Germany exits coal: A model for Asia?

[ceo_energemsier + 1,818]

Germany exits coal: A model for Asia?

 

Uphill task in switch to renewables in Asia

Cheaper coal amid weak European demand

Affordability of energy a concern

 

 

Germany has announced grand plans of exiting coal and the world will be watching to see if its coal phase-out will be a model for the rest of the world, including Asia, to follow.

 

Germany's coal commission has recommended phasing-out coal-fired power generation by 2038 and capping coal capacity at 30 GW by 2023.

In Asia, Japan and South Korea are expected to reduce their coal imports, although demand for coal imports from Vietnam and India are still firm, the Australian Resources and Energy Quarterly showed in June.

While developing countries in Asia have also been turning to renewable energy, analysts told S&P Global Platts that a similar coal exit is unlikely in the near future. This is in part due to coal being a cheap resource, and also due to the high demand of energy in Asia.

"Many of these governments are facing short-term pressures in facilitating energy access and are building more coal-fired plants...which have an average life space of 40 years," Dr Christopher Len, senior research fellow with the Energy Studies Institute at the National University of Singapore, said.

RENEWABLES CHALLENGE

The International Energy Agency noted that coal-fired electricity generation in Asia has been on the rise since 2018, with China, India and Southeast Asia leading the climb.

Although China is battling air pollution and has been trying to reduce coal usage, market participants there said the country's use of coal is going to continue as it has an abundance of the fossil fuel.

According to the 2018 China Mineral Resources report by Ministry of Natural Resources, the country has 1,667 billion mt of coal reserve.

Karthik Ganesan, a researcher from India-based Council of Energy, Environment and Water told Platts that India is investing more in renewables, but the difficulty faced in getting these projects off the ground suggests that the country will continue to rely on coal.

"Solar and wind sectors are still struggling with major systematic challenges...including availability of finance, project allocation and land challenges," he said.

In addition, there are operational challenges such as the massive delay in payment by distribution companies.

"If this continues, we may end up with a cumulative capacity of 60-70 GW of solar and may be 45-50 GW of wind by 2022. This means that the electricity that was earlier planned to be generated from wind and solar may need to be generated from other conventional sources -- coal being the easiest," he said.

CHEAP COAL

Meanwhile, with demand in Europe dwindling, traditional suppliers to the continent have been seeking new markets in Asia.

The relatively inexpensive coal makes it even more attractive as an energy resource, which is probably the unintended effect of less coal usage in Europe, market sources noted.

S&P Global Platts Analytics has forecast that the EU will import 125 million mt of coal this year, down from 136 million mt from a year ago, and will further reduce the import tonnage to 119 million mt in 2020.

Meanwhile, the world's third largest coal exporter Russia is likely to export 168 million mt in 2019, up from 160 million mt in 2018, and will further increase its coal exports to 168.5 million mt next year, according to Platts Analytics' forecast.

The Australian Resources and Energy Quarterly expect the Asian thermal coal market to remain well supplied over the next two and a half years, with coals from Australia, Russia, and Indonesia.

Amid weak demand, the spot price of thermal coal has been on a decline. The price of Newcastle 6,000 kcal/kg NAR has reached a two year low of $66.05/mt last month, Platts data showed.

REPLICATION DIFFICULTIES

While the coal phase out in Germany has been gaining momentum, observers said that should the German experience provide a good example for other countries to do the same, it may not, however, be easy to replicate.

Countries which rely on coal exports are also facing difficulties in phasing out their coal industry because of the powerful domestic coal sector in these countries, according to a recent report by researchers of Sweden's Chalmers University of Technology.

A coal phase-out is workable when there are no large-scale losses incurred by closing down newly constructed power plants or coal mines, the research noted.

Dr Martin Rice, head of research from Australia's Climate Council, told Platts that Germany has devoted a lot of money to offer retraining opportunities to the coal miners, as it restructures their economy.

"Like climate change, the exit from coal is not going to be one solution, so it's really up to the individual and circumstances of each country," Dr Rice said.

China would face a similar issue should it proceed with weaning off coal, as it needs to think of alternatives to relocate the workers, Michael Langford, from Singapore-based energy consulting firm AirGuide International, said.

However, Langford highlighted there is now a lack of investments for a coal fired power station as the regulatory risk is high.

"More so, the health and environmental cost is now better understood," he said.

Meanwhile, the progress of the coal phase-out in Germany comes amid the need to balance environmental sustainability with affordability of energy.

"If energy-intensive industries can't afford to pay for the electricity here, they will go to other places to run their businesses there," Guido Steffen, spokesman for Germany's largest power generator RWE, said.

Paul Baruya, a coal market analyst with IEA Clean Coal Centre, added that Germany might watch and see how events in the market unfold, should the UK, France, and Netherlands switch completely to a mix of entirely gas and renewables, and see how stakeholders tackle the challenge of having more "limited opportunities to arbitrage between different fuels without coal and nuclear" as backup.

 

[markslawson + 1,057]

2 hours ago, ceo_energemsier said:

Uphill task in switch to renewables in Asia

Cheaper coal amid weak European demand

Affordability of energy a concern

Like most of the articles on renewables this one is mostly hot air.. The commission recommends ending of coal-fired power generation by 2038 generating capacity but the article doesn't really say what the Germans intend to replace more than a third of current supply (brown and black coal) with in that time frame. The official figures state that 35 per cent of German's power came from renewable sources in 2018.. but of that 10 percentage points came from hydro and biomass (wood burning boilers etc) which do not count as intermittent sources.. that leaves 25 per cent about coming from intermittent sources, mainly wind. That would make life difficult for the grid manager but certainly not impossible particular when we remember that the German grid is part of a much larger European grid. At the moment, as I've said before, rather than shut down the brown coal/lignite plants when wind suddenly comes on the system, which is not a good idea as they take a whole day to restart, the German grid can export/dump surplus power on neighbours and claim they are getting the green part.

The last of the nuclear plants (11 per cent or so of power in 2018) is to be phased out in a few years so what exactly do the Germans intend to do about this, or about phasing out of coal power? Even the report (download in English from here) itself doesn't seem to say, or at least I couldn't work it out. Perhaps someone with more time can fossick around in that wordy document.  In my brief perusal I found this "The electricity market must send reliable investment signals in order to ensure that supply security on the electricity market remains guaranteed even after nuclear energy is phased out by the end of 2022 . Planning security is required to provide this . This only exists if the market players can be confident that reliable political decisions will be made with sufficient time to implement them . Furthermore, within the European market, precautionary needs-based electricity production, for instance, must also be guaranteed at the  national level." 

I think this means that the market will make up the shortfall by building capacity of the right type to ensure that consumers will still be able to turn the lights on, provided everyone stops squabbling... I think..

In the meantime maybe the Germans could upgrade the interconnectors and buy more from Poland? The Poles have a lot of coal-fired plants. The French have a lot of nuclear reactors and would also happily sell any surplus to the Germans. Expanding gas power, as has happened in the UK and the US? This involves buying more gas from Russia but the Russian economy could do with the boost.     

[ceo_energemsier + 1,818]

3 minutes ago, markslawson said:

Like most of the articles on renewables this one is mostly hot air.. The commission recommends ending of coal-fired power generation by 2038 generating capacity but the article doesn't really say what the Germans intend to replace more than a third of current supply (brown and black coal) with in that time frame. The official figures state that 35 per cent of German's power came from renewable sources in 2018.. but of that 10 percentage points came from hydro and biomass (wood burning boilers etc) which do not count as intermittent sources.. that leaves 25 per cent about coming from intermittent sources, mainly wind. That would make life difficult for the grid manager but certainly not impossible particular when we remember that the German grid is part of a much larger European grid. At the moment, as I've said before, rather than shut down the brown coal/lignite plants when wind suddenly comes on the system, which is not a good idea as they take a whole day to restart, the German grid can export/dump surplus power on neighbours and claim they are getting the green part.

The last of the nuclear plants (11 per cent or so of power in 2018) is to be phased out in a few years so what exactly do the Germans intend to do about this, or about phasing out of coal power? Even the report (download in English from here) itself doesn't seem to say, or at least I couldn't work it out. Perhaps someone with more time can fossick around in that wordy document.  In my brief perusal I found this "The electricity market must send reliable investment signals in order to ensure that supply security on the electricity market remains guaranteed even after nuclear energy is phased out by the end of 2022 . Planning security is required to provide this . This only exists if the market players can be confident that reliable political decisions will be made with sufficient time to implement them . Furthermore, within the European market, precautionary needs-based electricity production, for instance, must also be guaranteed at the  national level." 

I think this means that the market will make up the shortfall by building capacity of the right type to ensure that consumers will still be able to turn the lights on, provided everyone stops squabbling... I think..

In the meantime maybe the Germans could upgrade the interconnectors and buy more from Poland? The Poles have a lot of coal-fired plants. The French have a lot of nuclear reactors and would also happily sell any surplus to the Germans. Expanding gas power, as has happened in the UK and the US? This involves buying more gas from Russia but the Russian economy could do with the boost.     

Germany will go the route of Spain , getting their wind  knocked right out of them and German industries and people will suffer once again.

[Douglas Buckland + 6,308]

Trying to compare one countries needs/solution with another's assumes that the social/economic/political make up of both countries is similar - they rarely are.

To try and adapt a 'developed' country's solution to a developing country is bound to fail as the economics, historically and at present, do not transfer. Taxing, as per the European model, to pay for renewables probably would not work in say Congo or Laos.

[Rasmus Jorgensen + 1,169]

On 7/14/2019 at 7:28 AM, Douglas Buckland said:

Trying to compare one countries needs/solution with another's assumes that the social/economic/political make up of both countries is similar - they rarely are.

To try and adapt a 'developed' country's solution to a developing country is bound to fail as the economics, historically and at present, do not transfer. Taxing, as per the European model, to pay for renewables probably would not work in say Congo or Laos.

All true. 

It is also true that renewables are better at certain (niche) applications than conventional. As developing countries are building new they do not have to deal with "sunk" costs so for some projects the natural choice is renewables... 

[Douglas Buckland + 6,308]

14 hours ago, Rasmus Jorgensen said:

All true. 

It is also true that renewables are better at certain (niche) applications than conventional. As developing countries are building new they do not have to deal with "sunk" costs so for some projects the natural choice is renewables... 

There will be 'sunk costs' moving towards renewables as well.

Developing countries will look at both options and then select based on the 'biggest bang for the buck', energy density and so forth. They will not give a damn about clean air and their carbon footprint UNLESS outside entities either sanction them for not adhering to global 'green' expectations OR subsidizing the entire effort (another tax on developed countries).

[Rasmus Jorgensen + 1,169]

4 hours ago, Douglas Buckland said:

There will be 'sunk costs' moving towards renewables as well.

No. For a developing nation building new generation capacity there is no sunk cost to consider. 

4 hours ago, Douglas Buckland said:

Developing countries will look at both options and then select based on the 'biggest bang for the buck',

I think there are a few other parameters as well such as financing and air quality. But other than that I agree. but sometimes you get the most bang for your buck with renewables. For example for a small african farming communnity I would expect that biomass or solar would be the best option.

For population centers I think the choice will also in large part be influenced by availabillity of natural resources within the nation. I actually think that we will see more NG power-gen in Africa in the next 10 - 15 years. 

[Douglas Buckland + 6,308]

47 minutes ago, Rasmus Jorgensen said:

No. For a developing nation building new generation capacity there is no sunk cost to consider. 

I think there are a few other parameters as well such as financing and air quality. But other than that I agree. but sometimes you get the most bang for your buck with renewables. For example for a small african farming communnity I would expect that biomass or solar would be the best option.

For population centers I think the choice will also in large part be influenced by availabillity of natural resources within the nation. I actually think that we will see more NG power-gen in Africa in the next 10 - 15 years. 

Assuming that the African nation has some form of fossil fuel based generation system presently in place (a valid assumption), the sunk cost will be abandoning that infrastructure in favor of a renewable option, that is, starting over.

I don't think the discussion concerns small rural farming communities at this point, they are easily addressed by a variety of options. The dense population centers are the initial concern.

In the 10-15 year period mentioned, where is the natural gas going to come from, is it renewable and how will impoverished countries pay for it?

[Rasmus Jorgensen + 1,169]

2 hours ago, Douglas Buckland said:

Assuming that the African nation has some form of fossil fuel based generation system presently in place (a valid assumption), the sunk cost will be abandoning that infrastructure in favor of a renewable option, that is, starting over.

I my view yes and no. My understanding of Africa (and South America for that matter) is that they are running at max capacity already, meaning more capacity would need to be added. 

2 hours ago, Douglas Buckland said:

I don't think the discussion concerns small rural farming communities at this point, they are easily addressed by a variety of options. The dense population centers are the initial concern.

Fair enough. 

2 hours ago, Douglas Buckland said:

In the 10-15 year period mentioned, where is the natural gas going to come from, is it renewable and how will impoverished countries pay for it?

Many African countries have O&G production. Mozambique is big in gas. I have seen projects in Angola and Nigeria focusing on taking gas that is currently being flared and using it for electricity generation. It is only a guess but it seems to me as something that would be relatively easy to replicate in many African countries. 

I never said that NG would come from renewables sources, but I do believe that bio-gas facilities will be built in Africa especially in rural areas as it is a good way to use resources more efficiently. 

-------------------------

I do not have an anti O&G agenda, but there is no reason not accept that in some cases renewables is more economical. Even for a developing country. One example I have seen in Nigeria is solar-cells + batteries replacing diesel generators powering cell phone towers. 

[Douglas Buckland + 6,308]

Most of the African countries with any significant oil and gas are located on the coasts. Many of those inland in the sub-Saharan regions have little or none. The oil and gas infrastructures are, to the best of my knowledge, 'managed' by the multinational oil and gas companies as they are the only ones that can afford to 'play' offshore in waters deeper than jack-up territory.

South American is a different operating environment entirely.

The thing is, the KISS Principle (Keep It Simple Stupid) is the best way to go in these areas from a logistics and maintenance standpoint. Oil is still the biggest 'bang for your buck' if you consider the energy density of oil and gas as opposed to renewables...especially if the country has been blessed with these natural resources.

I really can't see the scenario where South American and African countries rush to embrace renewables and the Paris Accord when the majority of their populations live in poverty and would be overjoyed with a hot plate to cook on (no more gathering firewood), running water and flush toilets.

Adding on a renewable infrastructure onto an already existing fossil fuel infrastructure simply adds complexity as well as logistical and maintenance burdens.

As I have said previously, bringing a 'first world' mentality to a developing world issue is problematic in the extreme.

It does not sound like you have an anti-oil and gas agenda....and it is refreshing to simply have an informed discussion!

[Rasmus Jorgensen + 1,169]

1 hour ago, Douglas Buckland said:

Most of the African countries with any significant oil and gas are located on the coasts. Many of those inland in the sub-Saharan regions have little or none

Here especially renewables make sense, but the CAPEX required to build the infrastructure to transport the fuel source is high. The exception is if a pipeline can be built from a neighbouring country. 

 

1 hour ago, Douglas Buckland said:

The oil and gas infrastructures are, to the best of my knowledge, 'managed' by the multinational oil and gas companies as they are the only ones that can afford to 'play' offshore in waters deeper than jack-up territory.

Agree. 

1 hour ago, Douglas Buckland said:

The thing is, the KISS Principle (Keep It Simple Stupid) is the best way to go in these areas from a logistics and maintenance standpoint.

I agree to some extent. The point I am trying to make though is that small temporary power is big business in Africa. A lot of times because business need energy security. I know of projects that is considering renewbles instead; especially as IMO 2020 is expected to increase cost of diesel.

 

1 hour ago, Douglas Buckland said:

I really can't see the scenario where South American and African countries rush to embrace renewables and the Paris Accord when the majority of their populations live in poverty and would be overjoyed with a hot plate to cook on (no more gathering firewood), running water and flush toilets.

What I am trying to say is that for example in Northern Brazil wind power generating capacity build-out happening. Not because of subsidies, but because of CAPEX constraints in building infrastructure for transport of hydrocarbon fuel. The big driver being that there is no need to either transport electricity or fuel over long distances. 

--------------

Renewables and hydrocarbons will co-exist. 

[Douglas Buckland + 6,308]

Understood, but putting together a 'patchwork' grid would tend to cause problems down the line, when a nation grid is attempted...wouldn't it?

[Rasmus Jorgensen + 1,169]

17 hours ago, Douglas Buckland said:

Understood, but putting together a 'patchwork' grid would tend to cause problems down the line, when a nation grid is attempted...wouldn't it?

Don't know. Others can probably answer better than me, but I can't see why it would ? 

[Douglas Buckland + 6,308]

I was thinking in terms of logistics and maintenance (spares). Perhaps there would be compatibility issues between the various systems.

Maybe someone with more knowledge of this issue could comment.