Coal will trump gas in Southeast Asia: report

GEO-COAL gasification burner in Curug, Jakarta processes raw brown coal with superheated steam, removing 60 to 80 percent of moisture_2
GEO-COAL gasification burner in Curug, Jakarta processes raw brown coal with superheated steam, removing 60 to 80 per cent of moisture. Photo: Total Sinergy International

A new report on Southeast Asia’s future energy sources has tipped coal to be the fossil fuel of choice by 2020, contrary to popular opinion that natural gas will be the region’s top fuel.  Meanwhile, environmentalists vote for neither one.

Coal’s cost advantages and accessibility, coupled with improvements in ‘clean coal’ technologies, will make it a popular choice for the region where power demand is set to triple by 2030, said the report by international research firm Wood Mackenzie, released on Thursday last week.

The region’s energy growth is on the back of an estimated 5.2 per cent annual growth in the region’s overall gross domestic product (GDP) over the next decade, according to the report’s authors.

To meet this demand, an extra 190 gigawatts (GW) of energy will have to be generated, said the report, which also noted that while demand for all fuel types will increase to meet the shortfall, coal will benefit the most.

“A shift to coal in the region’s fuel mix has already started with 35 GW of committed coal-fired plants being developed in Indonesia, Malaysia, Thailand, Vietnam and even on a smaller scale in Singapore. We think that while there are opportunities for gas suppliers, the trend towards more coal-fired power in Southeast Asia will continue beyond 2020 despite arguments against it,” said Wood Mackenzie’s expert on the region’s gas and power, Graham Tyler.

Mr Tyler explained that local gas reserves in Java, Sumatra, the Gulf of Thailand and the Malay Basin are maturing, and that liquefied natural gas (LNG) is too costly for most Asean countries. “The era of cheap, local and abundant gas reserves is over. This leaves coal to meet demand,” he said.

A US Energy Information Association (EIA) report from 2010 states that production of older gas fields in Malaysia and Indonesia is declining, and that heavy investments will be needed to maintain current output levels. Both countries, along with Brunei and soon Papua New Guinea, are exporters of LNG, and natural gas production for the short term has ramped up to supply those projects.

LNG projects, which require facilities to liquefy natural gas on the export end as well as facilities to restore it to a gaseous state on the import end, have high start-up costs. In addition, LNG must be stored and transported in expensive purpose-built cooled containers. Once in operation, the projects depend on a plentiful supply of natural gas from domestic fields. Production at Arun and Bontang, two of Indonesia’s LNG export facilities, is already declining according to the EIA report.

The arguments against coal defined in the Wood Mackenzie report include the fossil fuel’s negative impacts on the environment, specifically air pollution, and the introduction of carbon abatement policies such as taxes on carbon emissions in an increasing number of countries.

Mr Tyler said that carbon abatement policies are unlikely to be a significant factor because governments in Southeast Asia, whose countries’ carbon emissions pale in comparison to top emitters such as China and the United States, are unwilling to sacrifice the development of their economies for the sake of carbon reduction. They will likely choose to increase energy efficiency and adopt new technology to reduce carbon emissions and other pollutants from coal rather than restrict its use.

Even with the added expense of new technologies, said Mr Tyler, “the implementation cost will still make coal-fired plants more economical than LNG.”

These new technologies include improvements to the fuel itself and to the power-generation process, as well as better ways of capturing the carbon emissions resulting from power production, such as carbon capture and storage (CCS).

One such technology could include a new process announced in April by Indonesian firm Total Sinergy International (TSI) that turns low-rank coal, which has higher moisture content and lower energy content than high-rank coal, into a more efficient, cleaner burning fuel. Called “Geo-Coal”, the firm’s technology involves using a superheated steam process to remove moisture from raw low-rank coal and turning it into a higher quality fuel source with 50 to 100 per cent more energy compared to the pre-treated coal.  Low-rank coal accounts for 65 per cent of global coal resources, but its use has been limited due its lower energy yield.

Geo-Coal’s developers say that the low-rank coal, which sits closer to the surface of the earth than high-grade coal and is less intensive to mine, has low levels of sulphur and ash compared to high-grade coal. This translates into fewer emissions for power plants. The lower moisture content, reduced by 60 to 80 per cent, also decreases costs and emissions due to transport from the mine to the power plant.

The technology uses low-value fine coal, previously considered waste coal, as fuel for the upgrading process. TSI said this makes it more efficient and economical to set up and operate than competing technologies on the market, resulting in significant cost savings.

Its first commercial production, with a capacity of 500,000 metric tonnes per year, will begin in June at a Kalimantan coal plant owned by associate company, Agritrade Resources Limited, a Hong-Kong listed corporation also based in Indonesia.

TSI plans to bring Geo-Coal to markets in China, India, Malaysia, USA and Australia in the foreseeable future. Its director, Peter Gunn, believes the converted coal will provide developing countries with an affordable technology option that allows them to develop economically. “The relative cleanliness of our coal makes it a natural bridging energy source as the world transits from fossil fuels to renewable energy,” he said.

TSI isn’t the only company banking on cleaner coal.  Several companies are developing technology that significantly improves the process of harvesting the energy from coal. The traditional process involved burning coal to produce steam, which powered the turbines that produce electricity. New technologies use various methods to capture waste heat and superheat coal so that it is gasified rather than just burned. Gasified coal pollutes less and more of its stored energy is converted to electricity. Project developers include France’s Alstom, which last year signed an agreement to build a $645 million clean coal plant in Vietnam, and Chinese state-owned China Huaneng Group, which owns and operates new technology coal-firing plants at both Singapore’s $2 billion Tuas Multi-Utilities Complex (TMUC) and Yuhuan’s 4000 megawatt project in China.

Both companies say they can convert coal to energy with an efficiency of 45 to 46 per cent, and Alstom predicts it will eventually be able to reach 50 per cent efficiency. Traditional coal-powered plants have an efficiency of 36 per cent.

The International Energy Agency (IEA) has predicted a 44 per cent increase in demand globally for natural gas by 2035 due to its ‘more favourable environmental and practical attributes.’ But natural gas has an efficiency rate of only 37 per cent, and recent studies have shown that the mining process releases significant amounts of the greenhouse gas methane into the atmosphere. According to the United States Environmental Protection Agency, methane is over 20 times more effective in trapping heat in the atmosphere than carbon dioxide over a 100-year period.

With natural gas’ environmental advantages in question and coal technologies reducing the environmental impacts of coal, Wood Mackenzie’s Mr Tyler states that “ when faced with growing energy demand, South East Asia will ultimately still have a choice between importing coal and gas via LNG. However, Wood Mackenzie’s view is that weighing up the key factors for and against coal, power plant economics still suggest that coal has a significant cost advantage and will emerge as the dominant fuel in the region’s power generation.”

But environmentalists maintain that coal has no place in the transition to clean energy. In a statement released yesterday, Australian NGO Beyond Zero Emissions criticised the Australian government’s continued investments in carbon capture and storage research:

“The Australian government has spent millions of dollars’ worth of taxpayer money on research into Carbon Capture and Storage (CCS) and allocated millions more in the 2011-12 budget. It’s time for the Gillard government to be transparent about the progress of CCS. It shouldn’t be throwing away money on the ‘clean coal’ pipedream.”

The concept of ‘clean coal’ has been controversial for years. A 2009 article in Time magazine entitled “Exposing the Myth of Clean Coal Power” argued that, although new technologies can undo some of the coal industries negative impacts, many more - such as the mining process itself - remain.

Narrowly defined, clean coal refers to CCS technology, which is still in developmental stages. Skeptics of clean coal, including Beyond Zero Emissions executive director Matthew Wright, say that the technology for CCS is not yet proven, nor is it developed enough to work on the timescale needed to limit climate change.  “If attempts by the world’s biggest and dirtiest coal companies along with the Australian government and the US department of Energy can’t get a clean coal carbon capture and storage project up then who can?” he asked.

His group is one of a growing number of organisations advocating for a rapid phase out of all fossil fuels. In February, WWF International released an energy report outlining a global plan for a renewable energy-based society by 2050. Earlier this month, the International Panel on Climate Change (IPCC) released its extensive Special Report on Renewable Energy Sources and Climate Change Mitigation, which suggested a plan for a transition to 80 per cent renewable energy by 2050.

But energy shortages are already affecting much of Asia Pacific – both Vietnam and China are experiencing unseasonable blackouts partly due to low water levels in hydropower dams– and governments are concerned with energy security in the near term. Coal industry players such as TSI’s Mr Gunn say that renewable energy is still in its infancy and won’t be able to fully replace fossil fuels for a few more decades.

To disprove this statement, Beyond Zero Emissions has partnered with the University of Melbourne Energy Research Institute to present a plan for getting Australia to zero emissions in ten years using commercially available technology.

In Australia, as with the rest of Asia Pacific, transitioning to renewable energy will take funding. Mr Wright believes that funding for research on fossil fuel technologies such as CCS is better spent on renewable energy. According to an April IEA report, fossil fuels in general received US$312 billion in subsidies globally in 2009, compared to US$57 billion for renewable energy.

Mr Wright said that the urgent challenge of climate change requires a rapid shift to zero-carbon sources of energy, and that scarce funding should be focused “to help proven renewable energy technologies get cheaper.”

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