of energy any time soon. What the future energy mix in Asia will or should look like, however, will remain a key source of debate.
BY : Nguyen Phuong Linh and Nahim Bin Zahur, Energy Studies Institute