A coal-fired electric generation plant in China. Photo: iStock/Getty Images

The Covid-19 pandemic has profoundly affected the energy market, triggering a crisis of confidence for energy companies generally, but most of all for those involved in coal. 

In mid-October, the International Energy Agency’s 2020 Global Energy Review showed that while global energy demand declined by 3.8% in the first quarter of 2020, global coal demand was hit the hardest, falling by almost 8%, when compared with the same period in 2019.

The outlook is similarly dim, with coal demand not returning to pre-crisis levels in any of the IEA’s scenarios, while the outlook for renewable energy shows growth across the board.

Those that ride the wave of the energy transition can come out ahead, but those that refuse to change will likely see their profits sink. 

How to act, and when to do so, are the issues facing the Asian companies attending Singapore International Energy Week, which kicks off on Sunday, October 25.

Global and regional trends are making such issues more straightforward to resolve. Across Asia, in many of the countries where coal was expected to grow, building new renewable energy infrastructure is now the cheaper option. 

When it comes to climate, as the IEA points out, the energy infrastructure already built is enough to take global warming past the 1.5-degree limit aimed for by the Paris Agreement. Meeting the Paris target means not just halting further expansions of fossil fuel infrastructure, but even retiring existing infrastructure early. 

Corporate world is shifting fast

Against this backdrop, events are unfolding fast. We only need to look at policy shifts over the past month to see the evidence of change. Since September, major players in the coal-power industry in Asia have headed for the door marked Exit. 

US giant General Electric, which at the beginning of the year was helping develop 18 coal-power stations around the world, 50% of which were in Asia, announced at the end of September it would not provide equipment to any new coal-power stations. 

In South Korea, multibillion-dollar tech giant Samsung, recently faced with a global campaign targeting the involvement of its construction arm in Vietnamese coal-power station Vung Ang 2, has announced it will not build any further coal-power stations. South Korean utility KEPCO (Korea Electric Power Corporation) has also indicated the same. 

Last week, Japanese trading house Mitsui also announced its exit from its current coal operations. While it still owns stakes in coal-fired plants in Indonesia, China, Malaysia and Morocco, its chief executive officer has set a goal to make Mitsui’s ownership of coal power zero by 2030. 

These developments, and many others over the course of this year, raise the question of why any reasonable company would be looking to build a new coal-power station.  

But Singapore’s Sembcorp is proposing to do just that, proposing two new 700-megawatt coal-power projects in coastal Bangladesh. The company reportedly submitted a feasibility study for the first phase of the Matarbari Kohelia coal-power project to the Bangladeshi government this year.  

The Matarbari Kohelia project itself is fraught with risk. It has been contested by local residents, who claim that they have received inadequate compensation for their lands and that their fishing and farming livelihoods have been seriously damaged by coal power in the area. 

What’s more, the Bangladeshi government initiated plans for a review of 26 of its 29 planned coal plants in August, stating the country’s intention to “move from coal-based power,” rendering this project at risk of becoming a stranded asset.  

Sembcorp has experience with such assets. It is still trying to offload its recently purchased coal-power projects in India, with no success to date.

In March 2018, when Sembcorp released its Climate Strategy, its aim of ensuring its investments would meet its greenhouse-gas emissions targets seemed ahead of the curve.  

But times have changed and today, any policy allowing coal projects to be built is woefully inadequate. Any company seriously considering building new coal-power plants demonstrates a lack of understanding of current realities. 

Singapore International Energy Week offers the ideal opportunity for Singaporean companies such as Sembcorp to take stock of their operations and focus on a renewable energy future, rather than getting mired in polluting industries of the past.

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Julien Vincent

Julien Vincent is executive director of Market Forces, an NGO on environmental finance.