Technology
Asia's coal transition dilemma amid renewable energy push
This podcast episode delves into Asia's ongoing reliance on coal amidst a global shift towards renewable energy. Experts discuss the economic implications, energy security concerns, and the futur...
Asia's coal transition dilemma amid renewable energy push
Technology •
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Interactive Transcript
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Hello and welcome to the Plats Commodities focus podcast by S&P Global Commodity Insights.
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Where today we will be talking about how in a world where one part we see energy is being
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transitioned into greener and cleaner sources of energy.
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At the same time we see Asia's dependence on cold remains pretty high.
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So today I am joined by my colleague Tanejan associate price reporter for thermal cold
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in the Asian market. Anirodaya senior price reporter for energy transition and Andrei Lambing
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associate director Lee Ray Pack short term power and renewable research.
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So before we start off I just wanted to highlight how you know last year UK shut down its last
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cold power plant whereas at the same time we continue to see half of Asia's electricity is being
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fueled by thermal. So Tane my question is to you in a world where you know energy security has
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become an important topic be it due to economic uncertainty is or the geopolitical turmoil that
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we have seen over the last half of a decade. How do you feel that cold will help these
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developing and underdeveloped economies to carve out an independent energy policy?
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Hey Webov the energy security of countries as you mentioned is currently a big corner stone for
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the economic and environmental strategies of many underdeveloped and developing countries.
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Thermal cold specifically has been the predominant source of electricity and power generation in Asia
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for several years now. Within Asia Indonesia has remained one of the largest exporters of the
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commodity well-earned in China continue to be the largest consumers of the same. And a big part
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of why thermal cold has remains irrelevant despite its environmental limitations is its price point.
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In using thermal cold a lot of these developing countries are able to achieve energy independence
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by providing cheap, abundant and despachable energy sources for their economic and industrialization
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growth and a lot of major countries especially like India and China can focus on the increasing
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domestic production and continue to be reliant on their own production through that.
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And given your expertise in this market and in this region what do you have to say about it?
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Yeah to me when it comes to the power sector I think there are two main categories of countries
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here in Asia. So the first category is countries that are mostly located in South and Southeast Asia
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and they have economies with very high growth rates and in turn they have also very high growth in
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power demand. So we talked a little bit about these countries but the other category is highly
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developed countries that have a relatively low power demand growth and some of these are in
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Northeast Asia and one example is Japan. So Japan has a deregulated power sector and if you look
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at Japan's power demand has been pretty much unchanged for the last 10 years and during this period
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Japan has developed lots of new solar power and has also restarted some of the nuclear reactors.
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And as a consequence there's less need for thermal fuels and thermal fuels are your cold
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gas and various oil products and as Japan has used less of this type of power the most expensive
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fuels have been cut first. So oil is usually the most expensive and that is now almost completely
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gone from the power mixing in Japan. Gas has also declined for every year lately and the thing is
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that coal is almost unchanged over the last three years and that is because it's the cheapest fuel.
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So to me coal has a definite cost advantage over the other thermal fuels especially for countries
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that have to import these fuels and this is different from places like Europe where they have a
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high carbon price which impacts coal more than gas. So I think across Asia coal has a very strong
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position among almost all countries mostly because of its cost advantage and its abundance also.
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So if you want to buy coal you can choose no shortage at least nothing there shorter markets
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that I focus on. And I just wanted to get back about Japan and certainly we have also seen
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you know Japan's imports which were supposed to actually go down sharply. I have remained pretty
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stable when it comes to coal import and at the same time they have also diversified the you know
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imports in terms of rather than relying heavily on Australia which they still do but they have
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also moved to other alternatives as well. Like in terms of a timeline or in terms of an expectation
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do you see that coal will continue to be in the mix for Japan even though they continue to push
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for you know energy translation. You know I think for the next five, 10 years is going to be
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continue to be very relevant but I think as Japan was closer to the target date for
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using its emissions coal will need to be impactors were reduced and I think that will come
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not from you know cost or things like that but it will be a policy decision to cut back on some
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other coal use. So I mean it's coming but to me I usually focus on the first couple of years
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forecast and I think you know this is well in the future maybe in the 2030s we'll start to see some
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some changes. Pretty interesting stuff. That also brings me to the next question. We have seen
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you know authorities have taken a different approach when it comes to adapting energy translation
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and we have seen there has been a push in certain countries where the regulations or policies have
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been formed in such a way that things have been hastened whereas in Asian countries you know
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coal continues to be a major part of the overall economy and not just the energy complex but also
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different industries where you know coal continues to be the major source of either a fuel or a
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feedstock. So Anaro this brings me to you given your expertise and energy transition. Do you
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feel you know like that coal can still remain an integral part of the economy while at the same time
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having their own independent policy will be carved out? Yeah thanks, we have. So as my previous
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two colleagues who have so discussed that coal is there to stay and coal is quite important because
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of the coal dynamics or this involved in it. It's also quite hardening to know that many Asian
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countries are coming up with domestic compliance carbon markets which ensures that most of the
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hard to evade sectors like steel and coal-fired power plants are also you know under the mix
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and they are covered under the mechanism and they are given targets and they make sure that
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their targets are made thereby you know reducing emissions from these sectors. So if you see there
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is a lot of things that are happening especially in South and Southeast Asia, India and China do
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the largest emitters not just in Asia but across the globe are coming up with carbon markets which
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will ensure that there's a gap on these emissions and also ensure that these countries go and meet
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in Asia what targets are the earliest. But other than that there are several other things besides
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carbon markets, several other things that governments are doing to ensure that NG transition is
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translated on ground as well just on paper. There are ideas being explored of renewable energy being
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set up with a battery storage component just for the electricity. Either generated is also given
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out to the grid. People are exploring the idea of transition credits for early retirement of coal
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for plants just so that it will help them in replacing them with renewable energy plants going ahead
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and under the article 6.2 regime of the carbon markets, governments are also collaborating with
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each other to exchange intelligence, exchange technology and make sure that their meeting the
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time it goes pretty easy. So there are a lot of things that going on besides all of these
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governments are coming up with mandates for you know use of electric vehicles though electricity
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for these vehicles are still from the traditional route. They still hope that one day most of these
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electric vehicles will be powered by a quarter renewable energy sources and besides the mandates for
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electric vehicles there are also mandates for biofuel blending with the traditional fuels.
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You know some airlines are going out there and seeing if there's chance or
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possibility to procure staff. There's also especially in the context of India how government is coming up
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with mandates for blending petrol with ethanol. Can you please just highlight what staff is and
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how is that going to you know come into play when it comes to energy transition?
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So basically staff is just sustainable aviation fuels. You take those traditional fuel and you
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blend it with some of the biofuels like ethanol or any of these biofuels that are generated
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from agree waste or you know used cooking oil for that matter and you blend that and you ensure
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that this is used to fuel these engine simulation sector and that would thereby lead to reduction
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in emissions. Airlines are also you know myelated under two different phases within Korsia to
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reduce their emissions. I'm also glad to inform that APAC as such is quite aggressive in terms of
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pursuing Korsia markets which targets airlines and their efforts to reduce emissions.
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So Asian economies though they'll be able to land on cool at this point in time.
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There are several steps that are being taken to energy transition. This happens on-ground.
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Taneer would you like to weigh in as to how do you see this shaping up in the coming years?
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Yeah just like Karnatoreth mentioned there's a bunch of policies being made by
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respective governments to increase the usage of renewable energies in power production.
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In coal on the other hand it seems like the governments are still sort of keeping power plants
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alive and are not very interested in completely phasing them out. For example a couple of years ago
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in India asked utilities to sort of not retire or repurpose coal-fired power plants at least
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before 2030 and in China the retirement of coal-fired power plants is still happening
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at a pace that's quite behind the official targets. At the same time coal also happens to be at
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the back end for a lot of currently existing power generation things like steel,
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the sponge iron sector, the cement sector all of these despite having several other raw materials
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still require a lot of power generation needs at the moment which is currently largely being
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used through thermal coal. Our power consumption is also growing a lot in the face of increasing
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data centers across the world, upticks in EV usage, AI generation needs and these power generation
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requirements come at a time of a lot of global warming. Currently in order to fulfil these
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growing demands on a short term basis coal tends to remain the most active and sort of a stabler
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source of the power generation. It's also the cheapest like we talked about earlier which is a
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big advantage for a lot of developing countries or countries with large populations that needs to
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meet requirements for several people at the same time. This brings me to the next question about how
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you know in terms of energy transition what are the existing of future policies that can sort of
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go hand in hand and with the reliance of coal in major economies like India and China and
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this is a question to everyone like do you feel that authorities can come up with method or
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policies that align well with the current dependence on coal to ensure that you know they remain
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on the right track when it comes to energy transition but at the same time ensure that their
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countries have energy security in place. Okay yeah so a lot of technologies like I mentioned earlier
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for example I think AI and data centers tend to be the biggest examples of this at the moment
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and because of that like I said thermal coal provides the cheapest power generation for these data
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centers especially factoring in the fact that a lot of these are based in Asian regions especially
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regions like Indonesia or Malaysia. This basically requires governments of these specific countries
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to look towards more renewable sources of power production and because of that these governments
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are also focused on maintaining their economies by ensuring that thermal coal stays as relevant.
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So basically in recent years even though the weakness in prices is allowed utilities to sort of
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shift towards higher calorific value coal which tends to emit less pollution than lower grade
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coal and it improves the efficiency of plants. It seems like there are improvements being made
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within thermal coal as well to make sure that end users are using a less polluting sorrows of coal.
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India and China on the other hand have also adapted stringent measures to sort of improve the
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quality of coal instead of only focusing on the sheer volume of coal being produced in both countries.
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Another thing to bring up here would be how the carbon capture utilization systems are in place
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and you know how they are sort of helping in terms of reducing the overall carbon emission that
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is happening to coal-fired power plants. So maybe if you can touch upon that.
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Yeah thanks. So like I previously mentioned, governments coming up with domestic
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complex carbon markets is just a starting point but there's still a long way to go for them to
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realize the potential of these carbon markets and ensure that emissions are reduced and the
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zero-coles are met. But in that end there are several things that the government can do.
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One of them obviously being giving us subsidies, one manufacturing of solar panels,
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solar cells which ensures that there is more of the supply of these mid-years in the market
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and this will equiditate in the market and ensure that nid zero targets are a bit ambitious
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but also achievable at the same time just so that people are not discouraged.
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Industries are not discouraged. Production because many of the countries in
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Asia are still developing so manufacturing is a very key component of the growth index
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and having many stringent zero targets might also deter manufacturing which might not
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turn out well for the country's growth story. Other than that there are also several other routes
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that the government could look at by producing electricity not just by the conventional or renewable
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routes but also from hydrogen which some countries in Asia are looking at. And briefly also
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touching upon how certain steaks companies in and around like India and other countries in Asia
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are also exploring the idea of capturing carbon from the production facilities in the CCUS
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system you know utilizing that carbon back into operation. They're just ensuring that carbon
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whatever carbon is emitted from the production of say steel is captured is utilized and in some
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cases also stored well way beneath the earth's surface. You know there are certain standards,
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private standards also working on methodologies to ensure CCUS operations get carbon credits as well.
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So there are a lot of options a lot of automators available at the government's disposal
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doing so growth remains intact to ensure that emission is curve and they meet the targets
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but also take care of the country's inflation by supporting you know the usage of coal. But you know
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gradually keep reducing the consumption as we go. In terms of research I understand a lot of research
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would also be focused on the kind of policies and measures that the government is coming up.
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So So Andrei just asked you to could you also sort of you know highlight in terms of how you
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was in that. For policies on coal in the short term power markets you know the prime example
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this year has been for South Korea where the government has rolled out three different policies to
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curb coal burn in certain periods of the year. And these are periods of the year when there's a lot
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of air pollution in Korea. So the policies have cut back on coal burning those periods but the
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coal generators have been allowed to produce as much as they are able to outside this period.
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So as a whole you know for the year the amount of coal-fired power generation being produced is
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about the same as last year but we've seen these large shifts in the seasonality of this power
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output. And I think that's you know something that shows that you know policies can come in and
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make the air cleaner you know but it doesn't necessarily have to also cut back on coal if
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is done in the right way. So I'll move on to our next question and which concerns the kind of
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weather unpredictability and the complexity it poses for the renewable energy sources and we have
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seen over the last couple of years you know there have been adverse with the patterns. So
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and this is a question open to all of you considering climate change is visible to us and every
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year different parts of the world undergo severe shifts in with the patterns. What implication does
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this have for the future of renewable energy in these? These nations particularly. And I know
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would you like to start off? Yeah thanks we're both. I think the answer lies in the question itself
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when you're seeing changing weather patterns and when we're seeing the climate changes
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real and it's happening on ground. There's all the more need for us for the entire world to push
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to go towards renewable energy but it wouldn't be possible to just switch to renewables overnight.
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It wouldn't be possible to discard you know coal consumption overnight and just move to renewables.
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It is a gradual process but there has to be a starting point and it has to start at some point
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and gradually build up and like I mentioned previously also you know for renewable energy
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having the battery storage component do it's quite capital intensive. It's a sure shot is one of the
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ways to ensure that there is electricity that is generated from renewables sources connected to
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the grid and available for mass consumption. But given that climate change is a real and
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it's happening in real time. Countries and authorities need to ensure that there is more
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of a push towards greener cleaner energy while also ensuring that the usage of coal is gradually
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reduced and not taken away abruptly just so that it provides some economic shock to countries in the
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world. Tanya and Andrei would you like to sort of reign? Yeah okay I'd also just like to add
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as Anilud mentioned it's not renewable sources are not going to come into play completely overnight.
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Currently the average lifespan of a coal power plant is quite higher as compared to a solar plant.
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For example coal power plants currently can last up to 40 to 50 years in average with a little bit
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more maintenance they can maybe be pushed up to 60 years especially when a lot of countries are
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trying to curb on retiring their power plants. Solar panels on the other hand can last up to only
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20 to 30 years that is after requiring constant and very frankly speaking costly maintenance.
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The same goes for things like wind turbines which also require constant upkeep and also have a
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shelf life of about 20 to 30 years with proper care. The longevity of renewable sources at the
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moment is a little bit lower than coal based power plants and the goal for a lot of major
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population based countries is currently to get as much of an output as they can from the energy
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sources at the moment. That's all I want to add Anilud you can go ahead. Yeah I think Anilud
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touched upon the batteries earlier and I think that's really relevant here so energy storage
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should ideally be developed hand in hand with renewable energy sources but it kind of remains
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expensive. This week for example Vietnam analysis building is first pumped hydro facility and yet
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that has financial backing from the European Union. So these types of storage will help the
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use of renewable energy even it's dark or not windy but the solutions remain relatively expensive.
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But on the other hand I think new flexibility is emerging and that is really the keyword here
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flexibility and this is coming from the running of nuclear and coal plants and how to actually
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lower the supply of these units or ramp up very fast when renewable energy becomes too high or too low
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because the problem goes the other way to a lot of markets are experiencing negative power prices
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because there's too much power for certain periods during the day. So what we see happening is that
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the first example is from France where the power production from nuclear reactors are adjusted
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within the day to take advantage of price variations in the power market. So a few years ago this
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was unheard of as seen some adjustments on nuclear power in Korea but the scale in France is just
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much much bigger than what I've seen here in Asia. So that's one point and the second example is
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from Australia where they are now turning off coal plants for a few hours here and there during
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the day and when the plants are coming back in production it's at very high utilization so the
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production is ramped up within minutes. In the past all coal plants have needed several hours to
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ramp production up and down and we are starting to see this change. Thanks Andrea for wonderful
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insights. I think so far we have been able to establish that the usage of coal and energy
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transition can both go hand in hand. I would like to thanks very much Tanya, Anarod and Andhra for
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joining me in this conversation and of course thank you for listening in. This episode was produced
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by Chandray Mukherjee and Chikaseng.