Australia Faces Economic Disruption as Japanese Investors Abandon Coal
With Japanese banks and trading houses dumping investments and dropping plans for new power stations, analysts in Asia are pointing to a “monumental” shift in energy markets that spells “the start of the end for thermal coal,” and disruptions for Australia as a major coal supplier.
The Global Coal Plant tracker says three-quarters of the coal plants that were on the books in Japan in 2015 are now unlikely to be completed. That’s a startling development for Australia, which counts the country as its largest customer for thermal coal exports.
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“The most recent proposal likely to be shelved, a 1.3-gigawatt coal-fired power station in Akita, in Japan’s northwest coastal region, follows the cancellation of two others earlier this year,” The Guardian reports. “Sojitz Corporation this week announced further divestment from thermal coal, following Itochu announcing a coal exit last month, and Mitsui in November.”
At the same time, major financial backers “have in recent months expressed their intention to invest more heavily in the renewables sector,” the paper adds. “The increased interest in renewables comes, notably, from investors and companies with existing exposure to coal. Demand for electricity in Japan is declining, as the population declines. In that market, coal appears to be crowded out by additional capacity provided by nuclear restarts, solar, and other renewables,” including offshore wind.
“When Japan moves, it’s not just Japan,” said Tim Buckley, Sydney, Australia-based director of energy finance studies for the Institute of Energy Economics and Financial Analysis. “It’s also the funder of the growth agenda that the coal industry has been relying on.”
“From last year we’ve seen some changes from the major banks and megabanks and also insurance companies as well as trading companies. Their positions have changed on coal power policy,” said Kimiko Hirata, international director of Japan’s Kiko Network. “They’re thinking that continued support for coal power, both domestic and international, is no longer acceptable by the international community, and also in Japan. We very much welcome the big change happening.”
But Hirata warned the change in attitude may be limited to new projects, not the 15 gigawatts of coal-fired capacity now planned or under construction. “Campaigners are awaiting the release of a long-term strategy to guide Japan’s approach to tackling climate change up to 2050, believing it will be a key test of the government’s seriousness,” The Guardian says.
That plan is expected before Japan hosts the G20 summit in Osaka in June, and some members of Prime Minister Shinzō Abe’s cabinet are said to be pushing for more assertive climate action. The news report indicates that Foreign Affairs Minister Tarō Kōno is dissatisfied with a national target that calls for renewable energy to supply 22 to 24% of the country’s energy by 2030, with 56% still coming from fossils, considering that renewables already account for 24% of the global energy mix. “As Japanese foreign minister, I consider these circumstances lamentable,” he said last year.
Australian trade commissioner Simon Buckingham said his country’s Coalition government recognizes the world is moving away from coal-fired power generation. “We do urge countries to make as ambitious commitments as they can, but the long-term projections are that the demand for Australian thermal coal in these markets remains very strong,” he said.
But Buckley said new coal projects in developing Asian countries depend on government banks that are also making significant moves toward renewables. “The vast majority of the Asian coal-fired power fleet expansion is underwritten by government subsidies, capital subsidies,” he told The Guardian. “Once you remove that capital subsidy, private enterprise is not going to put their own capital at risk on $4- and $5-billion capital projects in a foreign market. Projects that have been endorsed, announced, in train for five years all of a sudden become total stranded asset proposals.”
He added that, “if Australia doesn’t understand that, if we as the exporter fail to transition our economy, we leave entire communities absolutely stranded and the work force is not going to be protected by multinationals. The question is, will our government sit there and abrogate their responsibility to protect the workers and their communities when the multinationals cut and run?”