Executive Summary (March 2010)
Outlook for Sustainable Fossil Energy Development in APEC
Kensuke Kanekiyo
Managing Director
The Institute of Energy Economics, Japan
1. Key for Development
Considering the pathway to achieve sustainable development of the world, the greatest
challenges facing us today are energy security and climate change. And, addressing these
two challenges, construction of a “Low-carbon Society” is the desired answer, exerting
extensive efforts on energy efficiency and conservation, and development of renewable
energies.
However, there are many technical, socio-economic and environmental barriers and time
constraints in deploying non-fossil fuel development extensively. Despite proactive efforts to
promote renewable energies, the world is likely to depend on fossil fuels heavily for decades to
come. Thus, clean and smart use of fossil fuels is the key to achieving a “Low Carbon Society.”
Roles that fossil fuels play will be distinct in the foreseeable future. Oil will be used
predominantly for transportation, and the major portion of natural gas and coal will be used
for heat and power uses. Natural gas is the most preferred energy option among fossil fuels
because it is clean, its carbon content is low, and it is easily applied for sophisticated high
efficiency technologies such as the gas turbine combined cycle. Although natural gas is
expected to be utilized more intensively, due to barriers in terms of geographical resource
distribution, applicable technologies, funds for development, and time constraints on building
natural gas infrastructure such as pipelines, there will be a limit for natural gas use.
Consequently, it is inevitable for us to depend on coal for the rest of the energy requirements.
The quantity of coal required is substantial, and it is important for us to consider clean and
smart use of coal.
To materialize this difficult but meaningful task, the world should cooperate closely
because greater potentials of emission reduction exist in emerging economies where
technologies, funds and social systems are not always sufficient. To this end, Japan’s
self-funded project “Outlook for Sustainable Fossil Energy Development for APEC” was
proposed and endorsed at the EWG38, which is aligned with the EMM8 Declaration and
APEC Economic Leaders’ Declaration in 2007, and conducted in cooperation with EGCFE
and EGEDA. We believe that this activity will contribute to the APEC-wide efforts to counter
climate change.
Based on our observations and analyses, we would like to emphasize that clean and smart
use of coal is particularly important in Asia, where coal will continue to bear a significant
portion in the energy supply mix.
2. Asia / World Energy Outlook 2009 by IEEJ
The IEEJ forecasted an energy outlook for Asia and the world. According to the analysis,
world energy consumption will increase by more than 50% until 2035 in the reference case
projection (Figure 1). Despite growing efforts to promote renewable energies, the world is
likely to depend on fossil fuels heavily. The fossil energy ratio in the primary energy supply
mix will reduce only slightly from 88.4% to 85.2% between 2007 and 2035.
Figure 1 Primary energy demand in the world
Source: The Institute of Energy Economics, Japan
Figure 2 Primary energy demand in Asia-Pacific
Source: The Institute of Energy Economics, Japan
The Asia-Pacific economies with mega-populations will grow fast. Their energy
consumption will almost double by 2035 in the reference case, reflecting rapid electrification
and motorization (Figure 2). The trend of fossil use in the Asia-Pacific region is the same as
the world case. Coal will continue to be the dominant fuel to supply heat and power, and oil
for transportation fuel, despite proactive introduction of renewable energies. The fossil fuel
ratio in the Asia-Pacific region will decrease only slightly from 89.0% to 84.8% from 2007 to
2035.
In the power sector of the world, coal remains the dominant fuel for power generation
despite that natural gas use will increase significantly at the fastest rate. CO emissions by
2
coal-fired power stations share 30% of the global emissions as of 2007. It is projected to
increase from 8.2 Gt-CO to 12.6 Gt-CO from 2007 to 2035, and its share will slightly
2
2
increase to 31%. Therefore, clean and smart use of coal with clean coal technology will surely
play an important role in countering climate change, reducing the use of coal and its CO
2
emissions.
In the power sector of the Asia-Pacific region, we have the world’s largest coal producers,
namely, China, America, India, Australia, Russia and Indonesia. They share four-fifths (78%
for 2008) of world coal production. Consequently, coal is an overwhelmingly dominant fuel for
power generation. Coal shares 53% in the generation energy mix in the Asia-Pacific region
excluding Russia, and 27% for the rest of the world as of 2007. Its share will continue to be
high in the coming decades. Among others, natural gas and nuclear will expand fast,
increasing their shares to 18.3% and 5.5%, respectively.
Figure 3 Power fuel mix of the world and Asia-Pacific
Source: The Institute of Energy Economics, Japan
In the reference case, as world energy consumption increases by more than half from 2007
to 2035, world CO emissions will also increase from 28.8 gigatons to 41.5 gigatons during the
2
same period. The IEEJ also made a forecast of an advanced technology case where innovative
and latest available technologies are deployed proactively under the strong policy initiatives
by major countries. In the advanced technology case, energy consumption and CO emissions
2
are reduced substantially. The effects of introducing advanced technology are greater for
emerging economies. To materialize these effects, we need to implement intensive R&D,
technology transfer and, above all, massive investment in energy infrastructure.
Under the advanced technology case, the world is supposed to take counter global warming
measures proactively by adopting best available technologies and systems, and also intensify
R&D of innovative technologies. With accelerated application of global warming measures,
energy consumption and CO2 emissions can be reduced substantially. Nevertheless, fossil
fuels remain the major energy source to drive economic development, maintaining its share of
more than 80% in the energy mix even in 2030. Coal dominates in Asia among fossil fuels. Its
share will be about 10% higher than the world average.
Figure 4 World total primary energy supply and CO2 emissions in advanced technology case
Source: The Institute of Energy Economics, Japan
GasificationSyngasMethanationAmmonia SynthesisMethanol SynthesisSNGFertilizerMethanolIGCCPre-processing
Less GHG emissionsPotential of developing unconventional natural gasClean-burning with less air pollutants
30.530.829.3AdvancedTechnologyCase12.67314.02514.572AdvancedTechnologyCaseSource:
Balances
of
OECD/non-OECD
countries
2009
IEA
Energy
version
34.8%34.2%36.3%26.6%32.7%41.6%5%10%15%20%25%30%35%40%45%
Figure 5 Energy-mix of the world and Asia
Source: The Institute of Energy Economics, Japan
3. Clean and smart use of Coal
In the Asia-Pacific region, it is no doubt that coal will remain the most reliable and
economic energy source. The role of natural gas will also become increasingly important to
accommodate growing demand, as it offers various advantages. In particular, unconventional
gas, which is not yet tapped in the Asia-Pacific region except for North America, may have
great potential to contribute in our struggle with global warming. Yet, in view of various
elements such as smaller and cheaper investments for development of production and use,
ample resource endowments in the region, a relative price advantage against natural gas,
and better energy security with a higher regional supply ratio, coal will still be the largest
energy source in the Asia-Pacific region at least until 2030.
Figure 6 Coal versus Natural gas
Source: The Institute of Energy Economics, Japan
As the coal demand will grow fast, intensive use of coal will not only emit a greater amount
of CO2 but also bring heavier burdens on the global environment, resulting in more serious
air and water pollution. Therefore, we have to use coal smartly. The first countermeasure will
be curbing CO2 emissions. We should apply high efficiency technologies such as superior
power generation by a super critical or ultra super critical system, intensifying R&D on even
more efficient technologies like IGCC and IGFC, a smart energy system to optimize energy
use and its transportation, and, in the long run, carbon capture and storage.
Countering air and environmental pollution, we have developed various clean coal
technologies to date. We should enhance their penetration as fast as possible especially in the
emerging Asian economies. Regarding the stability of coal supply, we can consider various
high efficiency technologies that will reduce coal consumption. It is also important to consider
proper and wider use of low-rank coals or brown coal. The most important thing is that we
should aim at clean and smart use of coal as a system for the whole of society.
4. Efficient use of coal
Among fossil fuels for thermal power generation, the efficiency of coal is the lowest,
especially in Asia. Since we will use a huge amount of coal in the course of economic
development, this situation must be changed. It is necessary to demolish obsolete plants,
adopt existing high efficiency technologies proactively, and promote R&D of innovative
technologies.
Figure 7 Efficiency of thermal power generation
As a national average, Japan has achieved the world highest thermal efficiency for
coal-fired power generation. However, many low-efficiency coal-fired plants are in operation
worldwide, in particular in emerging Asian economies. In China, in 2006, thermal power with
generating capacity less than 600 MW amounted to more than 80%, among which, those with
less than 300 MW amount to 45%.
Figure 8 Efficiency of coal thermal by country
Source: IEA Energy Balances of OECD/non-OECD countries 2009 version
If the current best thermal efficiency realized in Japan (43%) were achieved worldwide, 1.4
Gt of CO2 emissions could be reduced annually. Demand for coal will also be reduced
substantially. Among them, 1.1 Gt or 80% of CO2 could be reduced only by three countries,
namely, the United States, China and India. To achieve this, of course, we need to make a
large amount of capital investment.
Figure 9 CO2 reduction potential by region / country
Source: IEA Energy Balances of OECD/non-OECD countries 2009 version
At present, a generating efficiency of 43% is achieved in Japan by the Ultra-Super Critical
(USC) technology, at No.2 Unit of the Isogo Power Station in Yokohama. This plant is located
in the center of the Tokyo metropolitan area, and is equipped with a sophisticated coal
receiving and storage system that prevents coal powders from flying out and a
high-performance exhaust gas clean-up system to remove SOx, NOx and particulate
materials.
In addition, R&D on Integrated Coal Gasification Combined Cycle (IGCC) and Advanced
USC (A-USC) aiming at higher efficiencies is underway. Experimental projects on IGCC
underway in Japan will provide valuable information to reduce cost and increase efficiency
(the Eagle-2 project aims at 55% efficiency). In the future, development of Integrated Coal
Gasification Fuel Cell Combined Cycle (IGFC) is highly expected.
Figure 10 Technologies for better efficiency
Source: Cabinet Office of Japan “Cool Earth 50 – Energy Innovative Technology Plan”
5. Responses to Air Pollution
In Japan, technologies of de-SOx, de-NOx and PM recovery are almost completed and
equipped at most of the power stations. These cleaning technologies must be adopted
worldwide with due consideration on regional backgrounds. In particular, acid rains in
emerging countries are the most serious issue directly affecting environment and human
health. Any new power plant must be equipped with these counter environment pollution
facilities in addition to efforts of improving the existing facilities.
Figure 11 Comparison of old and new Japanese power plants’ cleaning technologies
SNPSource: The Institute of Energy Economics, Japan
6. Utilization of Brown/Low-rank Coal
In the world, 950 million tons of brown/low-rank coals are used for power generation
annually. However, their energy efficiencies are not very high. In the Asia-Pacific region,
major consumers of brown coals are the United States, Russia, Australia and Thailand; (and
maybe China also, though brown coal production does not appear on statistics.) Smart use of
brown coal will substantially ease supply and security problems worldwide. There are various
technologies known to us to use brown coal smartly, upgrading or transforming it. Above all,
dehydration technology for pre-processing is easy to apply and extremely important for better
utilization of brown coal.
Figure 12 Technologies to use Brown Coal
Source: The Institute of Energy Economics, Japan
7. Summary and conclusion
In summary, fossil fuel consumption will continue to grow in the coming decades. Fossil
fuels will remain substantial in the energy mix of the world as well as the APEC region,
sharing more than 80% of the total energy supply even for the Advanced Technology
Scenario. Therefore, cleaner use of fossil fuels in addition to promotion of energy efficiency
and conservation will be the key for sustainable development.
Then, coal will remain the primary energy source despite its high environmental burden,
because of its price advantages and superior supply stability. Coal in the APEC region is
forecast to bear a high share in the energy mix of 2035; 36% for the Reference Scenario and
32% for the Advanced Technology Scenario. This is substantially higher than the rest of the
world, where coal shares only 15% in the energy supply mix.
In addition, we recognize that great potential is expected for improving efficiency in use of
coal, in particular in emerging Asia. We will be able to reduce coal consumption in the APEC
region taking various measures proactively.
As a conclusion, it should be emphasized that smart use of coal shall play a key role in
enhancing energy security and countering global warming, which are essential for
sustainable development of our society. We should pursue cleaner and efficient use of coal
curbing consumption, reducing environmental pollution and GHG emissions, and enhancing
supply. And, above all, we should consider a comprehensive social system with optimal
structuring of production, transportation, consumption and ash disposal, not a patchwork of
individual clean coal technologies. At the same time, it is essential to adopt best advanced
technologies, as time is precious in global warming actions. Replacement and expansion of
energy infrastructure will take not years but decades. No action is too early to take up
modern technologies listed here from today.