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Launching Event: Assessment of the Role of Coal in the ASEAN Energy Transition and Coal Phase-Out

27 June 2024

Photo 1. Photo Session with the participants 

The ASEAN Centre for Energy (ACE) hosted an event on 22 May 2024 at the Vertu Hotel Harmoni in Jakarta, Indonesia. The gathering marked the launch of the Position Paper on the Assessment of the Role of Coal in Energy Transition and Coal Phase-Out to respond to the ASEAN Taxonomy for Sustainable Finance Version 2 (March 2023) and Version 3 (March 2024), this launching event aims presented the findings of the assessment of the role of coal in the ASEAN energy transition and coal phase-out; and deliberate the findings among experts and the ASEAN stakeholders to hope further that these findings could be considered in enhancing the next version of the ASEAN Taxonomy for Sustainable Finance. 

Photo 2. Opening Remarks by Dato’ Ir Ts Abdul Razib Dawood 

Dato’ Ir Ts Abdul Razib Dawood, CEO of Energy Commission Malaysia and Chair of the ASEAN Forum on Coal (AFOC), opened the event by underscoring ASEAN’s rapid growth and the surge in electricity demand, driven by domestic consumption. He discussed the revised ASEAN Taxonomy, which requires activities to align with the “1.5-degree pathway” and the IEA Net-Zero emission trajectory, sparking discussions on the 2040 deadline for coal phase-out. Despite coal’s key role in ASEAN’s energy sector, Dato’ emphasised the need to balance its economic benefits with environmental impact and to explore alternative energy sources. He concluded by highlighting the event as a platform for discussion and collaboration towards a sustainable future for ASEAN. 

Photo 3. Opening Remarks by Dr Nuki Agya Utama 

Then, it continued with the opening remarks delivered by Dr Nuki Agya Utama, Executive Director of the ASEAN Centre for Energy (ACE). Dr Nuki reflects on the enduring prominence of coal in the ASEAN energy landscape. He noted that coal, particularly in the power and industry sector, remains a crucial source for maintaining grid stability, ensuring energy security, and preserving energy affordability. Dr. Nuki highlighted that the position paper underscores ASEAN’s commitment to sustainability. However, he expressed concern that requiring a coal phase-out for projects to be classified as ‘green’ or sustainable could hinder the financing of Clean Coal Technologies/Carbon Capture Utilisation and Storage projects. This requirement, which applies regardless of the type of coal-fired power plants and omits electricity generation activities from abated coal power plants, could potentially obstruct the region’s energy security and the value of a just and inclusive energy transition. 

Photo 4. Chaedar Indra Pramana, Research Analyst at ACE during his presentation 

The event proceeded with the main agenda item, the presentation of the launching position paper by Chaedar Indra Pramana, Research Analyst at ACE, who presented key findings on the role of coal in ASEAN’s energy transition, highlighting coal’s historical and current significance despite its declining contribution to the primary energy supply. By 2019, oil accounted for 40% of the region’s energy supply, with natural gas and coal each at 20%, but coal’s role is projected to remain crucial, meeting 30% of demand by 2050. He emphasised coal’s importance for affordable energy, particularly in Indonesia and Vietnam, due to significant investments and economic contributions. He noted the economic challenges of transitioning away from coal, the varying development stages across ASEAN countries, and the potential negative impacts on energy security and economic growth from a rapid phase-out, as seen in Europe. He called for careful planning, significant investments in clean energy, and a tailored ASEAN Taxonomy for Sustainable Finance, advocating a coal phase-down approach with Clean Coal Technologies, expanded grid capacity, and strengthened domestic industries to balance development, security, and sustainability. 

Photo 5. Panel discussion moderated by Beni Suryadi, Manager of ACE 

Following the paper launch agenda item, a panel discussion titled “Navigating the Path to Sustainable Finance: Exploring Coal Phase-out Implications and Strategies in ASEAN” was convened. The discussion was moderated by Beni Suryadi, Head of the Power, Fossil Fuel, Alternative Energy and Storage (PFS) Department at ACE. The panel comprised distinguished experts from various sectors: Dr Lars Schernikau, Advisory Board member from HMS Bergbau AG; Putra Adhiguna, Managing Director of the Energy Shift Institute; Anindita Satria Surya, Vice President of Energy Transition and Climate Change at PT. PLN; Claudia Vasquez, Program Leader for Infrastructure & Lead Energy Specialist at The World Bank; and Jennifer Tay, PwC Asia Pacific Infrastructure Leader from PwC Singapore. The panellists brought their unique perspectives and insights to the table, contributing to a rich and enlightening discussion on sustainable finance and coal phase-out strategies in the ASEAN region. 

Jennifer highlighted during a panel discussion the lack of interest in the private sector in investing in coal-related decarbonisation initiatives, posing a significant hurdle towards sustainable energy practices. She emphasised the importance of balancing environmental goals and economic development in the ASEAN region, noting that without economic development, investors are unlikely to invest in any technology, whether thermal or green. She argued for the inclusion of economic development in the equation as it provides necessary fiscal support for programs. Expressing hope for the next blueprint to balance environmental and economic objectives, she stressed the need for a sustainable approach that considers both environmental conservation and economic growth, while addressing private sector challenges. 

Claudia addressed the trilemma of security, affordability, and climate mitigation in phasing out coal in the ASEAN region. She recognised coal’s ongoing significance in the region’s energy mix but also identified untapped opportunities to shift towards lower carbon sources due to the region’s rapidly growing electricity demand. This growth, she noted, offers a chance to add lower carbon capacity, unlike in regions like Europe, where stable demand makes changing the mix more challenging. However, she pointed out the current lack of cost competitiveness of lower carbon resources compared to fossil fuels in the ASEAN region, citing Zambia’s lower solar PV tariffs despite more challenging macroeconomic conditions and financing access. She also emphasised the need for collective efforts to address these issues to facilitate an affordable transition to a lower carbon energy mix in the ASEAN region. 

Anindita outlined PLN’s energy transition plans during a panel discussion. By 2040, PLN aims to have renewable energies and gas make up around 75% and 25% of their energy mix, respectively. While there is no coal phase-out planned, a coal phase-down strategy is in place to reduce coal-produced energy and replace it with green energy. He also highlighted the challenge of most coal-fired power being produced by Independent Power Producers (IPPs), which could lead to compensation implications from the government if the capacity factor is reduced to phase down coal. He also mentioned a 660-megawatt process for coal phase-out, subject to mid-regulation and the impact of early retirement. Further, he stressed the need for strategic planning and government collaboration to navigate the complexities of transitioning to a lower-carbon energy mix. 

Putra emphasised during a panel discussion that the current debate on coal phase-out or phase-down in the ASEAN region is largely semantic, with the focus being on initial steps such as the first 500 megawatts. He acknowledged the ongoing debates about the timeline for phasing out coal, rooted in various perspectives and reasons, and stressed the importance of understanding that any plan is a mix of technicalities and politics. While many argue for a science-based approach to climate discussions, he noted that what is considered reasonable or scientific can vary. He suggested that the ASEAN region should currently focus on controlling the first few gigawatts of capacity, avoiding any growth in coal demand, and replacing it with renewable energy rather than debating on coal phase-out or phase-down. He concluded by calling for a ‘reality check’ and a focus on practical steps towards energy transition. 

On the other hand, Dr Lars underscored the importance of long-term thinking in energy investments during a panel discussion, cautioning that short-term thinking can lead to long-term mistakes. He predicted that in seven or eight years, ASEAN countries will not be able to serve peak power based on their current energy plans.

He suggested that future taxonomies should consider the cost of not serving peak power and the cost of not having reliable energy, as energy is fundamental for economic development. He expressed his belief in the necessity of investing in more thermal power plants at present and emphasised the importance of considering the life cycle, not just emissions when evaluating energy sources. He warned that optimising for CO2 alone could lead to significant economic and environmental mistakes. He concluded by stressing the need for a balanced, environmentally friendly, and economically correct approach to energy planning that considers the life cycle of energy sources. 

Despite the different opinions of the panel of experts, Beni highlighted the consensus on the need to diversify energy resources in ASEAN to ensure a balanced, secure, and sustainable energy future for the region. He further hoped that the paper would provide comprehensive guidance on advancing cleaner policies and regulations to promote clean technology development in the region.