Is it time to rethink the financing of #coal power plants in developing countries?

Even if the European Investment Bank (EIB) and the World Bank introduced a few years back restrictive emissions performance standards to block the financing of coal power plants in a bid to encourage the development of renewables, the appetite of the developing world has not budged by much. The unintended consequence of this move has been to create a massive economic opportunity for China, Japan and South Korea to fill in the vacuum. Already these countries are funding coal projects in Kenya, and multiple coal projects in Indonesia, Southeast Asia’s largest economy. And this is just the tip of the iceberg - writes Colin Stevens
Indeed, many national leaders in the developing world have welcomed and even demanded coal projects as an affordable source of power, pointing to the fuel’s role in Europe and North America’s economic success. Many of these countries want the same path to success, since renewables are still much costlier than renewable energy sources in most markets. What’s more, renewables’ dependency on wind and sun to generate electricity leads to fundamentally unstable energy output – correcting this intermittency requires the addition of even more expensive battery storage technology, technology that has not even been deployed on a wide scale in the West.

While much of the energy generated in sub-Saharan Africa comes from renewables, a whopping 500 million people live without any source of electricity whatsoever. Worse, most of this energy comes from wood, leading to deforestation and indoor air pollution, responsible for the deaths of 1.3 million people each year. As Kofi Annan said in a speech earlier this year to the Africa Progress Panel, “As our report clearly states, the cost of transitioning to renewables may be prohibitively high in the short term – especially for countries that use their sizeable endowments of coal and other fossil fuels to generate energy. What we are advocating is that African governments harness every available energy option, so that no one is left behind.”
Similarly, Nigeria’s powerful Vice President Yemi Osinbajo emphasized the need to prioritize development in Africa while not losing sight of environmental concerns. ''We are faced with a very dire situation and in most of Africa we simply don't have power and without power there is very little that can be done," he explained, adding that developed nations could help resolve the issue by sharing the technology necessary for clean coal. Nigeria’s finance minister, Kemi Adeosun, criticized western institutions last year for insisting that Africa focus on costly renewable energy, after their own countries built their success on cheap coal and other high-emissions energy sources for hundreds of years.

Last month, the President of the African Development Bank, Akinwumi Adesina, called for a balanced approach to meeting Africa’s energy needs: “Endowed with many different energy sources – both renewable and conventional – Africa needs a balanced energy mix. This must include renewable and conventional sources of power for lighting and heating homes, for cooking, for schools and hospitals, and for powering offices, manufacturing plants and factories.”
Despite some headlines making a case otherwise, coal is still significantly cheaper than renewable energy sources. India, which has been held up as an example of renewables beginning to undercut coal, will still be relying on fossil fuels for the foreseeable future. The country’s energy demand has been projected to increase roughly threefold by 2040. With infrastructure already in place, and substantial national coal reserves, the country is already invested in a future that depends on coal.  Under these circumstances, the current government has not hesitated to vocally support coal power. Narendra Taneja, the key architect of energy policy for the ruling Bharatiya Janata Party, said in 2015 that coal will remain the backbone of the Indian economy for the next 5 or 6 decades.
Furthermore, insiders have emphasized that further improvements to coal power in India will make it the most feasible source of power for the foreseeable future. Partha Bhattacharya, former chair of state-owned coal monopoly Coal India, explained that more efficient coal plants will create massive new demand for the fossil fuel. He also pointed out that analyses projecting that solar power will soon outstrip coal “fails to take into account the enormous scope and ample technology that can take the average plant load factor of coal-based power plants… to far more respectable levels”.
Plant load factor is the ratio between a plant’s power generation and its potential generation – basically, its level of efficiency. To this end, India’s power minister announced this week that all power plants that have been in operation for 25 years will be replaced with modern, supercritical ones to enhance production and to improve their impact on the environment.
The development of Carbon Capture and Storage (CCS) technology is another essential component of emissions reduction, which risks being neglected by a focus on still out of reach renewables. CCS technology, if deployed faster for coal power, could reduce cumulative emissions by 35 gigatons of C02 through 2050. Faster deployment of CCS would help the world meet its Paris agreement target to keep warming levels under 2 degrees Celsius.
Given the economic advantage of coal power, the EU should encourage the EIB, as well as the World Bank, to promote the financing of clean coal technology, and to fund the retrofitting of outdated coal plants with HELE (high energy, low emissions) or supercritical technology. In the US, the Trump administration has already moved in this direction, and the EU should follow their example, understanding that modern clean coal technology is not just competitive but necessary for developing nations attempting to meet growing energy demands on a budget. The longer these countries rely on outdated coal plants, hindered by lack of financing, the more harm they risk inflicting on the environment.

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