Page 4 - AsiaElec Week 41

AsiaElec COMMENTARY AsiaElec
Japan’s commitment to coal could be costly
Japan’s coal-fired generating sector faces becoming uncompetitive and a risky investment as the cost of renewables falls, writes Richard Lockhart
JAPAN
WHAT:
Japan could face $71bn of loss-making coal-fired generating projects by 2007
WHY:
The cost of renewables in falling, making coal uncompetitive
WHAT NEXT:
Japan is investing in renewables, but it is also maintaining its commitment to coal, in contrast to most other industrialised economies
THE falling cost of renewables could severely undermine the prospects of coal-fired generat- ing in Japan, creating so-called stranded assets worth $71bn.
That is the conclusion of a recent study from Carbon Tracker, together with the University of Tokyo and the Carbon Disclosure Project, that highlights the risks associated with Japan’s per- sistent commitment to coal as a generating fuel.
Yet alongside Tokyo’s attachment to coal, the country has an ambitious post-Fukushima pol- icy-making record regarding climate change, with many of the country’s engineering giants such as Mitsubishi and Hitachi playing a leading role in building wind projects worldwide.
Research
Japan has 11 GW of coal capacity currently under construction, permitted or pre-permit- ted, and Carbon Tracker found that this capac- ity, worth $29bn of investment, would need to be closed prematurely if the country were to be compliant with the Paris Agreement on reducing global warming and cutting emissions.
As well as Paris, declining utilisation rates at power plants and the falling cost of solar and wind could also make coal uncompetitive in the long run, creating huge risks for investors in the fuel.
Carbon Tracker found that renewables would be cheaper than existing coal projects by 2025, and new coal power plants by 2022.
Developing up to 11 GW of coal power plants today would create higher power bills for con- sumers and fiscal liabilities in the future, the study found.
This would undermine consumer spending and the country’s economic competitiveness as a whole.
The study compared the levelised cost of energy (LCOE) of coal, solar and wind. It found that by 2022, new offshore wind could be cheaper at $64 per MWh than new coal plants. In 2023, new solar plants would become cheaper at $65 per MWh. Then by 2025, new onshore wind could be cheaper at $66 per MWh.
These are the prices at which coal would no longer be able to earn an economic return for the investor because of regulatory and
market changes associated with the transition to a low-carbon economy.
Looking ahead, Carbon Tracker predicts that existing coal power will have a constant LCOE of roughly $55 per MWh, which would be over- taken by both new offshore wind and new solar in 2025 and by new onshore wind by 2027.
In the wider context, the cost of solar is fall- ing. Indeed, Carbon Tracker’s figures for Japan seem expensive compared to the recent tender in Uzbekistan, for example, where UAE solar giant Masdar bid $0.027 per kWh, or $27 per MWh, to build a utility-scale solar plant in the Central Asian country.
Power politics
The findings come as the Japanese government has been setting new renewables targets and creating a legal framework to drive forward the country’s energy transition.
In June’s G20 summit in Japan, Prime Min- ister Shinzo Abe publicised his country’s green credentials, and Tokyo has also recently engaged more forcefully with green energy and sustaina- ble development in Africa.
The government in June adopted a long-term emissions reduction strategy that aimed to cut dependency on coal-fired generation to the “lowest possible levels,” although no concrete target was set.
Current targets for renewables stand at 22-24% by 2030, up from 15% in 2018.
Yet abroad, Japan’s investment in coal is more prominent, with the government still support- ing coal projects by state funding agencies and the country’s power giants.
At the G20 in June, Japanese Minister of Economy, Trade and Industry (METI) Hiro- shige Seko said coal was still necessary, but that better technology could reduce its emissions.
“It’s inevitable that in some countries coal thermal has to be used. ... Japan’s coal thermal power, compared with conventional coal ther- mal power, has fewer carbon dioxide emissions and we should provide and implement it in developing countries, “he said.
“With [innovative] CCS and CCU, coal emissions can be captured, stored, used or recy- cled,” he added.
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w w w . N E W S B A S E . c o m Week 41 15•October•2019