Little immediate impact on Southeast Asia due to pandemic concerns
Asian governments still have access to China-backed coal funds, BRI
JOGMEC clears backing for overseas LNG terminals by Japanese firms
Singapore — Japan's vocal renunciation of support for coal-fired power generation both within the country and overseas addresses much of the criticism recently levelled at its industrial conglomerates for backing fossil fuels, but its repercussions are complicated and could take years to play out.
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The policy's impact on alternative fuels like LNG and renewables in the Asia-Pacific also needs to be viewed against the backdrop of coal-backing by regional heavyweights like China, the status of the energy mix in the end-user nations of Southeast Asia and South Asia, and its timing in the midst of the ongoing pandemic.
The coronavirus has shifted most regional governments into disaster management mode and for the time being few countries will be bothered by whether Japanese conglomerates can finance their next coal-fired power plant. And it matters even less if a renewables or solar plant can be built more easily, because on a broader level rescue packages, economic stimulus or medical spending will take priority, perhaps for several years to come.
"In Southeast Asia the trouble is life is complicated by the virus; governments are short of money and they've got other things to worry about," said Philip Andrews-Speed, Senior Principal Fellow at the Energy Studies Institute of the National University of Singapore.
"The virus has made decision-making by governments on clean energy more difficult because they've got less money in the short term and maybe in the longer term too," he said. "So, you know, the minister of clean energy isn't necessarily the most important person in the cabinet meetings.
"In Southeast Asia, I don't see this [policy change by Japan] making a big difference over the next two or three years in governments' decision making. Further out, once economies recover and they focus more on renewable energy, it might make a difference at the margin," Andrews-Speed added.
TOO LITTLE TOO LATE
The timing of the anti-coal policy, which does not exclude high efficiency coal power plants, also begs the question of whether it still matters after Southeast Asia has built the bulk of its coal-fired fleet, and with Chinese backing under the Belt and Road Initiative still on the menu.
Pakistan, for instance, was predominantly gas-consuming for decades until BRI-backed projects introduced coal into its energy mix in a big way, with the opening up of some of Asia's largest coal reserves in the Thar desert.
"There's a story that the damage has already been done. These Japanese and Chinese coal power plants have already been built, or are just about to be finished or are laying the first concrete and therefore can't be stopped," Andrews-Speed said.
"China could always fill a gap if the host country wanted to fill the gap," he said, adding that the probability of the BRI facing similar constraints as the Japanese in terms of lending or financing, even moderately, are low.
Andrews-Speed, author of the book 'China as a Global Clean Energy Champion' in which he has explored the dynamics of China's low-carbon energy transition, said he doesn't see Japan's exit as a big loss for Asian countries, not least because there's no pressing need for a shift to renewables in the region.
China accounted for around $35.9 billion in funding for 102 GW of coal plant projects over 27 countries, which was 26% of global coal-fired capacity under development outside China, according to a report by the Institute for Energy Economics and Financial Analysis in 2019.
The IEEFA also said in a 2019 report that Japan's public finance for fossil fuels amounted to around $9 billion/year, mostly to power plant developers, from agencies like the Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) and Japan International Cooperation Agency (JICA).
A Greenpeace report in August 2019 put Japan's public finance investment in coal plants at $16.7 billion between January 2013 and May 2019. The other big Asian financier of fossil fuel-based projects is South Korea.
FOOTHOLD FOR LNG
LNG projects in Asia Pacific can still get a foot in the door while Japan pulls out of low-efficiency coal. In June, Japan Oil, Gas and Metals National Corp. was allowed to finance Japanese companies participating in LNG reloading and import terminals outside Japan, following an amendment in the JOGMEC law that took effect June 12.
JOGMEC's Director General of Research and Analysis Tetsuya Furuhata said earlier this month that the financing would include FSRUs and is aimed at establishing an LNG market by creating large demand in emerging Asia.
He said JOGMEC also conducted studies for small-scale LNG in the Bay of Bengal along with Japanese explorer INPEX, although the window was closing with similar moves by Petronas and Myanmar.
But even on LNG projects, Japan and China are likely to become rivals.
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