A new study by the Institute for Energy Economics and Financial Analysis (IEEFA) foresees a record decline in coal-fired power in 2019.
The study entitled “Global Coal Power Set for Record Fall in 2019,” says that the decline of thermal power coal is likely in major markets such as the United States, China, European Union, and Japan. The slowdown in the US is a record one as coal-fire use in electricity generation is likely to fall by 13 percent. Coal power decline in the EU posted a staggering 23 percent year-on-year in the calendar year to September 2019.
It also notes that Southeast Asia is unable to absorb the dramatic decline of coal in these markets. “At just 4.6% of the world’s total coal-fired power generation in 2019, the Southeast Asian region is not big enough to compensate for the dramatic cuts in thermal coal use in the U.S, the European Union and South Korea, and the ongoing slow decline in Japan,” explained Tim Buckley, co-author of the report and director of energy finance studies at IEEFA.
The report also stresses that around the world, investments are moving away from coal due to fear of rising stranded asset risks. It also doesn’t help the coal sector that renewables are seeing double-digit deflation annually says the report. Buckley says it is clear that we will see a steady decline in thermal coal in the coming year. “The transition away from coal is happening faster than forecasters can keep up with.”
In the Philippines, it seems like there is no slowdown in coal power use. On the contrary, coal dominates and continues to dominate the country’s energy mix. A Greenpeace recent report says that coal remains our primary energy source with a 52.05 percent contribution. On the other hand, renewable energy sources share was less than half of coal at 22.27 percent as of December 2018.
The Greenpeace study also says that in terms of proposed committed projects, coal remains the king with 80 percent shareholding in total installed capacity. The environmental group says that coal power’s share in the power mix will increase to three-fourth if all these proposed projects were to be approved.
“We are already in a state or era of dirty energy because the majority of our power plants come from coal and there are a lot of proposed coal power plants,” Khevin Yu, Greenpeace Philippine campaigner noted.
Greenpeace also analyzed the commitments and energy portfolio of five power companies. These five firms’ portfolio when combined accounts for more than 50 percent of the present existing and proposed power projects in the country. The report pointed out that the proposed power projects of four out of five firms still have coal as their preferred energy source.
In terms of their priority, companies are focused on coal energy development. “This shows that these companies will lead us to a path that our energy system will become coal-dependent,” Yu said.
Greenpeace has recommended placing a moratorium on coal plants the soonest possible time so clean energy can flourish. The suggestion isn’t new as the Energy Secretary had already been asked in congress if he favors such move. To which the secretary replied that a moratorium would be a disservice to the Filipino people.
Stepping the brakes on the construction of coal-fired plants, and ultimately, the dominance of coal in our power mix is not a disservice to the Filipino people. On the contrary, building more coal-plants places Filipinos at a disadvantage as I have discussed before. We have to remember that coal plants are locked into long-term Power Sales Agreements or PSAs, which can run up to 25 years. This means that consumers’ choices are taken away from them in the long run, when in fact, what we should be working on allowing consumers to choose their preferred sources of power.
We can trace coal’s dominance in our energy mix to our energy planners’ skewed concept of the least cost. Again, our energy planners are using the ‘least cost method’ in terms of building costs without looking at the risks, namely fluctuation in foreign exchange rates and world prices of coal.
Perhaps our energy planners should be given a crash course on portfolio theory, developed by Harry Markowitz, a Nobel Prize winner. His theory posits that risks can be minimized at any level of expected return if the investor mixes assets in a portfolio, combining high and low or zero- risk assets. Putting this theory into energy planning, this means that we should diversify our energy sources portfolio.
Greenpeace says at the rate we are going, we are likely to end up with a 75 percent coal share in our power mix. This runs counter to what financial experts advise investors of diversifying one’s portfolio. Having three-fourths of our power come from coal means we are making our consumers more vulnerable to unpredictable global coal prices and fluctuation in foreign exchanges.
Yes, we can push for a moratorium on building coal plants. But unless our energy planners understand portfolio theory for energy planning, then we can expect them to always push for coal as they look at the least cost. We all should be very scared now if Greenpeace’s prediction that coal will contribute 75 percent and brace ourselves for possibly higher power rates in the future if this forecast comes true.
Of course, we need to reduce coal in power use significantly as we aim to meet our commitment of 70 percent emission reductions below business-as-usual-levels. We, along with other nations need to help save the environment. But another compelling reason to move away from coal is to provide consumers with more choices and reduce the risk of having them pay for more expensive electricity in the future. May our energy planners realize that their misplaced appreciation of the least cost method is costing Filipino consumers more.