The removal of subsidies, price volatility and international competition has led to average gas prices being twice that of coal on an energy equivalent basis.
The unprecedented pace and scale of economic development in ASEAN has driven a surge in demand for electricity. Between 1990 and 2014, while the region’s economy grew by 5% per year on average, electricity generation grew by 7.4% reaching 843 terawatt hours (TWh) in 2014.
Natural gas has historically dominated ASEAN’s electricity supply. In 2013, according to the IEA, gas was responsible for 44% of electricity generation, compared to 22% globally. In the recent past, coal generation has played an important, albeit supporting, role to gas – producing a third of electricity generation in 2013, compared to 41% globally.
From 2010, however, there has been an undeniable transition in regional economies toward coal-fuelled power generation. As a result, the share of gas in electricity generation declined 5% between 2010 and 2014, while the share of coal in the same period rose from 27% to 34%.
With the use of coal projected to continue to grow over the coming decades, a cleaner coal technology pathway is necessary if international climate objectives are to be met. ASEAN's Energy Equation highlights three key steps on this cleaner coal technology pathway:
- Pollution control technology – Greater deployment required to manage rise in pollutants
- HELE – Improving regional coal efficiency while reducing global carbon emissions
- CCS – Vital to delivering long-term regional carbon reduction
HELE reconciles international commitments to reduce carbon with the economic priorities of generating affordable and reliable electricity.
Investment in HELE is a more effective carbon reduction strategy than transitioning to renewables in ASEAN.
Electricity markets in ASEAN undeniably face a very different set of challenges compared to more mature markets. In 2016, the World Economic Forum (WEF) considered potential policy approaches for fast growing economies, such as ASEAN. The report recognised the need for newly industrialising economies to balance security, affordability and sustainability. Central to this premise, WEF encouraged energy stakeholders to adopt the most efficient pathway to policy objectives.
For ASEAN, the most efficient pathway undeniably includes a significant role for HELE coal generation.
ASEAN's Energy Equation considers a hypothetical scenario in which policy makers had $1 billion to spend with the objective of producing
the highest levels of electricity with the lowest emissions profile. The graph below plots several potential approaches:
- In the first scenario, the investment could be directed to continue the transition in Europe from gas (CCGT – baseline) to renewables. This would result in moderate reduction in emissions, although much lower levels of electricity generation.
- Secondly, the investment could fund a transition away from subcritical (SubC – baseline) to wind and solar deployment in ASEAN. This too is impractical given the much lower levels of electricity generated.
- In the final scenario, for the same level of expenditure, investment in HELE would achieve a similar level of CO2 emissions reduction to the deployment of renewables in Europe, while generating up to three times more electricity.