Indonesia halts January coal exports

Spanish Market: Coal
03/01/22

Indonesia has suspended thermal coal exports for January in order to divert supplies to domestic utilities that are grappling with acute shortages, and to avoid widespread blackouts that could cripple economic activity.

The unprecedented move by the world's biggest thermal coal exporter has fuelled uncertainty in the seaborne market as the decision will block shipments to key consumers such as China ahead of the peak winter demand season, even with deals already concluded to secure prompt cargoes. The step could infuse another round of price volatility after spot prices more than halved after hitting multi-year highs in late October 2021

Argus assessed GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) coal at a historical high of $154.21/t on 22 October 2021 after a historical low of $22.40/t on 11 September 2020. The market was last assessed at $60.41/t fob Kalimantan on 31 December.

The decision to ban exports follows calls by authorities in recent weeks to coal producers to meet their domestic market obligations (DMO), under which suppliers have to dispatch at least 25pc of their output to the domestic market. The export ban comes as a number of utilities are said to be holding barely four days of coal stocks after heavy rain in parts of Indonesia's key Kalimantan producing region also curbed output.

The supply of coal to domestic utilities is currently critical and very low and could have an impact on the national electricity system, Indonesia's energy ministry (ESDM) said late on 31 December. Thermal coal that has already been loaded onto ships or is lying at loading ports should be diverted to utilities, it said.

The coal mining industry called the decision as "not appropriate" as it could disrupt 38mn-40mn t in monthly coal production and affect cash flow of producers, Indonesian coal mining association (APBI) said.

A number of Indonesian coal suppliers have already declared force majeure citing the ban. The decision will also affect shippers as they could incur $20,000-40,000/day in demurrage costs, while the government could face about $3bn/month in foreign exchange losses on top of losses in royalty and other revenues, the APBI said.

The suspension of coal exports will be evaluated and reviewed on realisation of supplies to state-controlled utility PLN and its subsidiaries and other independent power producers in the country, the ESDM said.

The decision could also hamper Indonesia's plans to boost output this year. Last month, the ESDM forecast that coal producers could raise output to 637mn-664mn in 2022, based on preliminary discussions with coal mining companies and other industry stakeholders. The country's coal production target for 2021 was set at 625mn t. But cumulative output last year stood at 611.42mn t, according to ESDM data. Reporting lags mean that the government frequently revises historical figures, so production may have been higher than the data currently suggests.

A combination of factors such as weather-related disruptions and a shortage of heavy mining equipment are among the reasons cited for lower-than-targeted output last year. In August 2021, Indonesia announced plans to tighten regulations for coal mining firms that fail to meet their DMO, including potentially banning producers from exporting coal.

By Saurabh Chaturvedi

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04/11/24

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s election leaves energy policy in limbo

28/10/24

Japan’s election leaves energy policy in limbo

Tokyo, 28 October (Argus) — Japan's ruling Liberal Democratic Party (LDP) and its coalition partner Komeito were heavily defeated in the country's election on 27 October, and this is likely to leave the country's energy policy in limbo, especially for nuclear power. The LDP's first defeat in 15 years means no single party holds the majority of seats to govern parliament now. Forming a fresh alliance, if not a coalition government, would be essential for any party, but depending on who teams up with whom, the country's energy policy could deviate from its present course, especially because of the parties' different approaches to nuclear power policy. The LDP and Komeito together won 215 seats, falling short of the 233 seats needed to hold the majority and take control of parliament. The LDP is now faced with the choice of seeking other parties to join its coalition, or to remain as a minority in the government. Komeito could also face challenges in establishing a new structure, as Keiichi Ishii, the leader of the party, was defeated in the election. "We have to take the outcome seriously," said Shigeru Ishiba, the current prime minister and the LDP's governor, indicating he intends to take immediate action for political reforms. But the LDP's weakened position may make it difficult to push for its pro-nuclear energy policy to ensure the country's energy security, economic growth and decarbonisation as part of its 2050 net zero emissions goal. The second-largest opposition party with 38 seats, the Japan Innovation Party (JIP), also called Ishin, holds a similar stance on nuclear policy as the LDP. But it is unwilling to align itself with the current coalition government, because of distrust against the LDP resulting from a political fund scandal that was part of the reason for the current political turmoil within the LDP. JIP is not planning to form a coalition with any parties, said its leader Nobuyuki Baba. The Democratic Party for the People, also named Kokumin, which quadrupled its number of seats to 28, has also promoted the use of domestic nuclear and renewable power sources. Forming an alliance with Kokumin may keep the LDP's nuclear power policy in place. But Kokumin's leader Yuichiro Tamaki has also declined to form a coalition with the LDP and Komeito, although he said that co-operating on a specific agenda could be possible. The biggest opposition party, the Constitutional Democratic Party of Japan (CDPJ), which won 148 seats, will step up efforts to co-operate with other opposition parties to change the government, according to the party leader Yoshihiko Noda. Noda served as prime minister of Japan and president of the then democratic party of Japan from September 2011 to December 2012. The CDPJ pledged in its manifesto to not build a new nuclear fleet or expand capacity, while pushing for a swift phase-out of existing reactors. The party aims to cut Japan's greenhouse gas (GHG) emissions by more than 55pc by 2030 against 2013 levels, and ensure carbon neutrality by 2050, while lifting the share of renewable energy in its power mix to 50pc by 2030 and 100pc by 2050. The climate goal by the CDPJ is ambitious compared with the LDP's strategies so far. Japan's strategic energy plan, which was updated by the LDP-led government in 2021 and is now under review, targets a 46pc reduction in the country's GHG emissions by the April 2030 to March 2031 fiscal year from its 2013-14 level, in line with its goal to have net zero emissions by 2050. The 2030-31 target assumes Japan relies on thermal generation for 41pc of its electricity demand, along with a 36-38pc share for renewables, 20-22pc nuclear power and 1pc hydrogen and ammonia. A special diet session is scheduled to be held before 26 November to appoint the new prime minister. Following the LDP's defeat, it remains unclear if Ishiba, who was just sworn in on 1 October, will be re-elected despite his willingness to hold onto power. By Motoko Hasegawa and Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

UK ramps up climate action under new leadership

28/10/24

UK ramps up climate action under new leadership

London, 28 October (Argus) — The UK's Labour government, elected in July, has taken the country's climate policy in a new direction, restoring pledges the previous administration scrapped and seeking to funnel investment to renewables. The UN Cop 29 climate summit presents an opportunity for it to follow this up on an international stage. Hosting Cop 26 in 2021 allowed the UK to burnish its climate leadership credentials, but subsequent changes in the Conservative government saw policy reversals. Labour sought to differentiate its position on climate during the election campaign — possibly noting an increase in support for the UK's Green and Liberal Democrat parties, both of which hold firm pro-environment stances. Labour promised to issue no new oil, gas or coal licences — although it said it would not revoke existing permits — and is aiming for zero-emissions power by 2030. Energy minister Ed Miliband in his first week in office lifted the de facto ban on onshore wind, and set up a taskforce to speed the country's path to a decarbonised power grid. The UK has in recent weeks pulled in around £24bn ($31bn) of investment for renewables, including from utilities Orsted and Iberdrola, and announced "up to" £21.7bn in funding over 25 years for carbon capture, use and storage (CCUS) — although it is unclear how the money will be deployed. The government moved swiftly to raise the windfall tax on oil and gas profits, lifting it to an effective rate of 78pc and scrapping one of the investment allowances — although the decarbonisation investment allowance remains in place. And, spurred by a landmark ruling made by the UK's Supreme Court in June, the government pledged new environmental guidance for oil and gas fields by spring 2025. The judgment ruled that consent for an oil development was unlawful, as the Scope 3 emissions — those from burning the oil produced — were not considered. The government has in the meantime halted assessment of any environmental statements for oil and gas extraction, including those already being processed, until the new guidance is in place. The Labour government has declined to defend in court decisions taken by various iterations of the Conservative administration, including the permission granted for a proposed coal mine in northwest England. The High Court quashed that planning permission in September. International stage Miliband has sought guidance from independent advisory the Climate Change Committee (CCC) on the country's new climate plan, known as a nationally determined contribution (NDC). The CCC assessed the previous government as off track to hit legally binding emissions-reduction targets. The UK has cut emissions by half since 1990 and is in line with all carbon budgets to date. But much of this progress was made from a baseline of a high rate of coal-fired power generation, all of which is now shut down. The next stage of the country's decarbonisation will be more fragmented and is likely to pose more of a challenge. The UK has bucked the trend set by some European neighbours by shifting further left with Labour, although the new government has promoted fiscal caution. Climate finance will dominate the talks in Azerbaijan, and the UK has been clear it will continue to contribute. Labour pledged in its manifesto to "return to the forefront of climate action", noting that the previous administration had "squandered [the UK's] climate leadership". Foreign minister David Lammy has embedded climate and nature issues into his foreign policy brief and the government has appointed special representatives for climate and nature. But Cop 29 will prove the first real test of the pledges made, with a global audience watching. UK greenhouse gas emissions Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US data center growth effect on coal may be limited

24/10/24

US data center growth effect on coal may be limited

New York, 24 October (Argus) — The US coal industry is pondering ways to respond to the projected boost in domestic power demand linked to planned data centers in the pipeline, but the centers' effect on coal could be mixed or limited. A number of projects have been announced for coming years. But generators are still grappling with uncertain estimates of which major projects in the US will come to fruition, where they will be located and other criteria that will drive demand. "Data center companies are shopping around in different utilities' territories and showing up multiple times and being double counted", said Laurie Williams, director of the Sierra Club's Beyond Coal Campaign. According to the National Telecommunications and Information Administration, there are more than 5,000 data centers currently in the US, and demand for data centers in the country is projected to grow by 9pc annually through 2030. Approximately 8-10 larger data centers could be developed across the US in coming years. A number of large-scale projects, which could include so-called 'big tech' — Apple, Alphabet (Google), Amazon, Facebook (Meta), and Microsoft — are going through the feasibility study phase, Argus sources said. The Sierra Club is expecting electricity demand from data centers to increase anywhere between 5pc-20pc/yr. Some generators that spoke with Argus said they project growth of 9pc/yr, while an "organic" increase in electricity demand was previously expected to be 2pc-3pc. The US Energy Information Administration (EIA) earlier this month projected commercial electricity sales would rise by 3pc this year and 1pc in 2025, helping to boost overall electricity generation. "It is fair to say that the growth of commercial demand for electricity is at least due in part to the effect of data center development," said US Energy Information Administration (EIA) economist Jonathan Church. "We cannot, however, provide a precise estimate of what that effect is or what data center growth is." So far this year, US coal-fired generation has fallen as lower-cost natural gas, nuclear and renewable generation maintained or expanded their leads over coal in the generation mix. EIA expects coal-fired generation to fall in 2024 and edge higher in 2025 . A number of factors still need to come together before more certain projections of data centers' impact on the US coal industry are released, market participants said. Those include state environmental goals and federal regulations, availability of overall energy infrastructure and different generation types, and the approach that the IT sector will pursue when planning new projects. At least some IT companies are favoring lower-CO2 emitting generation. For example, Microsoft, Amazon and Alphabet recently have signed agreements to use nuclear or renewable generation for some projects. Other developers have indicated wanting to buy generation from wholesale electricity markets. In addition, US utilities continue to retire coal units to comply with US Environmental Protection Agency (EPA) rules. The amount of coal-fired generating capacity available in the US is expected to shrink to 163.7GW by the end of 2025 from 177GW in 2023, according to EIA. Longer life for coal plants? But some in the electric power industry are concerned about enough generating capacity being available to meet expected load growth because, in some cases, new generating facilities need to be built to provide the amount of power needed. "With the level of demand increasing, all energy resource consumption will increase," Utah Office of Energy Development acting director Dusty Monks said. "It is not out of the realm of possibility to say these industries (data centers and AI) will surpass the energy use of traditional customers in the next 10-15 years". Some generators that project increased electricity demand driven by data centers have proposed extending the operation of their coal plants. Limited natural gas pipeline infrastructure in some regions and mine-mouth power plants also support increased coal consumption to some extent. Alliant Energy delayed the coal-to-gas conversion of a Wisconsin plant by three years to 2028. Duke Energy may put off some coal-fired power plant unit retirements in Indiana, with the intention of burning coal in the state until 2038 . Elsewhere in the US, companies representing up to 15GW of load — mostly data centers — are seeking service from American Electric Power by 2030. Other utilities are continuing to convert coal-fired facilities to natural gas instead of retiring them. While the EPA has rolled out rules for gas plant emissions, gas units may still be more competitive financially and technologically over coal since gas prices have been lower and new gas units generally are more efficient when used as a backup to intermittent renewable energy. Even power plants in Utah, which traditionally favored coal, generated nearly the same amount of power from gas and coal over the first seven months of 2024 ( see chart ). US coal producers are paying close attention to plans for data centers and possible effects on coal demand but are still scaling back output. US coal mines' output totaled 591.5mn st (536.6mn metric tonnes) this year through 12 October, down by nearly 13pc from the same period in 2023, according to EIA data. Some of the states with the greatest growth in commercial electricity demand still have relatively large amounts of coal-fired generation , the EIA data show. But many of these states are also natural gas generation hubs. This includes Virginia and Texas, which had an outsized share of commercial generation growth last year. The fate and plans of data center projects in the pipeline as well as economics, regulation and company preference will determine the outcome for coal generation. By Elena Vasilyeva Generation in selected states, January-July 2023-24 MWh Coal-fired generation Gas-fired generation Renewables Total States 2024 2023 2024 2023 2024 2023 2024 2023 Arizona 5,593,283 6,228,907 28,916,433 27,939,458 10,905,903 9,452,570 64,588,784 62,083,941 % of total 8.7% 10% 44.8% 45.0% 16.9% 15.2% Georgia 10,887,241 8,828,638 34,824,577 35,144,586 7,318,882 6,552,342 83,496,202 73,139,216 % of total 13% 12.1% 42% 48.1% 8.8% 9.0% North Dakota 13,382,059 12,873,017 1,242,138 1,267,175 9,657,014 9,606,927 24,336,701 23,816,246 % of total 55% 54.1% 5.1% 5.3% 39.7% 40.3% Ohio 17,756,489 16,619,607 48,526,513 44,227,623 4,370,982 2,709,434 81,756,362 73,249,449 % of total 22% 22.7% 59% 60.4% 5.3% 3.7% Oklahoma 3,142,129 2,855,139 27,714,093 25,662,258 25,081,028 23,054,481 56,121,790 51,712,526 % of total 5.6% 5.5% 49% 49.6% 44.7% 44.6% South Carolina 9,885,901 8,792,049 12,670,286 13,811,018 3,254,362 3,198,205 59,528,878 58,292,079 % of total 16.6% 15.1% 21.3% 23.7% 5.5% 5.5% Texas 34,791,194 39,405,356 160,458,170 154,904,393 99,240,556 90,277,178 319,162,821 310,039,675 % of total 10.9% 12.7% 50% 50.0% 31.1% 29.1% Utah 6,954,233 8,802,671 6,720,481 6,762,046 3,452,974 3,331,940 18,090,480 19,499,948 % of total 38.4% 45.1% 37% 34.7% 19.1% 17.1% Virginia 1,190,771 990,257 35,852,015 28,696,547 4,885,261 4,143,970 59,761,590 52,708,332 % of total 2.0% 1.9% 60% 54.4% 8.2% 7.9% Wyoming 13,486,437 16,573,741 2,756,775 1,141,796 6,258,359 5,759,272 22,786,928 23,743,769 % of total 59.2% 69.8% 12% 5% 27.5% 24.3% — EIA Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Southeast Asia's coal phase-out faces slow progress

22/10/24

Southeast Asia's coal phase-out faces slow progress

Singapore, 22 October (Argus) — Southeast Asia remains heavily reliant on coal to meet its energy needs, and although some countries have embarked on initiatives to phase out coal-fired power, they will have to overcome considerable obstacles. Coal is still projected to be the region's second-largest source of energy by 2030 after oil, according to the Asean Centre for Energy's 8th Asean Energy Outlook , released last month. The IEA expects southeast Asia's power demand to rise by 5pc/yr through 2026, with most of that additional demand to be met by fossil fuels. It sees coal's share of the regional power mix edging down in the coming year, but absolute coal-fired generation rising by 4pc/yr through 2025. Regional coal dependency rose to 33pc in 2023 from 31pc in 2022, according to energy think-tank Ember. Coal's share of the mix in Indonesia hit a record 61.8pc in 2023, while its share in the Philippines rose to 61.9pc, making them the region's two most coal-reliant countries. Vietnamese demand is also growing fast, with coal accounting for 57pc of generation in the first half of 2024. But Indonesia and the Philippines have also begun to take steps to reduce their coal dependence, in line with decarbonisation targets. The Monetary Authority of Singapore (MAS) last year launched the Transition Credits Coalition, to use carbon credits for the early retirement of coal-fired plants. Philippine energy firm Acen aims to use the transition credits to accelerate the retirement of the 246MW South Luzon coal-fired facility, and replace it with a clean energy dispatch facility. Indonesia joined the Just Energy Transition Partnership (JETP) in 2022, putting it in line to receive $20bn from international financing partners. Under the JETP, a bank provides a loan to buy the coal-fired plant from the current operator, which receives compensation for debt equity and profits foregone for selling the asset for its early retirement, energy finance specialist at the Institute for Energy Economics and Financial Analysis, Mutya Yustika, told Argus . But the JETP has not been successful because policy makers want a higher proportion of grants than loans, Mutya added. Efforts to retire regional coal-fired plants early have yet to scale up because of a "heavy reliance on concessional capital", which is not enough to mobilise the necessary private capital to finance Asia's large and young fleet of coal-fired plants, a joint report by MAS and consultancy McKinsey said. Locked in and loaded Private sector financiers are also more interested in investing in renewable energy assets that generate returns, Mutya said, rather than taking on a polluting asset until it shuts. The JETP has motivated Indonesia to develop a comprehensive investment and policy plan, but the plan remains aspirational and lacks a clear strategy for implementing investment, Mutya said. Coal plants in southeast Asia are on average less than 14 years old, according to a 2023 report by Climate Analytics. Phasing out young plants is challenging because of recent investments and unpaid debt, so this could lock in their emissions for decades. About 60pc of coal plants in south and southeast Asia are financed by state-owned utilities or based on a single-buyer model, which "shields them from market competition", Climate Analytics said. Most power purchase agreements with state utilitiesin Indonesia and Thailand extend beyond 2030. And Jakarta has yet to signal a move away from coal reliance, while public ownership and state officials' shareholdings in mining operations might complicate this, Mutya said. China, Japan and South Korea dominate financing of regional coal plants, and their support checks renewables' expansion, Climate Analytics said. Unless governments and private-sector investors can reduce risk and raise concessionary funds, new coal-fired generation could stay in the region's energy mix until 2030. By Prethika Nair and Tng Yong Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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