April 23, 2020
Issue 319  |  View Past Issues

Editor's Note

With discussion increasing over the link between air pollution and the health impact of the coronavirus a poignant example was unintentionally highlighted by Turkish President Erdogan when he noted the prevalence of lung diseases in the small coastal city of Zonguldak meant it had been added to the list of far larger cities requiring tighter coronavirus restrictions. Zonguldak hosts the country’s largest coal plant.

As the health toll from the coronavirus continues to mount the depth of the impacts on the energy industry become more apparent. The last coal power plants in both Austria and Sweden have closed in the last week. In Australia, decisions about major mine expansions have been put on hold for the year. In the US, Moody’s has downgraded the credit rating of Peabody Energy due to a bleak outlook for both thermal and metallurgical coal. As one analyst has noted, the decline in European power demand has had the effect of reducing coal generation and testing how the grid can accommodate far higher levels of renewables.

Longer-term trends are also at play. The resounding election victory of South Korean President Moon Jae-in is likely to see greater restrictions on coal generation at home and the scrapping of financial support for new coal projects abroad. In India, the auction of 2000 megawatts (MW) of new renewables capacity proceeded despite the lockdown and delivered even lower prices than achieved in 2019. In Pakistan, there is now alarm at the overcompensation of new Chinese-backed coal projects. There has also been a flurry of banks announcing new policies restricting coal financing. This week alone two of Japan’s largest banks, Sumitomo Mitsui Financial Group and Mizuho Financial Group, have announced new coal policies, albeit with significant loopholes. In the US, Citi has also tightened its 2015 policy for both new and existing thermal coal mines and power plants.

Bob Burton


Coal's sell-by date just moved closer as Vietnam retreats on new coal

A softening of support for new coal projects in Vietnam suggests that thermal coal exporters hopes for substantial growth in Southeast Asian demand may be misplaced, writes Clara Ferreira Marques in Bloomberg.

Canadian trout population crashed downstream from Teck mines

In the 1990s the Canadian province of British Columbia established a task force to address selenium pollution from Teck’s Elk Valley metallurgical coal mines but since then it has got far worse, writes Carol Linnit in The Narwhal.

Fate of Egypt’s coal-fired project a sign of greener times

The indefinite postponement of the proposed 6000 MW Hamrawein coal plant in Egypt provides an opportunity for China’s Belt and Road Initiative to emphasise clean energy projects in Africa, writes Simon Nicholas from the Institute for Energy Economics and Financial Analysis.


Austria and Sweden end coal power

Austria has become the second European country to exit coal power with the closure of the 246 MW Mellach plant. The closure comes after a decade of advocacy by Global 2000, an Austrian NGO, for a transition to renewables and the closure of the plant. Seven more European Union countries are scheduled to phase out coal power by 2025. However, Voestalpine’s Linz steelworks, which burns metallurgical coal, is Austria's largest greenhouse gas emitter and the 12th largest in the European Union. In Sweden, the 120 MW Vartaverket combined heat and power station, the country’s last coal power unit, has closed. (Euractiv, Europe Beyond Coal, The Mayor.eu)

Top News

South Korean election results pose new challenge for coal projects: In a landslide result President Moon Jae-in’s centre-left Democratic Party and its affiliated Together Citizens’ Party won the April 15 election with 180 seats in the 300-seat parliament. In the lead-up to the election the Democratic Party platform endorsed a phase-out of overseas coal financing by government-owned financial institutions and the transformation of domestic energy with support for renewables and the imposition of a carbon tax. (Climate Home News)

Rio Tinto’s proposed Mongolian coal plant delayed: Rio Tinto subsidiary Turquoise Hill Resources has been unable to reach an agreement with the Mongolian Government over the proposed 300 MW coal plant near the Tavan Tolgoi coalfield. In late 2019 the company it had agreed on a power source framework agreement with the government to mutually agree on the project details with the aim to begin construction in 2020. The agreement set April 14, 2020 as the deadline to agree on the project. Having failed to meet the deadline, both parties are now assessing whether to continue with the current grid supply from China, or alternatively, a renewables option or a power plant at the site of the Oyu Tolgoi copper and gold mine. If they fail to reach agreement by June 14, the decision on power supply is up to the company. (Turquoise Hill Resources)

Turkish President nominates coal power town for restrictions due to prevalence of lung disease: On April 4 President Recep Erdogan announced tighter COVID-19 restrictions targeted at the country’s 29 largest cities with population of over 750,000 people. He also included the far smaller city of Zonguldak, which has a population of fewer than 250,000. Erdogan said that the decision was based on the “prevalence of lung diseases” in the city. The 2790 MW ZETES power station, which is the country’s largest coal plant and relies on imported coal, is located on the outskirts of the city and has long been criticised for its impact on the region’s air quality. (Al-Monitor)

Indian coal ash spill pollutes water reservoir: Analysis of satellite data by the Centre for Research on Energy and Clean Air has revealed that coal ash sludge from the collapse of the tailings dam at Reliance Power’s 3960 MW Sasan power plant has not only smothered residential and agricultural land but also contaminated the Rihand Reservoir. The reservoir is the main water source in the area. Satellite imagery has revealed that sludge from the October 2019 coal ash dam collapse at NTPC’s Korba power station also reached the reservoir. It had previously been reported that mercury-contaminated runoff from the ash dams flowed into the reservoir. (Centre for Research on Energy and Clean Air)

US Government opens door to legal challenge to mercury emissions rule: US Environmental Protection Agency (EPA) Administrator, Andrew Wheeler, has weakened the cost-benefit analysis that underpinned the rule requiring cuts in emissions of mercury and other pollutants from coal plants. The EPA changes increased estimates of the economic costs of the rule and downgraded the value of benefits by excluding consideration of health co-benefits such as reduced heart disease and asthma attacks. While the change leaves the Mercury and Air Toxic Standards intact, environmental groups fear the change could open the door for legal challenges. (New York Times)

NSW water agency opposes underground mine expansion: WaterNSW, the New South Wales agency responsible for the management of the state’s water resources, has warned that South32’s proposed expansion of the Dendrobium underground mine could cause major water losses by damaging up to nine major watercourses and many smaller tributaries. While South32 estimated losses could be up to 5.2 million litres of water a day, WaterNSW estimates that this may be an underestimate. The agency also warned that the proposed mine expansion could also jeopardise its plans for two additional water storages. Lock the Gate, an NGO, has called for a ban on mining in special areas for water supply. (Sydney Morning Herald, Lock the Gate)

“Moody's expects a very challenging year for the coal industry in 2020 -- including meaningful reduction in industry-wide demand for metallurgical coal and thermal coal in the next few months driven by an unprecedented shock to the economy due to the coronavirus outbreaks,”

writes [registration required] credit rating agency Moody’s announcing why it was downgrading the long-term outlook for Peabody Energy.


Australia: Three debt-laden Queensland coal ports face challenges as coronavirus bites into volumes exported.

China: State-owned utility Beijing Jingneng has proposed a 5000 MW hybrid solar, wind, hydrogen and storage facility in Inner Mongolia.

Netherlands: Coal shipments through the Port of Rotterdam have fallen by 40 per cent in the first three months of 2020 compared to the same period in 2019.

North Korea: United Nations report calls for blacklisting ships implicated in coal trade in breach of international sanctions.

Philippines: Ayala Corporation, which has interests in two coal plants, aims to end coal investments by 2030.

South Africa: Eskom declares force majeure on Exxaro coal supply contracts for Medupi and Matimba coal plants until a month after the coronavirus lockdown has ended.

US: The City of Chicago has fined a company US$68,000 after the demolition of a coal plant coated a neighbourhood in dust.

US: The US Mine Safety and Health Administration has details of coronavirus-affected mines but has declined to release the information.

“We are sitting here on the cusp of either an opportunity or an economic catastrophe for the coal industry. I think we can, to coin a phrase, beat our coal shovels into wind turbines and solar panels,”

said Andre De Ruyter, the new CEO of the South African power utility Eskom.

Companies + Markets

India maintains support for renewables as coal struggles: The Indian Government has included new renewable generation construction on the list of activities eligible to resume when coronavirus restrictions ease on May 3. The government has also requested that distribution utilities maintain payments to renewable generators while there is a three-month moratorium on payments to coal generators. While some renewable construction projects have been affected by the shutdown and supply chain disruptions, the winning bids in a recent auction of 2000 MW of solar capacity by the government-owned NHPC revealed prices of 2552 rupees per megawatt hour, 4.7 per cent lower than 2019 auctions prices. The decline in Indian power demand has resulted in plant load factors for coal units falling to 58 per cent, the lowest in a decade, with private generators the worst affected. (Argus Media, Bloomberg New Energy Finance, Business Standard)

Japanese banks restrict new coal lending: Japan’s Sumitomo Mitsui Financial Group has announced that after May 1 it will “in principle” no longer finance new coal power plants. However, its policy states exceptions may include “environmentally friendly” ultra-supercritical plants and those that were supported before the policy revision. The announcement came the day after Mizuho Financial Group announced that from June 1 it would halve its 300 billion yen (US$2.8 billion) in loans to coal power projects by 2030 and phase them out entirely by 2050. Mizuho also announced it would not invest or finance new coal plants after June 1 but included loopholes that allowed for supporting upgrading existing plants, “lean and efficient next-generation technologies for energy conversion” and where support had been offered before the policy change. Mizuho’s policy applies only to project finance but does not restrict providing corporate finance for companies involved with coal projects. (Japan Times, Eco-business, Sumitomo Mitsui Financial Group, Mizuho Financial Group)

Citi announces new coal financing restrictions: Citi has also released a policy ruling out project financing for new thermal coal mines and power stations or expansions of existing ones. The policy also rules out financial support for projects that “negatively impact” existing World Heritage sites. Citi states that by 2025 it will halve financing of mining companies that derive over 25 per cent of their revenue from thermal coal mining and will end all support for companies over the threshold by 2030. In its 2015 policy Citi had set its threshold for restrictions applying only to companies with over 50 per cent of revenue from thermal coal. (Citi, Sierra Club)

South African bank unveils coal lending policies: In its new coal lending policy Absa, a major African bank, commits to taking a “balanced” view of proposals for new coal mines, power plants and metallurgical projects. Absa’s policy states it will remain open to funding new coal plants in “extenuating circumstances” such as where there are “no cost effective alternatives” capable of delivering power within the same timeframe as determined by a panel of “independent” experts. The bank states it will support new greenfield coal power projects with expansion of existing projects subject to new due diligence standards. The policy also states it will support the expansion of existing coal mines but they will be assessed against the Equator Principles, a framework for assessing environmental and social risks. Nedbank is the only South African bank to rule out support for new thermal coal mines and power plants. (Mining Weekly, Absa)

European coronavirus power shift provides test drive for higher renewables grid: Finnish power engineering firm Wartsila estimates that the sharp change in the European generation mix, in large part due to coronavirus restrictions, has demonstrated how the energy system can cope with much higher levels of renewable power. In the first quarter of 2020 European coal generation fell by 25 per cent while lower power demand has resulted in renewables providing 43 per cent of generation. The low prices of renewables have squeezed coal out of the generation mix. “This sets the scene for the next decade of the energy transition,” said Bjorn Ullbro from Wartsila Energy Business. (Platts)

Chinese coal companies call for coal cuts: The China Coal Transport and Distribution Association (CCTD), the leading coal industry lobby group, has called for a reduction in domestic thermal coal production of 10 per cent to boost domestic prices and overcome a coronavirus-induced glut. In March the coal industry increased production to record levels after the government urged producers to ensure sufficient supply. CCTD has also called for similar production cuts for coking coal in May and appealed for restrictions on imports. In 2019 China is estimated to have imported 241 million tonnes of thermal coal and 75 million tonnes of metallurgical coal. (Bloomberg)

China downgrades risks of further coal projects: A document released by the National Energy Administration (NEA) in late February is seen as opening the door for further coal plant construction being endorsed in the next five-year plan due to take effect in 2021. The NEA has given just three regions a red rating for capacity, indicating a serious risk of overcapacity, with three regions given an orange rating. Red and orange ratings on capacity impose binding restrictions. The rest of the regions have been rated green. The NEA’s assessment on coal and water constraints rated 12 regions as red. Ten regions have been rated as red when assessed for profitability. (China Dialogue)

Australian company defers mine expansion decisions: Whitehaven Coal has announced that decisions on three major coal mine expansion projects will be deferred beyond 2020 due to “volatile financial market conditions.” Since 2014 the company has had approval to build the A$700 million Vickery coal project in New South Wales. A proposal to expand the scope of the proposed project to 10 million tonnes a year is currently being assessed. The company’s proposed A$1 billion Winchester South metallurgical coal project in Queensland, which is currently subject of initial design work and draft environmental assessment, may also be affected. The company is also seeking to expand its Narrabri coal project, which currently produces 11 million tonnes of thermal coal a year, to extend the mine life from 2031 to 2042. In its latest quarterly report the company noted coal port closures in India and recently announced steel production cuts are likely to affect metallurgical coal demand. (The Land, Lock the Gate, Whitehaven Coal)

Contract awarded for design of new Russian coal railway: Tuva Energy Industrial Corporation (TEIC) has awarded Stroyproekt the contract to design a 412 kilometre coal railway to connect the Elegest coalfield with the Trans-Siberian main line. The design and survey works are proposed to be completed by August 2021. The project is intended to cater for up to 15 million tonnes a year of metallurgical coal for export through the port at Vanino. In 2009 Russian Railways and TEIC agreed that the cost of the project be split between a Russian Government fund and the company but the government subsequently withdrew its support for the plan. In mid-2015 TEIC entered into a memorandum of understanding with a subsidiary of China Railway Construction Corporation for the project, which at that stage was touted as a mixed freight railway. TEIC is owned by Roslan Baysarov, one of Russia’s richest businessmen. (Railway Gazette,  Dni.ru [Russian])

Pakistan committee urges major changes to private power projects: A 278-page report by a high-powered committee appointed by Pakistan’s Prime Minister Imran Khan argues that the public coffers have been deprived of up to 100 billion rupees (US$936 million) by independent power producers. Some of the factors behind the loss to public revenue and power consumers include excessive capacity payments and tariffs set by the energy regulator based on recovering plant and fuel overheads without ensuring independent verification of the actual costs. The investigation also found that while the National Electric Power Regulatory Authority had approved a 17 per cent profit margin for two new coal plants, one had recovered 71 per cent of investment in two years and the other recovered 32 per cent of its investment in one year. Prime Minister Imran Khan has reportedly sought to discuss with China the excessive capacity payments for projects approved as part of the China–Pakistan Economic Corridor. (The Express Tribune, Dawn)