Coal news and updates

Record coal prices pose problems for power producers

Coal futures have soared to record highs, reaching $179 per tonne this month. Spot prices of thermal coal, used in power stations, have risen 110 percent since the start of the year and are nearing 2008’s record.

Prices are being pushed up by China and India, where power producers are ordering more to meet higher demand for electricity from factories. Supply is not increasing because miners are reluctant to invest in an industry falling out of favour with governments and ordinary people around the world.

The high cost of coal could cause problems for Cambodia. The Kingdom relied on coal-fired power stations for 47 percent of its electricity last year,  according to the Ministry of Mines and Energy (MME). Coal plants produced nearly 4,000 gigawatt hours of power. One gigawatt equals 1,000 megawatts. A single megawatt of power from a coal plant creates enough energy for between 400 and 900 average Western-style homes for a year.

Hydropower was the next biggest electricity source at 41 percent, but recent droughts have left the country reluctant to rely too heavily on water-driven power plants. As for the rest of the energy mixture in 2020, fuel oil generated 8 percent, solar 3 percent and biomass 1 percent.

Amaury Brucker, communication and development support officer for Singapore-headquartered renewable energy company The Blue Circle, says the energy mixture is likely to shift along with the price of coal.

“This price volatility shows that not only coal is damaging the planet but also that it cannot be relied upon for long-term investment decisions. Since coal Power Purchase Agreements [PPAs] have their electricity purchase price indexed on the price of coal – except in very rare cases –  the current surge of the fossil fuel cost will have an inflationary impact on the utilities P&L [profit and loss] as well as on the balance of trade of the country,” he said.

“On the other hand, solar and wind PPAs have fixed prices, which gives a lot more visibility in the long run to decision makers. These energy sources also happen to be cheaper than coal and much faster to build – half of the construction time is required on average.

As a result, solar and wind power would be most likely to benefit from a rapid governmental shift towards sustainable sources. However, the energy transition’s pace will depend on the ability to progressively phase out fossil fuels as they are still important to the country’s current economic development,” Brucker said.

Bridget McIntosh, country director of sustainable power advisers EnergyLab Cambodia, agrees that the rising price of coal makes greener options much more appealing.

“Coal prices globally have fluctuated significantly in the last decade and Cambodia carries the volatility risk because the price EDC [Electricite du Cambodge] pays to coal power plants is linked to the coal import price,” she noted.

“The lowest coal price was in 2016, the year EDC average cost to buy electricity was 9.5c/kWh [cents per kilowatt hour]. Ironically, it was also the same year EDC began to look to solar power. Now, EDC can buy solar for less than half that, with prices for solar and wind between 3.88c/kWh to 6.8c/kWh. Solar and wind plants don’t rely on imported fuels, so it’s great for energy security and avoids economic risk from price volatility. Oh, and they don’t release air or climate emissions.”

Solar looks to be the alternative energy source of choice for the government. The Blue Circle is still negotiating with EDC about how much it can charge for power produced by its first wind farm in the Kingdom. It says it is working closely with the electricity company and the government to bring forward the project, even though Coronavirus has cut power demand, and hopes to agree on the price by the end of the year.

The company says the government has not really factored wind power into its plans. It says even if the 2030 target of 17,677mW total installed electrical generation capacity set in 2019 by the government was revised down by 30 percent following the pandemic, the wind power share would only represent 0.64 percent of Cambodia’s total capacity installed in 2030. In the same timeframe, the government’s Electrical Master Plan includes 1,740mW of solar power to be installed by 2030, potentially representing 12.1 percent of Cambodia total capacity .

“For the moment, we have 80mW (Bokor Wind Farm) of wind power in the MME’s Power Development Plan to be installed by 2024,” said Brucker.

“We are still on time to comply with this timeline. Regarding future projects, the decision relies entirely on the MME to incorporate more wind power in Cambodia’s energy mix. We stand ready to develop more wind projects in order to help the government meet its energy-related targets.”

The MME says renewables will make up one quarter of the total power supply by 2030. The move is intended to help the government meet its goal of cutting greenhouse gas emissions by 21 million tonnes per year.

Even so, the Kingdom is expanding its coal-powered electricity production capacity. A 265mW plant is being built in Oddar Meanchey province. It is expected to come online early next year, supplied with locally-mined coal.