Chapter 2

Review of the First Study

This chapter should be cited as

Otaka, Y. and P. Han (2015), ‘Review of the First Study’, in Study on the Strategic Usage of Coal in the EAS Region: A Technical Potential Map and Update of the First-Year Study. ERIA Research Project Report 2014-36, Jakarta: ERIA, pp.5-20. Available at: http://www.eria.org/RPR_FY2014_No.36_Chapter_2.pdf

5

Chapter 2

Review of the First Study

This chapter is a review of the first-year study. However, data is updated based on

latest trends.

2-1. The Importance of Coal in the East Asia Summit Region

2-1-1. The trends of energy demand and the political positioning of coal

In the EAS region where economic development and growth have been remarkable,

demand for electricity is forecasted to increase substantially, half of which will be met by

coal-fired power generation as shown in Figure 2-1. In particular, coal-fired power

generation has vastly increased in China and India, and future increases are also forecasted

in the Association of Southeast Nations (ASEAN) region. As coal is priced lower compared

to petroleum and natural gas, demand for coal is therefore expected to continue increasing

from an economic point of view.

Figure 2-1. Estimate of Coal-Fired Power Plant in the East Asia Summit Region

Note: ASEAN values refer to new policies scenario. All other values are taken from the reference scenario. Sources: International Energy Agency (IEA) (2013), World Energy Outlook Special Report: Southeast Asia Energy Outlook.

999 GW

1,531 GW

Coal2,211 GW

940 GW

1,575 GW

Othersources

2,310 GW

0

10

20

30

40

50

60

70

80

90

100

0

1,000

2,000

3,000

4,000

5,000

2011 2020 2035

Coal share

of

genera

tion c

apacity

[%]

Pow

er

genera

tion c

apacity

[GW

]

51.5% 49.3% 48.9%

1,939 GW

3,106 GW

4,521 GW

China

India

ASEAN

NZ, AUS, KORJapan

0

2,000

4,000

6,000

8,000

10,000

12,000

2011 2020 2035

Coa

l e

lectr

icity g

en

era

tio

n [T

Wh

]

69.9%

69.1%

64.9%13.3%

15.3%

20.8%

4.0%

5.8%

8.0%

7.5%

5.6%

3.2%

5.2%

4.1%

3.1%

5,364 TWh

7,544 TWh

11,406 TWh

Share of coal-fired power stations in the EAS region Coal-fired power generation by country

Coal

Capacity

CAGR

+3.4%

Coal

Generation

CAGR

+3.2%

6

As such, coal has become an important energy source in the EAS region. Petroleum

and natural gas are also produced in the region and will remain important energy sources

in the future. Figure 2-2 shows the origin of primary energy import in the EAS region where

42 percent of liquefied natural gas (LNG) consumed is produced within the region whereas

42 percent is imported from the Middle East. A mere 6 percent of the petroleum consumed

is regionally produced with 66 percent being imported from the Middle East. In contrast,

coal produced in the EAS region constitutes 85 percent of the total coal consumption in the

region. All these data indicate that coal, mainly produced and consumed within the region,

is not dependent on the Middle East as petroleum and natural gas are. In view of political

uncertainties in the Middle East, which may raise concern over transportation security at

strategic pathways such as the Strait of Hormuz, coal will be of further significance in the

energy security context as well.

Figure 2-2. Origin of Primary Energy Imports in the East Asia Summit Region

Sources: International Energy Agency (IEA), Coal Information; International Group of Liquefied Natural Gas (GIIGNL) Importers; and International Trade Centre (ITC) Trade Map.

2-1-2. Features of coal resources and their importance

(1) Coal resources

In global coal reserves, high-rank coals such as bituminous coal and anthracite that

are used as cooking coal and steam coal make up around 47 percent of the reserves

whereas low-rank coals constitute about half of the overall coal reserves with 30 percent

sub-bituminous coal and 23 percent lignite. Figure 2-3 shows the world’s mineable coal

reserves by region and by coal rank. Unlike other energy sources, coal is distributed widely

but unevenly throughout the world. Coal reserves are large in Oceania and in Asia, and the

Qatar30%

Oman5%

Yemen4%UAE

3%Australia

14%

Malaysia14%

Indonesia10%

Brunei4%

Russia5%

Nigeria5%

Eq. Guinea2%

Others4%

Indonesia50%

Australia30%

Vietnam2%

China1% Russia

6%

S. Africa5%

Canada2%

US1%

Other3%

Saudi Arabia23%

United Arab Emirates

13%

Iraq8%Kuwait

7%

Qatar5%

Iran5%

Oman4%

Other Middle East

1%

Indonesia2%

Malaysia1%

Australia 1%

Other ASEAN+3

2%

Russia5%

Angola5%

Venezuela4%

Nigeria2%

Kazakhstan1%

Colombia1%

Congo1%

Others7%

Coal import origins EAS (2013) LNG import origins ASEAN+3 (2013) Crude oil import origins EAS (2013)

Middle East:

42%

Total: 684

million tonnes

Total: 163

million tonnesInter-EAS: 42%

Inter-EAS:

85%

Total: 928

million tonnes

Middle East:

66%

7

proportion of their lignite reserves is high. Even in the world’s largest steam coal exporter

Indonesia, which exports mainly to Asian countries, the amount of its bituminous coal

reserves is only 27 percent of total reserves and thus its exports of sub-bituminous coal are

increasing.

Figure 2-3. Recoverable Coal Reserves in the World (by region and coal rank)

Source: WEC, ‘Survey of Energy Resources’, BP Statistics 2010.

(2) Coal consumption in Asia

Figure 2-4 shows the flow of steam coal in 2012. Steam coal is mainly exported to

Asia by Indonesia and Australia; it is also exported by South Africa and Russia as well as

China, Colombia, the United States (US), and Canada, although in smaller volume.

Indonesia is the biggest steam coal exporter to China; its exports accounted for 48

percent of total Chinese imports in 2011. Republic of Korea (henceforth, Korea), Taiwan,

and India also import coal from Indonesia. Of the nearly 300 million tonnes (MT) of steam

coal exports from Indonesia, 96 percent are for Asia. It is estimated that other countries

without adequate data also import big quantities from Indonesia.

Australia is the second largest steam coal exporter to Asia after Indonesia, with 97

percent of its steam coal exported to Asia, which totalled 144 MT in 2011. Indonesian and

Australian coal exports account for three quarters of the steam coal imported by Asia.

Australia exports the biggest quantity of steam coal to Japan. Its exports to China, Korea,

and Taiwan exceed 15 MT but its exports to India are smaller. India imports more coal from

South Africa, which is nearer than Australia.

Source: WEC “Survey of Energy Resources 2010,” BP Statistics 2010

94%

6%

9%

91%

0%

100%

South Africa (30.2Bt)

46%

41%

13%

U.S. (237.3Bt)

89%

11%

Other African countries (1.5Bt)

Canada (6.6Bt)

Colombia (6.7Bt)

Other SA countries (5.8Bt)

93%

7%

54%30%

16%

China (114.5Bt)

India (60.6Bt)

Indonesia (5.5Bt)

53%

2%

45%

Other Asian countries (47.6Bt)

31%

62%

7%Russia (157.0Bt)

19

%

17

%64

%

Europe (10.8Bt)

48%

3%

49%

Australia (76.4Bt)

27%

53%

20%

53%

13%

34%

bituminous+anthracite

(47.0%)

lignite (22.7%)

subbituminous (30.3%)

8

Other Asian countries import mostly from Indonesia. According to forecasts of

future coal demand, demand for energy and, in particular, electricity is expected to increase

substantially as a result of the economic growth in Asia; thus, many new coal-fired power

plants are being planned. Coal consumption for power generation is forecasted to increase

in Asia. In Viet Nam, where anthracite used to be widespread, a plan for a new plant to be

fired on blended coal, or anthracite with imported Indonesian coal, is in progress.

Figure 2-4. Flow of Steam Coal (2011 estimate)

Note: The above figure does not show flows of less than 3 MT. The blue-coloured numbers show an increase relative to the previous year and the red-coloured numbers show a decrease relative to the previous year. North America as an importer includes Mexico. Source: International Energy Agency (IEA,) Coal Information 2012.

(3) Consideration on future coal demand and supply

Demand for steam coal in Asia will increase at an annual growth rate of 2.4 percent

from 2010 to 2035, and will increase by 1.8 times from 3,730 MT to 6,652 MT during the

same period. Figure 2-5 shows a steam coal demand forecast in Asia. Steam coal demand

in China will not show such a rapid growth as it did during the 2000s. But as the demand

for electricity is expected to increase with economic growth in the future, the demand for

power generation should likewise increase. The demand in India for steam coal will increase

at an annual growth rate of 3.7 percent to 2035 due to a rapid increase in demand for power

generation. India is expected to consume up to 1,297 MT in 2035, which is a 2.5-fold

increase relative to 2010. ASEAN countries are expected to use cheap coal power in order

to meet the increasing demand for power generation; hence, coal demand will increase.

80.1Mt

Other Asia477.4Mt

OECD Europe181.5Mt

Other Europe39.7Mt

Latin America21.1Mt

22.2Mt

10.0MtMt

3.9Mt

74.2Mt262.2Mt

37.9Mt

6.8Mt

OECD Europe181.5Mt

18.9Mt

50.4Mt

56.9Mt

3.1Mt

17.7Mt

10.0Mt

China10.6Mt

Russia109.4Mt

23.9Mt

9.8Mt

South Africa71.7Mt

7.8Mt

7.3Mt

8.1Mt

5.5Mt

10.8Mt

9.6MtIndonesia308.9Mt

6.7Mt

Africa/Middle East21.4Mt

North America23.5Mt

3.5Mt

USA34.1Mt

Colombia75.4Mt

Japan121.5Mt

Canada5.9Mt

Australia144.1Mt

3.4Mt

9

Specifically, Indonesia is building a coal power generation station using low-rank coal

produced domestically. Its steam coal demand will be close to 100 MT in 2020 and further

increase to 190 MT in 2035. Steam coal demand in Viet Nam will increase to 132 MT in

2035 with the addition of coal power. The consumption of steam coal in other countries

will increase by two to three times in 2035. On the contrary, Japan, Korea, and Taiwan,

which have widely used steam coal for power generation, will still experience increases in

their demand but their growth is expected to slow down.

Figure 2-5. Steam Coal Demand Forecast in Asia

Source: Actual data is from International Energy Agency (IEA) and forecast is by Japan International Cooperation Agency (JICA).

Most of these increases in coal demand in the region are expected to be addressed

by Indonesia. Having abundant low-rank coal with low ash and low sulphur content that

offer advantages in both price and environmental compliance, Indonesia expects its low-

rank coal export to further increase in the future. Such trend has shed light on low-rank

coals that used to be regarded as non-marketable; China and India have been importing

low-rank coals with fuel efficiency mass lower than 4,000 kilocalorie/kilogram (kcal/kg),

which have now entered the market.

Korea has been expediting low-rank coal utilisation and expansion. Likewise, it has

expedited measures such as combustion improvement through blending with high-rank

coal and high efficiency clean coal technology (CCT) such as ultra super critical (USC) in

consideration of high moisture and low calorific value that low-rank coals carry.

Indonesia, the major coal supplier in the region, in recent years saw a steady

economic growth after having gone through the impact of the global financial crisis, which

has boosted its own energy demand. Indonesia was once a member of the Organization of

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

Others

India

China

(million tons)

0

100

200

300

400

500

600

700

800

900

1,000

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

Others

Hongkong

Vietnam

Thailand

Philippines

Malaysia

Indonesia

Taiwan

Korea

Japan

(million tons)

10

the Petroleum Exporting Countries (OPEC) as a major oil and gas producer; however, it has

shifted its energy policy towards the effective use of domestically abundant and available

energy source (i.e. coal) in view of gradually depleting oil and gas resources. To meet the

increasing demand for electricity, it is planning to build many new large-scale, coal-fired

power plants, which require a continuous supply of coal. More than 80 percent of

Indonesia’s produced coal is exported and the rest is for domestic consumption. With a

surging domestic demand by the power sector, coal export in the coming years may see a

sluggish growth as the policy to prioritise domestic supply to meet domestic demand has

come into force. It may come up as a common agenda that Asia needs a concerted

coordination towards a balanced regional demand and supply.

2-1-3. Comparison of coal and natural gas prices

Figure 2-7 shows thermal coal and LNG import prices (in cost, insurance, and freight

[CIF] prices) on heating value basis as well as the price ratio of LNG/thermal coal for Japan.

The price of coal on heating value basis has always been more competitive than natural gas

and provides a high economic rationale. Historically, the LNG/thermal coal price ratio has

been between 1.5 and 3.5. Since 2000, the price ratio has increased and consistently been

around 2.3–3.5, except in 2009.

11

Figure 2-7. Comparison of Coal and Natural Gas Prices

Source: Japan import statistics.

2-1-4. The importance of CCT for improving energy security

The main features of coal for the EAS region can be summarised as follows:

1. Coal is the primary energy source in the EAS region.

2. Coal is the most secure energy resource in the EAS region.

3. Coal supply potential can be further expanded by developing lower grade coal.

4. Coal is more cost-competitive than natural gas.

However, coal is not used efficiently. It is relatively abundant in the region and an

important source of energy, and thus should be used as efficiently as possible. Figure 2-8

shows the thermal efficiency in Australia, China, India, Indonesia, Japan, and Korea as well

as Germany and the US. In some Asian countries, thermal efficiency is still lower than 35

percent, leaving more room for improvement. In order to maximise the potential of coal,

CCT should be introduced in the EAS region.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.000

0.002

0.004

0.006

0.008

0.010

0.012

0.014

0.016

0.018

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

LN

G/T

herm

al c

oal price

ration o

n h

eatin

g v

alu

e b

asis

Price o

n h

eatin

g v

alu

e b

asis

[JP

Y/k

cal]

LNG [JPY/kcal] Thermal coal [JPY/kcal] LNG/Thermal coal [Price ratio on heating value basis]

12

Figure 2-8. Thermal Efficiency of Coal-Fired Power Stations in Asia, Germany, and the United States

Source: International Energy Agency (IEA), 2011, Energy Balances of Organisation for Economic Co- operation and Development (OECD) Countries, Energy Balances of Non-OECD Countries.

2-2. Economic Benefits of CCT Introduction in the East Asia Summit Region

2-2-1. Application benefits of the introduction of CCT in East Asia

(1) Minimisation of capital outflow

According to forecasts in the ERIA research project titled ‘Analysis on Energy Saving

Potential in East Asia’ (hereinafter referred to as ERIA energy savings research project’),

coal is expected to remain as the main source of electricity generation; yet electricity

generation by natural gas is also expected to increase. If we assume that natural gas–fired

power stations can be replaced by coal-fired power stations, then capital outflow can be

avoided because coal is a self-sufficient natural resource in the EAS region.

Figure 2-9 displays the avoided capital outflow when new natural gas–fired power

stations are replaced with coal-fired power stations. According to the ERIA energy savings

research project, natural gas–fired power generation will increase by 2,300 terawatt-hours

(TWh) from 981 TWh/year in 2010 to 3,281 TWh/year in 2035. Based on assumptions from

the ERIA energy savings research project, the thermal efficiency of natural gas–fired power

stations is expected to increase from 44.1 percent in 2010 to 46.6 percent in 2035. In British

thermal unit (Btu), this means that natural gas consumption per year in 2035 will be 16.4

quadrillion Btu higher than in 2010.1 As analysed in the previous section, 26.1 percent of

1 The output in terawatt-hours (TWh) divided by thermal efficiency is equal to input in TWh. The conversion of

TWh to British thermal unit (Btu) is based on the IEA conversion rate of 1 TWh = 3412141.1565 million Btu

(MMBtu).

20%

25%

30%

35%

40%

45%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Avera

ge t

herm

al efificie

ncy,

LH

V [

%]

Australia China India Indonesia Japan Korea Germany United States

13

natural gas consumed in the EAS region cannot be supplied within the region (estimated

value in 2013) and therefore needs to be imported from outside the region, resulting in

capital outflow. At the assumed price of US$15.85/MMBtu (the LNG import price to Japan,

January 2013), capital outflow in 2010 would have been US$31.4 billion. Under the given

assumptions, capital outflow would be US$99.2 billion in 2035. Therefore, the increase in

imports from outside the EAS region is expected to increase capital outflow up to around

US$67.9 billion until 2035.

Capital outflow can be reduced by replacing natural gas–fired power stations with

coal-fired power stations. If we assume that all new natural gas–fired power stations can

be replaced by coal-fired power stations, the additional amount of coal required to

generate 2,300 TWh is around 758 MT per year2. From the utilities’ point of view, at the

assumed price of US$117.57/tonne (Thermal coal import price to Japan, January 2013), the

expected total cost for 758 MT of thermal coal would be US$89.1 billion. The total cost for

16.4 quadrillion Btu required to generate 2,300 TWh would be US$260.4 billion (at

US$15.85/MMBtu). In short, disregarding the origin of natural resources, the total savings

for utilities would be US$171.3 billion.

If we assume that all additional coal can be produced in the EAS region, savings due

to minimisation of capital outflow would be US$67.9 billion.

2 The amount of coal necessary was calculated by dividing 2,300 TWh by the thermal efficiency, which was

assumed at 43.5 percent (USC-type boiler thermal efficiency ranges from 41.5 percent–45 percent). With 1

TWh = 859845227.86 megacalorie (Mcal), and using the heating value of American Petroleum Institute (API)

6 Newcastle thermal coal at 6,000 kcal/kg, around 758 MT are necessary to generate 2,300 TWh.

14

Figure 2-9. Minimisation of Capital Outflow

Note: The definition of capital outflow is: 1 – Production (EAS region)/Consumption (EAS region). The price of natural gas assumed in this graph is US$15.85/MMBtu (LNG import price in Japan, January 2013) Sources: Compiled from the Economic Research Institute for ASEAN and East Asia (ERIA) Energy Savings Research Project; International Energy Agency (IEA) Coal Information; IEA Natural Gas Information; Japan import statistics.

(2) Environment impact reduction

Compared to other primary energy sources such as petroleum and natural gas, coal

contains more sulphur, nitrogen, and ash. These components are emitted as sulphur oxide

(SOx), nitrogen oxide (NOx), or particulate matter due to coal combustion, thereby exerting

a negative impact on the environment. As the carbon content in coal is higher than that in

petroleum or natural gas, emissions of carbon dioxide (CO2)—one of the gases that cause

global warming—are also higher than other primary energy sources. As a result, reducing

and removing such components that have an impact on the environment need to be

considered in coal utilisation.

Sulphur Oxide, Nitrogen Oxide, Particulate Matter

In the past when there were small-scale coal-fired power plants and other

combustion facilities only, emissions from coal combustion did not affect the environment

much. But the situation is now quite different due to the high and extensive growth of the

economy, and energy demand and consumption. These resulted in significant negative

impact on the natural environment and on public health caused by acid rain and particulate

4,809

Coal, 10,706

Coal increase by natural gas replacement,

2,300

Natural gas, 981

Nuclear, 1,429

Hydro, 2,231

Others, 1,366

0

5,000

10,000

15,000

20,000

25,000

2005 2010 2015 2020 2025 2030 2035

To

tal g

en

era

tio

n in

EA

S r

eg

ion

[T

Wh/a

]

4,809

Coal, 10,706

Natural gas (2010), 981

Natural gas increase, 2,300

Nuclear, 1,429

Hydro, 2,231

Others, 1,366

0

5,000

10,000

15,000

20,000

25,000

2005 2010 2015 2020 2025 2030 2035

Tota

l g

en

era

tion

in E

AS

reg

ion

[T

Wh/a

]

EAS electricity generation forecast by fuel, BAU case [TWh] Natural gas is replaced by coal scenario

2010-

2035

increase

Capital

outflow

outside EAS

Gas generation

replaced by

coal

Import

dependence

Capital

outflow

outside EAS

USD

67.9

billion

2,300

TWh

Self-

sufficient

No

increaseReplacement

by coal

Forecast Forecast

Gas

generation

increase

Import

dependence

2,300

TWh26.1%

Gas demand

increase

16.4

Quad

Btu

Coal demand

increase

758 MT

15

matters emitted along with large amounts of SOx and NOx.

Asian countries saw rapid economic development in recent years, which has

brought about industrial and environmental pollution including air and water, all of which

have become huge social issues. In addressing these issues, streamlining relevant

regulations and dissemination of key technologies are the major common agenda in the

region.

In Japan, denitrification equipment has become standard, aside from

desulphurisation equipment, to reduce NOx emissions. The desulphurisation equipment

used to be uncommon in coal-fired power plants in the Asia region because coal with low

sulphur content was then used and the number of coal-fired power plants used to be

relatively small. Recently built coal-fired power plants have desulphurisation equipment

while denitrification equipment is yet to be a standard. NOx has two types: fuel NOx is

generated by the nitrogen in the coal whereas thermal NOx is formed by the nitrogen in

the air during combustion. Thermal NOx can be reduced by using a low NOx burner, hence,

it has become widespread. However, to further reduce NOx in the future, the installation

of denitrification equipment is indispensable.

In summary, to mitigate the environmental impact caused by an increase in coal

consumption in the future, the installation of high-efficiency desulphurisation,

denitrification, and dust-collecting equipment in coal-fired power plants should be required.

Carbon Dioxide

With higher carbon content than petroleum and natural gas, coal upon combustion

generates the biggest amount of CO2 per unit among all primary energy sources. The ratio

of CO2 emitted by coal, petroleum, and natural gas is 5:4:3; the amount of CO2 emissions

per kilowatt-hour (kWh) in a coal-fired power plant is twice than in a natural gas–fired

power plant. It is necessary, therefore, to reduce the amount of coal used and improve the

efficiency of coal-fired power plants to reduce CO2 emissions. However, by using high

efficiency CCT such as USC, integrated gasification combined cycle (IGCC) and integrated

gasification fuel cell (IGFC), it is possible to reduce CO2 emissions to the level similar to that

of a petroleum-fired power plants or even less.

Figure 2-10 shows the connection between power generation efficiency and CO2

16

emissions, where CO2 emissions are evidently reduced as efficiency increases. Should a new

CO2 regulation for power plants proposed in the US on June 2014 be introduced, it is

necessary to add carbon dioxide capture and storage (CCS) to CCT.

Looking into the future, CCS is supposed to have the most potential in bringing

down CO2 emissions, which may be close to zero. However, as coal storage sites are limited

to sea bed and underground aquifers, coal seams, and oil fields, there are issues to be

addressed such as the economic issue regarding the cost of recovery and transportation of

CO2, environmental and safety considerations required of the stored CO2, the issue of public

acceptance, among others. Accordingly, the commercialisation of CCS may be expected

only around 2030.

Figure 2-10. Relationship between Power Plant Efficiency and CO2 Emissions

Sources: Author’s compilation.

In the meantime, high efficiency CCT like USC is already commercialised and CO2

reduction is possible either for newly constructed plants or existing power plants. Figure 2-

11 indicates the expected CO2 reduction by deploying Japanese high-efficiency CCTs at

numerous existing coal-fired power plants in Japan, US, China, and India. As power plants

in Japan are already working at the highest global level, it is not necessary to expect more

CO2 reduction. However, a reduction of 13.5 billion tonnes of CO2 can be expected if high

efficiency CCTs are deployed at plants in the US, China, and India. The last two in Asia are

expected to contribute a total reduction of 9.5 billion tonnes of CO2.

17

As discussed, high efficiency CCT utilisation at coal-fired power plants will cause

considerable effects on CO2 reduction. It is highly recommended that CCT be applied to

incoming coal-fired power plants at new sites as well as in newly replaced coal-fired power

plants under a replacement plan of existing power plants in the region.

Figure 2-11. CO2 Emission and Reduction Estimates in Coal-Fired Power Plants

Sources: International Energy Agency (IEA) (2009), World Energy Outlook; Ecofys (2010), International Comparison of Fossil Power Efficiency and CO2 Intensity.

2-2-2. Development and investment benefits

The increase in coal-fired power generation will provide ample investment

opportunities within the EAS region. The investment benefits for the EAS region are

assumed to be concentrated in new coal-fired power stations and new coal mines. In this

section, the investment benefits for coal-fired power stations and coal mines are quantified.

In reality, other investment opportunities associated with coal-fired power station

development such as investment in infrastructure will also arise.

Figure 2-12 displays the investment opportunities in coal-fired power stations and

coal mine development based on forecasts in the business as usual (BAU) case of the ERIA

energy savings research project on energy saving potential in the EAS region. In the BAU

case, electricity generated from coal per year is forecasted to increase by 5,897 TWh from

2010 to 2035. By 2035, this would require an estimated 898 gigawatt (GW) of new coal-

fired capacity across the EAS region, assuming operation at 75 percent. The costs associated

with utilising USC-type boilers are estimated at US$1.692 billion/GW to US$1.911

Source: IEA World Energy Outlook 2009,

Ecofys International Comparison of Fossil Power Ef f iciency and CO2 Intensity 2010

18

billion/GW. The total investment opportunities in coal-fired power stations across the EAS

region amount to about US$1.617 trillion, with investment opportunity in China accounting

for around US$751 billion.

Assuming that USC-type boilers with a thermal efficiency of 43.5 percent are

installed at new coal-fired power stations, around 1,943 MT of thermal coal is required

annually to generate the additional 5,897 TWh of electricity in 2035. Development costs

per metric tonne can range from around US$78 million to US$113 million, depending on

the type of coal mine (open-cut or underground). For the entire EAS region, the average

investment cost for coal mines is therefore estimated to be US$186 billion. The coal mine

investment opportunity per country was estimated based on projections of coal production

in 2030, with respective country share applied to the 1,943 MT of coal necessary to

generate the additional 5,897 TWh. In this approach, China, India, Australia, Indonesia, and

Viet Nam account for 1,088 MT, 428 MT, 204 MT, 172 MT, and 47 MT, respectively (or in

monetary terms, US$104 billion, US$41 billion, US$20 billion, US$16 billion, and US$5

billion of investment opportunity, respectively.

Figure 2-12. Investment and Development Benefits

Note: The coal amount necessary to generate 5,897 TWh was calculated using the American Petroleum Institute (API) 6 index for Newcastle free on board (FOB) coal at 6,000 kcal/kg and thermal efficiency of coal power stations at 43.5%. Values may not add up due to rounding. Sources: Economic Research Institute for ASEAN and East Asia (ERIA) Energy Savings Research Project, Japan International Cooperation Agency (JICA), and author’s own calculations.

Coal-fired power stations

Coal mines

Investments 2009-2035,

billion USD

Japan

USD 21 billion

Vietnam

USD 85 billion

South Korea

USD 55 billion

Indonesia

USD 82 billion

Australia

USD 20 billion Total EAS region

USD 1,803 billion

Malaysia

USD 39 billion

Philippines

USD 29 billionIndia

USD 629 billion

China

856 billion USD

$17

$66

$55

$0.1

$39

$0.1$5

$81

$104

$751

$41

$588

$186

$1,617Viet Nam

19

2-2-3. Job creation benefits

New coal-fired power stations and newly developed coal mines will create jobs in

the EAS region. Figure 2-13 shows an estimation of long-term job creation (excluding

construction jobs) related to power stations and coal mines.

In the ERIA energy savings research project BAU case, coal-fired power generation

is forecasted to increase by 5,897 TWh from 4,809 TWh/year in 2010, to 10,706 TWh/year

in 2035. Assuming productivity in power stations to be about 42 persons/TWh (or 23.9

GWh/person/year) based on generation and employment data from Australia, 200,966

employees are necessary to generate 4,809 TWh/year in the EAS region. In order to

generate 10,706 TWh/year, 447,423 employees are necessary. Under these assumptions,

employment in coal-fired power stations is estimated to increase by 246,457 persons.

The amount of coal required to generate the additional 5,897 TWh/year by 2035 is

around 1,943 MT/year. Under the assumption that employment in coal mines is 39

persons/MT, 3 new coal mine development in the EAS region is estimated to create

75,767 new jobs.

In addition to individuals required to operate power stations and coal mines,

workers will be required during the construction phase of these projects.

3 From Robert D. Humphris (1999), ‘The Future of Coal: Mining Costs and Productivity,’ in The Future Role of

Coal, International Energy Agency.

20

Figure 2-13. Job Creation Benefits

Note: Generation productivity is calculated as total generation excluding off-grid generation in Australia/number of employees in the power generation sector in Australia for FY 2006–2007. It was applied to the 2009 coal demand necessary for coal-fired power generation and to the 2035 coal-fired power generation to estimate the total number of employees in the EAS region. The coal mining productivity value was taken from Robert D. Humphris, ‘The Future of Coal: Mining Costs and Productivity’ from International Energy Agency (IEA) (1999), ‘The Future Role of Coal,” and applied to increased annual amount of coal required in 2035. Sources: Compiled from the ERIA Energy Savings Research Project; Bureau of Statistics, Australia; Department of Resources, Energy, and Tourism, Australia; and author’s calculations.

4,809

Coal increase,8,197

Natural gas, 981

Nuclear, 1,429 Hydro, 2,231

Others, 1,366

0

5,000

10,000

15,000

20,000

25,000

2005 2010 2015 2020 2025 2030 2035

To

tal g

en

era

tio

n in

EA

S r

eg

ion

[T

Wh/a

]

4,809

Coal increase,5,897

Natural gas, 3,281

Nuclear, 1,429

Hydro, 2,231Others, 1,366

0

5,000

10,000

15,000

20,000

25,000

2005 2010 2015 2020 2025 2030 2035

To

tal g

en

era

tio

n in

EA

S r

eg

ion

[T

Wh/a

]

Electricity generation EAS region BAU case Electricity generation EAS region natural gas replacement case

2009 -

2035

Coal

generation

increase

Employment

per TWh

Job creation

in power

stations

Coal

demand

increaseJob creation

in coal mines

5,897

TWh

42

persons246,457

persons1,943

MT

Employment

in coal mines

75,767

persons

105,315

persons2,700

MT

8,197

TWh

42

persons342,568

persons

BAU

case

Gas

replacem

ent case

Employment

per MT

39

persons

39

persons

Forecast Forecast