Ending Asia's Coal Addiction

New rules haven't stopped plant-building in China.

Photographer: Kevin Frayer/Getty Images

Asian nations lead the world in new investment in wind, solar and nuclear power. And all that clean energy should help them meet their commitments to cut greenhouse gases. Standing in the way, however, are ongoing plans to build thousands of new coal plants -- even though the market for coal power is shrinking fast.

In China, demand for coal appears to have peaked in 2014, far earlier than expected. In India, electricity from coal plants coming online in 2020 is expected to cost more than solar energy does today. Yet both countries -- and also Japan, the region's third big economy -- continue to add capacity.

China has enough projects on the books to build a new coal plant every week for nearly seven years, according to Greenpeace. By 2020, it could have 400 gigawatts more coal-fired power than it needs -- more than all coal power in the U.S. combined. And India's expanding coal fleet will be bigger than what's needed to meet the country's electricity demands through 2022.

As for Japan, if it moves ahead with all its coal projects on the drawing board, it risks stranding nearly $60 billion worth of assets, as the sector succumbs to overcapacity and competition from other forms of energy with lower marginal costs, such as nuclear and renewables.

The downsides of all this excess capacity are obvious: More coal burning means tens of thousands more people dying from air pollution, and much more carbon dioxide flowing into the atmosphere. In India and China, coal also crowds wind and solar power off the grids. Already some 15 percent of China's wind power goes unused.

Given these realities, one might hope that market forces would derail any new coal construction. Yet in China especially, there's institutional resistance to changing course. While the Chinese government has put a cap of sorts on new coal capacity, this doesn't cover all provinces and all types of coal-fired plants. Closing these loopholes will take some political will, given that local governments too often view new plants as an easy way to generate economic growth and preserve mining jobs.

In China -- as well as in India and Japan -- plans haven't been adjusted to account for the rapidly falling costs and additional capacity of wind and solar power. Japan could be doing more to show that it can run its nuclear power plants safely, further shrinking any demand for coal.

Asian governments also need to push harder to get utilities to make room for renewable energy -- either by setting minimum operating hours for the grid to use solar and wind or, as China already has, forcing utilities to pay for unused renewable energy. Operations should be transparent, so the public can see when and why utilities choose to use coal over wind and solar. In India, increasing interstate trading of electricity should give solar and wind generators more opportunities to sell their energy.

Energy investments across Asia are trending away from greenhouse gases, as are the economics of renewables. But governments need to make sure their policies push in the same direction.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.