Global Coal-Phase-Out and the International Coal … Coal Perspectives –The Global Steam Coal Market Vienna, 06.09.2017 5 A Focus on Demand-side and Supply-side Policies in India

COALMOD World

Global Coal-Phase-Out and the

International Coal Market:

A Focus on Demand-side Policies

in India

Ivo Kafemann, Franziska Holz, Casimir Lorenz, Roman Mendelevitch,

Pao-Yu Oei, Tim Scherwath

Vienna, 06.09.2017

Agenda

1. Global Coal Perspectives

2. Coal in India

3. Reference Scenarios

4. Model Structure

5. Results

6. Conclusion

Vienna, 06.09.2017A Focus on Demand-side and Supply-side Policies in India2

Global Coal Perspectives – Scenarios of Coal Consumption

Sourc

e:

Mendele

vitch e

t al. 2

016;

based o

n B

P (

2016),

EIA

(2016a),

ExxonM

obil

(2016),

IE

A

(2016),

McG

lade

and E

kin

s (

2015a),

MIT

(2015),

and S

tato

il (2

016).

Vienna, 06.09.2017

A Focus on Demand-side and Supply-side Policies in India3

0

20

40

60

80

100

120

140

160

180

200

220

240

2010 2015 2020 2025 2030 2035 2040

EJ

BP (2016) Statoil (2015) - REFS Statoil (2015) - RENSStatoil (2015) - RIVS ExxonMobil (2016) EIA IEO (2016) - RCMIT (2015) M&E (2015) IEA WEO (2016) - CPSIEA WEO (2016) - NPS IEA WEO (2016) - 450ppm

1

Global Coal Perspectives – Scenarios of Coal Consumption


• Spread of projections illustrates uncertainty about future

coal consumption

• Major drivers for differences in scenarios:

• Potential of renewable energy sources and storage

• structural changes in the energy system (e.g. higher

electricity demand due to sector coupling)

• CCTS employment

• Macro-economic trends and total energy demand

• Policy measures (e.g. carbon price)

1

Global Coal Perspectives – The Global Steam Coal Market


Sou

rce

: IEA

20

16

b

Major producers in 2014 Major consumers in 2014

China (3,200 Mt) China (3,280 Mt)

United States (770 Mt) India (760 Mt)

India (560 Mt) United States (750 Mt)

Indonesia (470 Mt) World consumption 6,090 Mt

World production 6,150 Mt Source: IEA 2016b.

1

Overview of world steam coal market: supply, demand, trade

Global Coal Perspectives – Regional Changes 2015-2040


Sourc

e: IE

A/O

EC

D (

2016),

p. 212.

• Climate pledges by EU, US and China result in coal demanddecrease

• Increasing coal demand mainly in India and Southeast Asia

1

Coal in India – Current status

• Coal consumption in power generation: 81 %

• installed capacity of steam coal power plants: 176 GW 60% of total

capacity

• Steam coal consumption 2015: 753 Mt

• Steam coal production 2015: 585 Mt

• Imports by power utilities: 22 % of their total coal consumption

• thermal coal imports 2015: 168 Mt

• main exporters

• Indonesia (125 Mt)

• South Africa (35 Mt)

• Australia (8 Mt)

• Russia (3 Mt)

• United States (2 Mt)


Sources: Cornot-Gandolphe (2016), IEA/OECD (2016), IEA/OECD (2016b).

2

Coal in India – Domestic Policies


2

• „ […], it is more than ever environmental policies that determine

the evolution of regional coal demand.” (IEA (2016), p. 212)

• Specific policies also affect international steam coal trade


2 Coal in India – Domestic Policies

Policyobjective

Measures



Policyobjective

Measures

Expansion ofRES

• New RES policy: Capacityexpansion solar, wind



Policyobjective

Measures

Expansion ofRES


Coal self-sufficiency

• Higher domestic production(target 1500 Mt)



Policyobjective

Measures

Expansion ofRES




Reduction of airpollution:

• Burning coal with lower ash content

• Washing


Policyobjective

Measures

Expansion ofRES






• Washing

Efficiencyincrease

• Plants based on supercriticaltechnology


2


Policyobjective

Measures Considered in Scenarios by

Expansion ofRES


• Different referencecoal demand based on:

• IEA NPS, IEA 450, ECT2



• Import tax• Import restriction• Minimum required

imports of 65 Mt



• Washing

• Not considered

Efficiencyincrease

• Plants based on supercriticaltechnology

• Quality Standard forimported coal

• Minimum requiredimports of 65 Mt


2

Reference Scenarios – Global Coal Consumption


0

1000

2000

3000

4000

5000

6000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Mtp

a

Global Coal Consumption by Scenario

IEA NPS (2016) IEA 450ppm (2016) with ECT2 in India IEA 450ppm (2016)

- 29%

3

- 33%

Deviation of

aggregated total

consumption:

Represented countries by type:

• 40 consumption nodes (C), 25 producers (P), and 14 exporters (E)

• Multi-period model with yearly equilibria in 5-years-steps from 2010 to 2050

• Demand in energy services from coal vs. cost in $/t makes the cost-efficient equilibrium solution non-obvious

The Setting

Mendelevitch, 40th International IAEE, June, 20th 2017Climate Policies to Reduce Coal Consumption16

3

Source: Adapted from Holz et al. 2016


5

Results

Results – Scenario Overview

NPS 450ppm 450ppm but India ECT2

Import Tax

Quality Standard

Import restriction


Results – Import Tax


0

50

100

150

200

250

300

350

400

450

500

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T2

45

0

2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050

no tax 10 $/t tax

Mtp

a

Indian Imports: Reference Scenario vs. Import Tax (10 $/t)

AUSTRALIA CHINA COLUMBIA INDONESIA MOZAMBIQUE RUSSIA USA VENEZUELA SOUTH AFRICA

5

Results – Quality Standard


0

50

100

150

200

250

300

350

400

450

500

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050

Mtp

a

Indian Imports: Reference Case vs. Quality Standard (Calorific value of 22.9 GJ/t )


5

Results – Quality Standard


0

50

100

150

200

250

300

350

400

450

NP

S

Ind

iaEC

T2

45

0

NP

S

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T2

45

0N

PS

Ind

iaEC

T24

50

NP

S

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T2

45

0N

PS

Ind

iaEC

T24

50

NP

S

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T2

45

0N

PS

Ind

iaEC

T24

50

2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050

Mtp

a

Indian Imports: Different Quality Standards (Minimum Calorific Value of 22.9 GJ/t vs. 23.1 GJ/t )


5

Results – Import Restriction


0

50

100

150

200

250

300

350

400

450

500

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

NP

SIn

dia

ECT2

45

0N

PS

Ind

iaEC

T24

50

NP

SIn

dia

ECT2

45

0

2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050

Mtp

a

Indian Imports: Reference Scenario vs. Import Restriction (65 Mt)


5

Conclusion – General Observations

• NPS: Import dependency due to domestic bottlenecks and

rapidly increasing demand

• ECT2 and 450: less import dependency due to lower

demand

Policies:

• Tax: decreasing imports; increasing domestic production;

trend continues with an increasing tax

• Quality Standard: does not reduce imports only

different exporters dependent on quality standard

• Import Restriction: domestic production increases by ~

100 Mt (NPS) and ~ 50 Mt (India ECT2 and 450 ppm)


6

Conclusion – Indonesia

• Tax: Loss of market share in India is compensated by

increasing exports to China

• Import restriction: loss of market share in India is

compensated by increasing exports to China

• Quality standard: loss of market share in India is

compensated by increasing exports to China, Taiwan and

Philipines


6

Conclusion – South Africa

• Tax:

low tax: Exports decrease slightly (20 Mt)

higher tax: loss of market share in India compensated by

Malaysia, Thailand and China

• Import restriction:

• In NPS: high decrease of exports 50 % less exports ~ 60 Mt;

losses partly compensated by China, Thailand and Malaysia

• ECT2 India and 450: slight decrease of exports

• Quality standard: if cv > 23 India market is lost,

compensated by China, Malaysia, Thailand and Latin

American Countries


6


Thank you


0102030405060708090100110120

USD/t

FOB costs (2010) for the export countries

low cost diff = (high cost - low cost) transport cost port feeSource: Mendelevitch et al. (2016) bases on Baruya (2007).

COALMOD Results: Analysis of Key Drivers

COALMOD Results: Analysis of Key Drivers


0102030405060708090

100110120130

US

D/t

CIF costs (2010) for selected routes

low production cost maximum production cost

land transport port fee

seafreightSource: Mendelevitch et al. (2016).

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Documents

Global Coal-Phase-Out and the International Coal … Coal Perspectives –The Global Steam Coal Market Vienna, 06.09.2017 5 A Focus on Demand-side and Supply-side Policies in India