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Summary of "Assessment of the Role of Coal in the ASEAN Energy Transition and Coal Phase-Out"

Core Content

This document provides an in-depth analysis of the role of coal in the energy transition of the Association of Southeast Asian Nations (ASEAN), focusing on the implications of the Coal Phase-Out (CPO) and Coal Phase-Down (CPD) strategies under the ASEAN Taxonomy for Sustainable Finance (Versions 2 and 3). It evaluates the feasibility, economic impact, and environmental considerations of coal phase-out policies in the context of ASEAN's unique energy landscape and development needs.

Main Points and Key Information

1. ASEAN Taxonomy and CPO Classification

• The ASEAN Taxonomy includes CPO as a classification for sustainable activities, with activities categorized as "green" or "amber" based on Technical Screening Criteria (TSC).
• To be labeled "green", coal-fired power plants (CFPPs) must align with a 1.5-degree pathway and the IEA Net-Zero Emission (NZE) trajectory, which implies a phase-out by the late 2040s.
• CFPPs constructed after December 2022 are not eligible for "green" status.
• "Amber" activities allow for a phase-out by 2050 with slightly less strict requirements.
• Both classifications limit the operational lifespan of CFPPs to 35 years from their Commercial Operation Date (COD).

2. Challenges with the Taxonomy

• The TSC in Version 2 of the Taxonomy fails to distinguish between abated and unabated CFPPs, potentially including abated plants in early retirement initiatives.
• The IEA NZE Scenario is overly ambitious and not tailored to ASEAN's energy context, overestimating the reliability and energy returns of solar and wind, while underestimating grid infrastructure costs.
• The omission of abated CFPPs (those with CCS/CCUS, biomass co-firing, or ammonia co-firing) in the TSC may hinder the development of cleaner coal technologies.
• The lifecycle GHG emission thresholds are not clearly defined for electricity generation activities, especially in relation to methane emissions.

3. Role of Coal in ASEAN

• Coal remains a key energy source in ASEAN due to its affordability, reliability, and supply security.
• It provides stable baseload power, which is critical for industrial and commercial sectors.
• Coal is currently more cost-effective than hydroelectric and solar PV in terms of VALCOE (Value-Adjusted Levelized Cost of Electricity).
• The 7th ASEAN Energy Outlook (AEO7) projects that coal will still constitute almost half of total generation in 2030 and 28% in 2050.
• Coal can serve as a flexible backup for Variable Renewable Energy (VRE), especially in systems with intermittency issues.

4. Need for Coal Phase-Down (CPD) Instead of Phase-Out (CPO)

• A gradual reduction (CPD) is more practical and equitable than a complete phase-out (CPO), especially in the context of ASEAN's economic and social development.
• CPD allows for 30 years of operational lifespan for recently commissioned coal plants, avoiding premature decommissioning.
• A just transition is necessary to protect economic growth, social stability, and energy affordability.
• A rapid shift to RE and storage is essential for achieving the 1.5°C target, but requires five times more investment than a gradual approach.

5. Alternative Energy Sources and Challenges

• Renewable Energy (RE) and Energy Storage are critical for the transition, but face challenges in infrastructure, supply continuity, and cost.
• Geothermal has the second-highest capacity factor after nuclear, but its deployment is stagnant due to institutional, regulatory, and tariff-related issues.
• Biomass co-firing and CCS/CCUS are promising but underutilized due to technical and financial barriers.
• Gasified coal with CCS and efficient mining/transportation are also considered viable alternatives to coal.

6. Key Recommendations

• The inclusion of CPO in the Taxonomy should be re-evaluated, especially the TSC, to ensure it reflects ASEAN's specific context.
• The Taxonomy should not be based solely on the IEA NZE Scenario, which may not be applicable to emerging economies.
• Clarification is needed on the definition of "best in class technology", affordable, and accessible criteria.
• The next version of the Taxonomy should incorporate the 8th ASEAN Energy Outlook (AEO8) to develop a more strategic phase-down plan.
• Support for grid improvements is essential to accommodate increased RE and manage supply-demand fluctuations.
• Transition finance mechanisms should be established to channel investments into clean technologies and energy efficiency.

7. Conclusion

• Coal will continue to play a significant role in ASEAN's energy mix for the foreseeable future.
• A just and gradual transition is necessary to balance environmental goals with economic and social considerations.
• The ASEAN Taxonomy should be flexible and tailored to support comprehensive and equitable energy transition strategies.

Key Figures and Tables

• Figure 1: Illustrates total energy supply and final consumption across different scenarios and jurisdictions.
• Figure 2: Shows electricity generation by scenario.
• Figure 3: Depicts the age distribution of CFPPs in ASEAN.
• Figure 4: Presents reference emission factors for coal in ASEAN.
• Figure 5: Compares lifecycle GHG emissions of different technologies.
• Figure 6: Highlights coal's role in primary energy supply, final consumption, power generation, and installed capacity under the AMS Target Scenario (ATS).
• Figure 7: Shows coal's role in ASEAN's energy system based on LCO.
• Figure 8: Illustrates coal domestic supply and trade balance of selected ASEAN Member States (AMS).
• Figure 9: Depicts macroeconomic relevance of coal based on 2017 data.
• Figure 10: Compares cost components of LCOE and VALCOE.
• Figure 11: Projects VALCOE for different technologies under low, medium, and high price assumptions.
• Figure 12: Compares power generation from conventional and RE sources in Germany.
• Figure 13: Shows installed capacity and power generation from dispatchable and RE sources in Germany (2010 vs. 2021).
• Figure 14: Compares dispatchable and RE sources in ASEAN (2010 vs. 2021).
• Figure 15: Displays global population without access to electricity between 2010 and 2023.
• Figure 16: Shows employment, coal production, and labour intensity in the coal industry from 2012 to 2020.
• Table 1: Lists AMS' emission reduction targets and NZE goals.

Final Thoughts

The transition from coal must be strategic, gradual, and inclusive, ensuring affordability, energy security, and social equity. The ASEAN Taxonomy should be revised to better reflect regional realities, technological advancements, and economic development needs.