OUTLINE OF PRESENTATION I. RISING COAL DEMAND IN EAS REGION II. III. IV. CLEAN COAL TECHNOLOGIES ECONOMIC ASSESSMENT OF CTT ECONOMIC, SOCIAL & ENVIRON

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1 Symposium on Sustainable Power Supply Mix in the Future 20 November Novotel Bangkok On Siam Square, Bangkok, Thailand ECONOMIC BENEFITS FROM AN INTRODUCTION OF CLEAN COAL TECHNOLOGIES IN EAST ASIA HAN, Phoumin, Ph.D Energy Economist ERIA (Economic Research Institute for ASEAN and East Asia)

2 OUTLINE OF PRESENTATION I. RISING COAL DEMAND IN EAS REGION II. III. IV. CLEAN COAL TECHNOLOGIES ECONOMIC ASSESSMENT OF CTT ECONOMIC, SOCIAL & ENVIRONMENTAL BENEFITS V. CONCLUSIONS & IMPLICATIONS 2

3 I. COAL DEMAND IN EAS REGION Source: ERIA Energy Outlook 3

4 Research Framework in 2014 ERIA Working Group for Analysis of Energy Saving Potential in East Asia 10 ASEAN Members Australia China, India, Japan, Korea, New Zealand MODEL ASSUMPTIONS Socio-economic & Energy saving target with action plans LEAP & MICROFIT E4CAST (Hybrid type) IEEJ MODEL (econometrics) Energy outlook results, BAU and APS (including the EE target) Energy saving potential = BAU APS in terms of TPEC and TFEC 4

5 Macro Assumptions Economic Growth 4.0 % P.A. from 2012 to 2035 Population Growth 0.6 % P.A. from 2011 to billion persons in 2012 to increase to 3.91 billion in 2035 GDP per capita 4,120 US$/person (constant 2005 price and US$) in 2012 increases to 8,800 US$/person in 2035 Crude Oil Price (nominal price) Increase to about 200 US$/bbl in 2035 due to tight balance between demand and supply Car Ownership 0.09 vehicles/person in 2012, increases to 0.18 vehicles/person using vehicle data of 14 countries Source: ERIA ESP WG Report

6 Macro Assumptions New GDP growth assumption reflect the current government estimated GDP growth. For example, Thailand average GDP growth rate has been used at 3.9 % to be consistent with the NEW PDP 2015 GDP Growth Rate by Country Population Growth Rate by Country Source: ERIA ESP WG Report

7 Energy Outlook Result (BAU) Final Energy Consumption (MTOE) times (3.4% P.A.) 1.7 times (2.3% P.A.) Coal Oil Gas Electricity Heat Other Share by Energy in FEC 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Coal Oil Gas Electricity Heat Other Gas will mark the highest growth at 4.3% p.a., followed by electricity (3.4%) and oil (2.7%). Consequently gas share will increase from 7% in 2012 to 11% in Electricity share will also increase from 20% to 25%. On the other hand, coal share will decline from 22% in 2012 to 16% in Source: ERIA ESP WG Report

8 Power Generation Coal fired generation will still be dominant and its share will be around 60% in (TWh) times (6.5% P.A.) 2.1 times (3.3% P.A.) % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Coal Oil Gas Hydro Nuclear Geothermal Others Coal Oil Gas Hydro Nuclear Geothermal Others Source: ERIA ESP WG Report

9 Rising Coal Demand Primary Energy Demand in EAS (MTOE) Mtoe 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Coal Oil Natural gas Nuclear Hydro Geothermal Others Source: ERIA Energy Outlook, 2014 ASEAN, together with China and India, has already shifted both economic growth gravity and energy demand to Asia; EAS is projected to grow at a faster pace of 2.5 percent per year on average from 4,910 Mtoe in 2011 to 8,912 Mtoe in 2035; Coal will still constitute the largest share of primary demand (above 50%). In absolute term, coal consumption will increase by almost double from 2,507 Mtoe in 2011 to 4,155 Mtoe in

10 Estimate of Coal-Fired Power Plants in EAS Share of coal-fired power stations in the EAS region Coal-fired power generation by country Power generation capacity [GW] 5,000 4,000 3,000 2,000 1, % 1,939 GW 940 GW 999 GW Coal Capacity CAGR +3.4% 3,106 GW 1,575 GW 1,531 GW 4,521 GW Other sources 2,310 GW 49.3% 48.9% Coal 2,211 GW , Coal share of generation capacity [%] Coal electricity generation [TWh] 10,000 8,000 6,000 4,000 2,000 5,364 TWh 5.2% 7.5% 13.3% 69.9% Coal Generation CAGR +3.2% 4.0% 7,544 TWh 4.1% 5.6% 5.8% 15.3% 69.1% 11,406 TWh Japan 3.1% NZ, AUS, KOR 3.2% ASEAN 8.0% India 20.8% China 64.9% Sources: IEA & ERIA,

11 Origin of Primary Energy Imports Coal import origins EAS (2013) LNG import origins ASEAN+3 (2013) Crude oil import origins EAS (2013) Canada 2% S. Africa 5% China 1% Russia 6% Vietnam 2% US 1% Other 3% Inter-EAS: 85% Eq. Guinea 2% Others 4% Nigeria 5% Russia 5% Brunei 4% Middle East: 42% Qatar 30% Kazakhstan 1% Other ASEAN+3 2% Nigeria 2% Colombia 1% Venezuela 4% Angola 5% Congo 1% Others 7% Saudi Arabia 23% Middle East: 66% Australia 30% Indonesia 50% Total: 684 million tonnes Indonesia 10% Malaysia 14% Inter-EAS: 42% Australia 14% Oman 5% Yemen 4% UAE 3% Total: 163 million tonnes Australia 1% Malaysia 1% Indonesia 2% Russia 5% Oman 4% Iran 5% Other Middle East 1% Qatar 5% Kuwait 7% United Arab Emirates 13% Iraq 8% Total: 928 million tonnes Sources: ERIA,

12 Flow of Coal Exports/imports Russia 109.4Mt 9.8Mt Other Europe 39.7Mt OECD Europe 181.5Mt OECD Europe 181.5Mt 10.0Mt 56.9Mt 3.1Mt Africa/Middle East 21.4Mt 23.9Mt Other Asia 477.4Mt 262.2Mt China 10.6Mt 6.8Mt 74.2Mt 10.0Mt Mt 3.9Mt 22.2Mt Japan 121.5Mt 80.1Mt 3.5Mt 6.7Mt 8.1Mt Canada 5.9Mt North America 23.5Mt 5.5Mt 10.8Mt 18.9Mt USA 34.1Mt Colombia 75.4Mt 50.4Mt 7.8Mt 17.7Mt South Africa 71.7Mt 7.3Mt 37.9Mt Indonesia 308.9Mt Australia 144.1Mt 3.4Mt Latin America 21.1Mt 9.6Mt Sources: IEA,

13 II. CLEAN COAL TECHNOLOGIES 13

14 Clean Coal Technologies for power generation Sources: JCOAL,

15 Schematic Overview of Typical Power Plant De-NOx, De-SOx and Electrostatic Precipitator (ESP) Gas-gas heater (GGH) is equipped to avoid white smoke from the stack by the warming-up of the flue gas exhausted from wet type Desulfurization equipment. 15

16 Integrated Gas Combined Cycle (IGCC) IGCC has been developed to improve the power generation efficiency using gasifier technology to turn coal into synthesis gas (syngas) for gas turbine power generation. The plant is called integrated because the syngas produced in the gasification section is used as fuel for the gas turbine, and the steam produced by syngas cooler in the gasification section and heat recovery steam is used by steam turbine in combined cycle 16

17 Higher Thermal Efficiency LHV Sources: JCOAL, 2014 Note: HHV- Higher Heating Value; LHV; Lower Heating Value 17

18 Relationship b/t power plat efficiency & CO2 emission 18

19 A REGIONAL TREND- ASEAN & EAS o Even with current USC, efficiency can be raised to over 40% o With deployment of next-generation technologies like IGCC, power generation efficiency of over 50% can be attained. 19

20 III. ECONOMIC ASSESSMENT OF THE CCT 20

21 General assumptions for cost-benefit analysis Values Remarks Capacity 1,000 MW Operation 25 years For cash flow purposes Plant Operation rate 80% Thermal efficiencies 42.1% (USC), 41.1% (SC), 38.2% (subcritical) LHV value from NEDO study Promotion of highefficiency coal-fired power stations in Indonesia Annual generation 7,008 GWh Coal specifications Heating value CO2 emissions 4,000 kcal/kg 1.43 kg-co2/kg coal Based on IPCC 2006 default emission factors for stationary combustion in the energy sector. 21

22 Cost Components LCOE consists of: base plant costs, desulphurization and denitrification costs, financing & CO 2 emission costs. Plant costs are divided into following costs: o Engineering, procurement and construction (EPC), o Operation and maintenance (O&M), and o fuel costs. Financing costs are calculated to generate 9.5% IRR and 15% IRR. To calculate cash flows over operation, electricity sales are set equal to annual generation at 7,008 GWh for a period of 25 years, CO 2 emission costs were calculated at USD 10/ton-CO 2. 22

23 LCOE, excluding financing and CO 2 costs 2009 to 1 st quarter 2014, coal prices for 4,200 kcal/kg coal ranged from USD 35/ton to USD 63/ton. Thus, price scenarios were chosen at: USD 40/ton (low scenario), USD 50/ton (medium scenario), and USD 60/ton (high scenario) Without financing cost, USC is more competitive in every coal price scenario Ultra-Supercritical (42.1%) Supercritical (41.1%) Subcritical (38.2%) High EPC (USD 2,076 million) Medium EPC (USD 1,941 million) Low EPC (USD 1,867 million) High EPC (USD 2,043 million) Medium EPC (USD 1,908 million) Low EPC (USD 1,796 million) High EPC (USD 1,925 million) Medium EPC (USD 1,796 million) Low EPC (USD 1,688 million) High (USD 60/ton) Coal prices Medium (USD 50/ton) Low (USD 40/ton)

24 LCOE, with financing and CO 2 costs If financing costs are set to generate 9.5% IRR, USC is again most competitive, even at USD 40/ton coal price; However, as initial capital costs are higher, USC is less competitive when financing costs to generate 15% IRR are considered USD 40/ton USD 50/ton USD 60/ton USDcents/kWh USDcents/kWh USDcents/kWh EPC O&M Fuel desox FC CO2 EPC O&M Fuel desox FC CO2 EPC O&M Fuel desox FC CO2 denox 1 denox 2 denox EPC O&M Fuel desox FC CO2 EPC O&M Fuel desox FC Co2 EPC O&M Fuel desox FC CO2 denox denox denox EPC O&M Fuel cost desox Financing denox cost CO2 EPC O&M Fuel cost desox Financing denox cost CO2 EPC O&M Fuel cost USC SC Subcritical desox denox Finance cost CO2 24

25 Generation Cost by Boiler Type & Coal Price Financing costs also account for a significant share of total generation costs, depending on IRR. USC loses cost-competitiveness when IRR is higher. For example, at coal prices of USD 50/ton, USC is most cost-competitive when IRR is 9% (USDcent 6.77/kWh). However, when IRR is increased to 15%, USC is less cost-competitive than SC and subcritical (USDcent 8.27/kWh). Therefore, USC may be less viable in countries which do not have access to low-interest loans. Boiler Type Ultra Super Critical (USC) Super Critical (SC) Sub-critical Capacity Coal CV / Price 1,000 MW 4,000 Kcal/kg (GAR) / 50 USD/ton Thermal Efficiency (LHV) 42.1% 41.1% 38.2% Initial Cost (million USD) 1,931 1,897 1,787 Coal Consumption (tons/year) 3,578,263 3,665,326 3,943,583 CO2 Emission (tons/year) 5,102,914 5,227,073 5,623,893 Generation Cost (USD cent/kwh) (@USD60/ton) Generation Cost (USD cent/kwh) (@USD50/ton) Generation Cost (USD cent/kwh) (@USD40/ton) IRR= 9.5% IRR=15.0% IRR=9.5% IRR=15.0% IRR=9.5% IRR=15.0%

26 IV. ECONOMIC, SOCIAL AND ENVIRONMENTAL BENEFITS 26

27 Potential investment benefits $104 $0.1 Investments , billion USD Coal-fired power stations $41 $751 $55 South Korea USD 55 billion Japan USD 21 billion Coal mines $588 China 856 billion USD India USD 629 billion $5 $0.1 Philippines USD 29 billion $186 $39 $81 $17 Malaysia USD 39 billion Vietnam USD 85 billion $66 $1,617 Indonesia USD 82 billion Australia USD 20 billion Total EAS region USD 1,803 billion 27

28 Employment creation Total generation in EAS region [TWh/a] 25,000 20,000 15,000 10,000 5,000 Electricity generation EAS region BAU case 4,809 Forecast Others, 1,366 Hydro, 2,231 Nuclear, 1,429 Natural gas, 3,281 Coal increase, 5, Coal Job creation generation Employment in power 2035 increase per TWh stations Total generation in EAS region [TWh/a] 25,000 20,000 15,000 10,000 5,000 Electricity generation EAS region natural gas replacement case 4,809 Forecast Natural gas, 981 Others, 1,366 Hydro, 2,231 Nuclear, 1,429 Coal increase, 8, Coal demand Employment Job creation increase per MT in coal mines BAU case Gas replacem ent case 5,897 TWh 8,197 TWh 42 persons 42 persons 246,457 persons 342,568 persons Employment in coal mines 1,943 MT 2,700 MT 39 persons 39 persons 75,767 persons 105,315 persons 28

29 Potential CO2 reduction by CCT Source: IEA World Energy Outlook 2009, 29

30 V. Conclusions CCT is an useful technology to be able to use low ranked coal, which has a plenty reserve in this region; CCT needs large investment; thus lowering upfront cost will make CCTS competitive; About $US 1,803 billion investment potential from the introduction of CTT & Coal Mines Around haft million job will be created About 13.5 billion tons of CO2 reduction potentials Strengthen environmental standard is key to the up-take of CCT technologies and deployment; Energy efficiency is vitally crucial for policy measures to save energy and use it effectively. Contact : report@tky.ieej.or.jp 30