Cheap coal turns Southeast Asia away from gas

Southeast Asia will “tilt away from gas to use more coal”, according to a recent report from Reuters, as the region tries to cut the cost of providing electricity for its 600 million people.

Driven by demand for LNG in Japan – where the nuclear industry is in crisis – and China as it tries to switch away from coal, the price of gas in Asia is currently five times that of gas in US. This makes 1 MW of LNG-fired power twice as expensive as 1 MW of coal-fired power in Asia, say the IEA. “People in this region keep talking about green growth, but when I look at the numbers, the growth is not green. It is black as coal,” says Fatih Birol, chief economist at the IEA.

Even with a wave of LNG projects coming online in the region in the second half of the decade, a concurrent rise in global LNG demand will keep the market tight and maintain coal’s cost advantage.

Power generation is set to rise by 50% in Southeast Asia to 2020: the IEA expects half of this to be coal-fired while only a quarter will be gas-fired. “Coal is now making a sneak return,” according to Fereidun Fesharaki, chairman of Facts Global Energy, an energy consultancy. “ Sellers of LNG believer the buyers have no choice. But they do: it is coal.”

Written by Jonathan Rowland

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