$60 billion in stranded value at risk in Indonesia, Vietnam and the Philippines

LONDON, October 29 — Compared to operating existing coal-fired power stations, by 2027/28 it will be cheaper to build new solar PV in Indonesia and Vietnam, and new onshore wind in Vietnam by 2028.

This is a key finding of Carbon Tracker’s new research which examines how meeting climate goals set out in the Paris Agreement could affect the role of coal-fired power plants in Indonesia, Vietnam and the Philippines. As government policy, market liberalisation and renewable technology advances play out across the three countries, owners of coal power units in Vietnam, Indonesia, and the Philippines risk losing up to $60 billion in stranded value.

Matt Gray, head of power and utilities at Carbon Tracker said:

“Given that power sector investments have multi-decade time horizons, investors and policymakers need to act now to minimise stranded assets and avoid high-cost energy lock-in.”

The companies most at risk from stranded assets are: PT PLN Persero (Indonesia) $15billion, San Miguel Corporation (Philippines) $3.3billion and EVN (Vietnam) $6.1billion (see table below).

Stranded Risk Summary Table – Refer to Individual Country Briefs for Full Breakdown

In addition, Carbon Tracker researchers found:

From 2010-17 coal generation increased 72% Vietnam, 50%+ in the Philippines, and 53% in Indonesia

Due to rapidly declining cost of renewable energy, the average coal unit in these nations will be retired at just 15 years old, far earlier than forty-year assumptions often associated with coal plant lifetimes

Matt Gray, head of power and utilities at Carbon Tracker said:

“Vietnam currently has $40bn of coal capacity under construction and planned. As consumers and tax payers continue to demand the lowest cost options, this analysis exposes not only the viability of new investments in coal power but the long-term role of the existing fleet.”

“The Philippines currently has $30bn of coal capacity under construction and planned. As consumers and tax payers continue to demand the lowest cost options, this analysis exposes not only the viability of new investments in coal power but the long-term role of the existing fleet.”

“Indonesia currently has $50bn of coal capacity under construction and planned. As consumers and tax payers continue to demand the lowest cost options, this analysis exposes not only the viability of new investments in coal power but the long-term role of the existing fleet.”

“Thanks to the dramatic fall in the cost of renewable energy, phasing-out coal power by 2040 will likely prove to be the lowest cost option for these South East Asian nations. Policymakers should act now, to avoid stranded coal assets as the rapid pace of the energy transition becomes increasingly apparent to investors.”

The Window For New Coal Investment is Closing Rapidly

As the world rapidly transitions to a low carbon economy, investors are becoming increasingly wary of the regulatory and environmental risk associated with coal-powered electricity generation and the increasing competitiveness of renewables and are subsequently withdrawing funding.

Standard Chartered[1], RBS and Nippon Life[2] have announcing their complete withdrawal from coal in the region. Analysts at Citi have noted an 80% reduction in coal financing 2010-2018[3] and the increasing challenge in attracting cash for new projects, that is likely to drive up coal prices, resulting in higher bills for consumers and utilities.

Methodology

Carbon Tracker employs a detailed asset level economic model for each country to inform the results of these briefs. This is underpinned by detailed asset inventory data, asset performance data and comprehensive technical, market and regulatory assumptions. For further details on the applied methodology, please refer to the Appendix of the individual country briefs.

To arrange interviews with the author Matthew Gray, please contact:

Joel Benjamin – jbenjamin@carbontracker.org

[1] https://www.telegraph.co.uk/business/2018/09/25/stanchart-becomes-latest-bank-pull-funding-new-coal-power-plants/

[2] https://www.reuters.com/article/us-japan-coal-divestment/japans-nippon-life-to-stop-financing-coal-fired-power-idUSKBN1KD08P

[3] https://www.ft.com/content/1a14b070-ca83-11e8-b276-b9069bde0956