Costly "cleaner" coal fights for space in emissions debate (updated)

GVK Power & Infrastructure

30/11/2015 07:50

* India ramping up use of coal to meet energy needs 
    * More efficient plants could help slow emissions growth 
    * Japan a leader in "USC" cleaner coal technology 
    * USC coal plants can cost up to 40 percent more 
    * Falling coal prices erode benefit of more efficient plants 
 
 (Adds power cost comparisons in paragraph 21) 
    By Krishna N. Das, Tommy Wilkes and Yuka Obayashi 
    NEW DELHI/TOKYO, Nov 30 (Reuters) - The global coal industry 
is trumpeting "cleaner coal" technology to fight bubbling 
competition from renewable energy, but the high costs of greener 
plants are proving a major obstacle in selling them to 
power-hungry countries such as India. 
    The challenges are highlighted by the experience of Japan - 
despite a concerted push by Tokyo to take a lead in exporting 
the technology, only 7 percent of the power stations built or 
planned since 2010 with funds from Tokyo's export credit agency 
were of the most energy-efficient type, according to data from a 
group of NGOs. 
    With world leaders due to meet in Paris from Monday to try 
to agree a deal to tackle climate change, the World Coal 
Association (WCA) is touting the use of very hot steam under 
extreme pressure to raise a power plant's efficiency, which it 
says can cut the greenhouse gases emitted from burning coal by 
up to 30 percent. 
    For companies such as Mitsubishi Hitachi Power Systems, a 
joint venture between Hitachi Ltd  6501.T  and Mitsubishi Heavy 
Industries Ltd  7011.T , and the merged power business of 
General Electric  GE.N  and Alstom  ALSM.NS , Asia offers the 
best opportunities, as Europe and North America switch to 
cleaner sources of energy. 
    India should be one of the most promising markets - already 
the world's third-biggest consumer, it is ramping up domestic 
production as it plans to more than double coal output to an 
annual 1.5 billion tonnes by the end of this decade. 
    More efficient use of its coal, the dirtiest of fossil 
fuels, could help New Delhi address accusations the world's 
third biggest emitter of carbon dioxide is not doing enough to 
slow its greenhouse gas growth.  urn:newsml:reuters.com:*:nL3N126162 
    "Expanding efficient coal consumption will help address 
India's energy trilemma of meeting demand, reducing energy 
poverty and actively participating in climate change 
commitments," WCA CEO Benjamin Sporton said. 
     
    FOREIGN MONEY 
    India says foreign money and technology are crucial for the 
success of its climate change commitments, particularly as it is 
expected to almost triple its installed coal power capacity to 
500 gigawatts by 2040.  
    There was a boost last week for exporters of high-end 
cleaner coal technology, when the OECD agreed to exempt the most 
energy efficient "ultra-supercritical" (USC) power plants from 
new restrictions on subsidies for exports.  urn:newsml:reuters.com:*:nL8N13C479 
    That was a victory for Japan, whose Prime Minister Shinzo 
Abe has consistently touted cleaner coal technology as part of a 
push to triple infrastructure exports to about 30 trillion yen 
($244 billion) by 2020 to help boost an anaemic economy. 
    Japan has been at the forefront of the development of the 
technology as it tries to manage the competing demands of 
cutting greenhouse gas emissions while burning coal at record 
levels after the Fukushima disaster shattered public confidence 
in the safety of nuclear power. 
    But Tokyo's push to sell USC power plants overseas has a 
long way to go. 
    Of 23 coal stations funded since 2003 by Japan Bank for 
International Cooperation, the biggest public financer of coal 
stations after China, only one used USC technology, according to 
a study by Japanese NGOs JACSES, Kiko Network and international 
groups including the Sierra Club. 
    Using more recent figures to account for the emergence of 
USC technology, only 7 percent of JBIC funded stations were of 
that type, the study said. 
    A JBIC official said the number of USC deals was expected to 
rise in coming years. 
    Hirosuke Tai, an analyst at Daiwa Securities in Tokyo, said 
Japanese companies would need to cut costs to make USC more 
competitive, but added their technological lead would be an 
advantage if higher global environmental standards were agreed.  
    "Tighter regulations may bring more opportunities for 
Japanese companies," he said.  
     
    CHEAPEST OPTION 
    USC plants can cost up to 40 percent more than conventional 
units, the WCA acknowledges, while many international lenders 
are turning their backs on financing new coal projects in favour 
of gas and renewable energy, where prices are falling fast. 
    Solar power prices in India, around 15 percent more 
expensive than coal today on a levelised basis, are expected to 
drop to about 10 percent below coal power prices by 2020 when 
all liftime costs are included, according to consultancy KPMG.  
    Even while coal remains cheaper, slumping prices - the cost 
of coal has fallen to multi-year lows as supply outpaces demand 
- are also eroding the cost benefits of more efficient plants. 
    And in emerging markets such as India, where many consumers 
regard cheap power as a right, producers still mostly go for the 
cheaper option. 
    GVK Power & Infrastructure Ltd  GVKP.NS , which is 
developing a 540 megawatt coal-based plant in northwestern 
Punjab state, chose to use older sub-critical technology for 
that reason, said Chief Financial Officer Issac George. 
    The company would consider more efficient technologies for 
future plants, but George said that it depended on whether 
life-cycle costs came down significantly given the higher 
upfront capital outlay. 
    "If the government would give some sort of subsidy to reduce 
the capital cost... That's how we can finance green technology," 
George said." 
    India's largest power producer, state-run NTPC  NTPC.NS , 
runs more than 90 percent of its 34,400 MW of coal capacity on 
sub-critical technology, but most of its newer plants will be 
built using more up-to-date systems, the company said. 
    Some firms, such as Tata Power and Adani Power Ltd 
 ADAN.NS , which runs one of India's largest coal plants, have 
installed mid-range super-critical generating units, but across 
India more than two-thirds of the power plants built since 2010 
use sub-critical technology. 
    Asok Dasgupta, president of the Independent Power Producers 
Association of India, agreed more help was needed to push 
cleaner coal. 
    "Are you going to support the environmental guys or are you 
going to support power plants?" Dasgupta. "You will have to 
support both." 
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
GRAPHIC-Emission reduction targets    http://link.reuters.com/sed75w 
VIDEO-India plans Asia's largest coal mine    http://reut.rs/1FQMTcI 
GRAPHIC-Asia's dash for coal    http://link.reuters.com/wup75w 
GRAPHIC-Dirty power plants     http://link.reuters.com/neb26w 
GRAPHIC-Japan's coal financing    http://link.reuters.com/zyw95w 
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 (Reporting by Krishna N. Das and Tommy Wilkes in New Delhi and 
Yuka Obayashi in Tokyo; Additional reporting by Aaron Sheldrick 
in Tokyo; Editing by Alex Richardson) 
 ((Krishna.Das@thomsonreuters.com; +91-11-4178-1023, 
+91-98711-18314; Reuters Messaging: 
Krishna.Das.thomsonreuters.com@reuters.net, https://twitter.com/krishnadas56)) 
 
Keywords: CLIMATECHANGE SUMMIT/COAL