How does ASEAN coal sector look in the first quarter of 2019?

 

Coal plays an important role in fuelling ASEAN energy demand, not only in the Member States that still have a lot of coal reserves like Indonesia and Vietnam, but also in their neighbouring countries, which for energy security reasons, diversify their supply largely with coal, like Malaysia, the Philippines, and Thailand. Considering coal’s significant share in in ASEAN power generation mix (around 33.3%), it is a surprise that news on coal only correspond to 5% of the total collected news by ASEAN Centre for Energy (ACE).

In this article, we would like to provide more insights into ASEAN coal sector by analysing related news on the subject during the first quarter 2019.

 

Coal Production and Price Dynamics in Coal-Rich Countries

Indonesia and Vietnam as coal-rich countries seem to experience dynamics in coal production and trades in this first quarter of 2019.

The decreasing trend of coal price looms over Indonesia’s coal sector in the last three months. The Government of Indonesia (GoI) has set the coal benchmark price (HBA) for March at USD 90.57 per tonne, marking the seventh month of consecutive price fall. This coal benchmark price has been continuously falling from USD 92.41 per tonne in January, to USD 91.8 per tonne in February. The government has also lowered its coal production target in 2019 to 480 million tonnes as an effort to stabilise global coal price. It is uncertain whether the government would keep this production target, seeing that they revised the target in September last year to 507 million tonnes, and set the Domestic Market Obligation (DMO) at 121 million tonnes.

So far, the government has also aimed to keep the DMO policy which requires coal mining firms to sell at least 25% of their production to domestic market, and to cap the selling price for State Electricity Company (Perusahaan Listrik Negara/PLN), with different applicable caps depending on the calorific value.  However, DMO sales last year reached only 21.7% of the domestic production, and a number of coal miners could not meet their DMO requirement.

In contrast, amidst the volatility of the global prices and uncertainty of the market in 2019, some of Indonesia’s big coal producers plans to increase production in 2019 in response to China’s and India’s increasing demand.

Another coal-rich country in ASEAN, Vietnam, aspires to earn higher revenue from the coal sector, targeting VND 128 trillion in 2019, half of which is expected from coal production, as stated by Vietnam National Coal and Mineral Industries Group (Vinacomin).

The blooming coal sector in Vietnam is also partly due to the increasing local demand which was estimated at 58 million tonnes this year, 90 million tonnes in 2025, and 130 million tonnes in 2030. In 2019, Vinacomin is targeting to reach 40 million tonnes of local production to cater to the total demand of 42 million tonnes.

 

 

Coal as Major ASEAN Electricity Source

Coal is shown to remain a key energy source for ASEAN Member States (AMS) in fuelling its power sector, especially for those with abundant coal reserves.  Coal’s prominent role in those Member States is reflected in their governments’ directives under medium-or-long term power development plan. On the other hand, there is emerging demand from diverse communities for the region to start shifting away from coal and look for cleaner and more sustainable energy sources.

The resource abundance combined with governments’ priority to provide affordable energy and reach their electrification rate targets make coal a favourable energy source for coal-rich ASEAN Member States such as Indonesia and Vietnam. Under the current administration, Indonesia expects to supply 54.4 per cent of the country’s electricity by 2025 with coal, while renewables will account for 23 per cent of the energy mix, compared to 12 per cent in 2017, according to PLN.  For the long-term plan, Indonesia is still boosting coal share by 58.5 per cent in the energy mix, and will keep coal as main energy source until 2050.

A quite similar story is going on in Vietnam. Vietnam Electricity (EVN) estimated that coal demand for electricity generation in 2019 will hit 25.84 million tonnes, which will be supplied by both Vinacomin and Northeast Corporation. It is estimated that 19 million tonnes will come from domestic supply, while 6.84 million tonnes will be imported. Although renewables also become part of the plan of the Government of Vietnam, the country’s power industry still forecasts a rise in coal-powered generation as the cheap and accessible source remains the most feasible option to meet the country’s rapidly rising power demands. As such, according to the forecast, coal generation will reach 50.5 per cent of the total power mix by 2028, with gas at 22.5 per cent, hydropower at 22.8 per cent and non-hydro renewables at 3.8 per cent.

The Philippines is also predicted to have the highest share of coal among ASEAN Member States in its power mix  12 years from now. Currently, 75% of the coal in the Philippines is imported, and it is the biggest source of electricity with a capacity of 7,419 MW. Therefore, despite the government-imposed tax hike on coal last year, the government still seems to continue supporting coal expansion, especially by introducing more investment in a new coal power plant.

Malaysia, as a coal-importing country, recently introduced its new blended coal-fired power plant in Lumut, Perak, as part of a continuous effort to ensure a sustainable coal supply for electricity generation. This new blended coal power plant technology will help secure coal supply for the power plant going forward as trend indicates that utilities in Malaysia tend to blend coal to match power demand with the availability of coal supply.

In this whole story, it seems that only Thailand that shows a different stance, as the country has declared to look beyond coal and decrease its share in the energy mix by investing more in natural gas through its state-owned energy group PTT.   In other countries, the push to shift away from coal is more and more coming from local communities and general public. A coalition of non-government organisations (NGOs) has called on Southeast Asia’s largest financial services group, DBS Bank, to back out of a 2,000-megawatt coal-fired power project in Indonesia that is close to finalise a financial deal. The pressure on this shift has been echoed at the global level with more and more financial institutions drawing out its support in financing new coal power plants, and countries phasing out their coal use.

In the Philippines, several provincial and municipal governments like San Juan and Negros Occidental recently declared that they will become coal-free and look to renewables as alternatives. This movement is driven by youth, communities and NGOs who successfully pushed several local administrations to make a commitment to move from coal. Another example was also shown last year in Thailand where the government halted the plan to build coal power plants in Krabi and Songkhla provinces due to the communities’ protests over its harmful effect on health and the environment. (NS. Featured photo credit:  SEA Globe)

If you wish to follow ASEAN’s journey in the energy sector, please subscribe through this link so we can extend our weekly energy news clippings & insights to you!