ASEAN Urbanization and the Growing Role of Coal

By Jude Clemente
Principal, JTC Energy Research Associates, LLC

Although global economic growth may have stalled recently, a number of regions characterized by clusters of emerging economies are poised to become drivers for a renewed wave of growth. One of the most prominent such areas can be found in Southeast Asia, where regional cooperation and a desire to improve standards of living could strengthen the urbanization and industrialization already in progress.

Founded in 1967, the Association of Southeast Asian Nations (ASEAN) now has 10 member states: Thailand, Myanmar, Laos, Vietnam, Malaysia, Singapore, Indonesia, the Philippines, Cambodia, and Brunei. ASEAN is home to about 630 million people today, with a growing population expected be above 785 million by 2050.1 As it expands, the ASEAN population is increasingly concentrated in urban areas.

Singapore is a leader in ASEAN urbanization.

Singapore is a leader in ASEAN urbanization.

Urbanization brings higher productivity because it concentrates economic activity and gives rise to massive economies of scale that lower costs. In Asia, for instance, urban productivity is more than 5.5 times that of rural areas.2 According to the UN, “No country in the industrial age has ever achieved significant economic growth without urbanization.”3 Thus, emerging ASEAN is urbanizing as its economies develop. The percentage of people living in urban areas is projected to increase from about 47% today to 56% in 2030 and then 67% in 2050 (see Figure 1).

FIGURE 1. ASEAN continues to urbanize.1

FIGURE 1. ASEAN continues to urbanize.1


On 31 December 2015, the implementation of the ASEAN Economic Community will “transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.”4 Per the Asian Development Bank, ASEAN will emerge as a rival even to the European Union and become a “truly borderless economic community by 2030.”5 From 2014 to 2030, ASEAN’s real GDP (in 2010$) is projected to more than double to US$5.2 trillion, with an average annual expansion of $180 billion per year.6 ASEAN could even enter a high-growth phase, leading to a tripling of per capita income by 2030, raising quality of life to levels enjoyed today by OECD countries. With a median age of about 28, a young population gives ASEAN an advantage in terms of economic prospects and labor pool.7

This growth, and the resulting expanding middle class with more purchasing power, is contingent on much more energy to support industrialization and urbanization. Urbanites consume more energy because they typically have higher incomes and more money to spend as well as better access to services. For example, the World Bank reports that urban residents in China consume about 3.6 times more energy than those living in rural areas.8 In ASEAN, this means that demand for coal, as a principal energy source in the region, is projected to increase. In addition, coal will be needed to support increased steel and cement production also associated with urbanization.


The role of coal in ASEAN is, and will continue to be, particularly strong because the Asia-Pacific region is the nexus of the international coal market. BP reports that this region boasts nearly 33% of the world’s proven coal reserves.9 Indonesia is by far the largest global exporter of thermal coal used for electricity and nearby Australia is the largest exporter of metallurgical coal for steel. Since 2000, as the urban population has expanded by over 120 million people, ASEAN’s coal production has leaped from about 110 million tonnes (Mt) to over 575 Mt, with Indonesia and Vietnam leading the expansion.10 The key coal importers in the bloc are Thailand, Malaysia, and the Philippines. In the short term, IEA expects ASEAN coal production to further increase to 660 Mt in 2019, nearly all of which is the thermal variety used for electricity.11

Electricity for Urbanization and Industrialization

Today, ASEAN is a developing region, characterized by considerable poverty and low levels of social development. For example, access to electricity is far from universal. The International Energy Agency (IEA) reports that 135 million people in ASEAN—over 20% of the population—have no access to electricity. Indonesia, with 255 million people, generates 170 TWh of electricity per year,12 compared to 203 TWh for Illinois, U.S.,13 with less than 13 million residents. About 70% of Myanmar’s 54 million people have no access to electricity whatsoever.14 Around 280 million ASEAN residents rely on traditional biomass for cooking, resulting in indoor air pollution deemed to be the “deadliest environmental threat.”15 Thus, lack of access to power affects all aspects of life and correlates to a shorter lifespan (see Figure 2). With modern energy access, standards of living will be higher, including improved childhood survival, nutrition, drinking water quality, and educational opportunities.

FIGURE 2. Electricity use and life expectancy

FIGURE 2. Electricity use and life expectancy

The amount of electricity needed to address the enormous challenge in ASEAN will be met by increasing generation from all sources (see Figure 3). Coal consumption is growing the fastest due to its abundance in the region, scalability, reliability, and lower costs.

FIGURE 3. Historical and projected electricity generation in ASEAN, by source

FIGURE 3. Historical and projected electricity generation in ASEAN, by source

Today, global oversupply has driven thermal coal prices to five-year lows, even as the coal build-out in Asia continues. Some 75% of the thermal capacity, and nearly 40% of total capacity, now under construction in ASEAN is coal fired. Moreover, high reliability means that baseload coal supplies 31% of actual generation while accounting for just 22% of total capacity. This reliability is a major reason coal accounts for almost 70% of all electric power in developing Asia.16 As pointed out by World Bank President Jim Yong Kim, “There’s never been a country that has developed with intermittent power.”17

IEA projects that coal use in ASEAN will rise from about 200 Mt today to 300 Mt in 2020 and to 535 Mt in 2035, extending its share of the primary energy mix from about 16% to nearly 30%.18 The power sector accounts for 52% of the increase in primary energy demand in ASEAN. Overall, IEA estimates that, by 2035, 50% of all power generation for ASEAN will be coal fired, compared to 18% in 1990 and 31% today.

Relying on coal for industrialization, urbanization, and to increase energy access has been common in developing Asia. ASEAN watched China lift 650 million people out of poverty since 1990, the most effective poverty alleviation campaign in human history.19 From 1990 to 2011, China’s electricity use per capita per year increased from 511 kWh to 3300 kWh today—China’s electricity generation was about 75% fueled by coal in 2014.20 Similarly, India relied heavily on coal to re-duce the number of people without electricity by 100 million from 2008 to 2012.21

As it builds its coal-fired power sector, ASEAN has an opportunity to deploy modern technologies and thus minimize the environmental impact of coal-based power production. Increasing the efficiency and plant size at existing and new stations is at the heart of any clean-coal strategy. IEA notes that the average coal plant efficiency is at 34% in ASEAN, just above the global average. However, supercritical (SC) plants have become the standard for large-capacity boilers and can achieve efficiencies of 40–45%. A single percentage-point improvement in the efficiency of a conventional pulverized coal combustion plant results in a 2–3% reduction in emissions of CO2, NOx, and SO2.

China has been focused on increasing the efficiency of its coal-fired fleet, effectively demonstrating that electricity from these plants is affordable. About 25% of China’s coal fleet has SC or ultra-supercritical (USC) steam parameters and about 75% of its capacity is from plants with a generation capacity above 300 MW.22 The cost of electricity from China’s coal-fired power plants is about 0.4 yuan/kWh and the cost for incorporating ultra-low emissions technologies is about 0.005–0.01 yuan/kWh for new plants and 0.01–0.02 yuan/kWh for retrofits. Natural gas combined-cycle plants can provide electricity for about 0.59–1.23 yuan/kWh in China (depending on natural gas prices).23

Similarly, IEA has concluded “coal has the cheapest generating costs in Southeast Asia over the range of assumptions analyzed” (see Figure 4). ASEAN is cooperating on advanced coal technologies with its more experienced +3 Dialogue Partners: China, Japan, and South Korea. Developing Asia will be stepping up its “efforts to develop cooperation programs, promote policies on clean coal technologies (CCT), such as high efficiency coal-fired power generation, the upgrading of low-rank coal technologies, carbon capture and storage (CCS), cokes making, coal gasification, coal liquefaction and develop the industry in the region.”24 For example, all existing coal-fired power plants in Peninsular Malaysia now use SC technology. The 2100-MW Manjung power station complies with World Bank standards, while the upcoming Janamanjung 5 plant will utilize highly efficient USC technologies.

FIGURE 4. Electricity generation costs in ASEAN, 2020–2035 Fuel price assumptions: $60/tonne coal; $10/MBtu gas

FIGURE 4. Electricity generation costs in ASEAN, 2020–2035
Fuel price assumptions: $60/tonne coal; $10/MBtu gas

As shown in Figure 3 (see “Other” line), the deployment of renewables is also beginning to ramp up in ASEAN. Thus, coal-fired power plants will require the flexibility to back up intermittent wind and solar power. Modern coal plants are well suited to this task and can change from full load capacity to 50% in less than 15 minutes.25 A 1000-MW plant can provide a 30–40-MW load change each minute, and this flexibility continues to improve.

Electricity from these new coal-fired power plants could be distributed throughout the region. ASEAN’s economic growth, increased trade, and need for more energy have sparked the move to a regional power interconnection. The ASEAN power grid will connect the national grids, upgrade energy security, increase supply, and lower electricity costs. By 2025, there will be up to 19,600 MW of cross-border power purchase and 3000 MW of energy exchange through the cross-border interconnections.26

Kuala Lumpur, Malaysia and other urban centers are growing as ASEAN urbanization increases.

Kuala Lumpur, Malaysia and other urban centers are growing as ASEAN urbanization increases.

Coal for Steel and Cement

ASEAN urbanization will also mean increasing demand for steel and cement—coal is important for the production of both. In the period 2014–2020 alone, the World Economic Forum estimates that ASEAN has US$8 trillion in new infrastructure needs.27

Coal must be used to produce new steel, much more of which will be needed for urbanization in ASEAN. According to OECD, ASEAN-6 (the six major and older nations in the ASEAN) steel-making capacity will reach over 51 Mt this year, up nearly 75% since 2007.28 Steel consumption has increased from 44 Mt to around 70 Mt since 2006, and is projected to further increase 8% in 2015.29

Transport infrastructure can also be a major steel consumer as about 55% of the weight in a car comes from steel.30 Aluminum, another important material for automobile production, is energy intensive, often relying on coal to provide the electricity. Today, ASEAN’s car ownership rates are still quite low, with tremendous demand potential (see Figure 5). All ASEAN nations except Singapore, Brunei, and Malaysia are at or below the $2500–10,000 per capita income bracket, the level at which the International Monetary Fund judges that car ownership grows twice as quickly as incomes.31 One university study projected ASEAN reaching 127 cars per every 1000 people by 2030.32

FIGURE 5. ASEAN’s vehicle market

FIGURE 5. ASEAN’s vehicle market

ASEAN is projected to continue to grow as a key vehicle production base for the world’s biggest car manufacturers, particularly given its proximity to the fastest-growing markets of China and India. Thus, ASEAN’s automotive industry has expanded rapidly, growing its share of global car production from 2.3% in 2002 to nearly 7% today. In 2015, ASEAN countries will produce over four million vehicles—about 7% more than last year.33 Indonesia is expected to become both the biggest producer and the biggest consumer of cars in the bloc. Thailand’s domestic market is less dynamic, but the country is exporting more cars than the rest of ASEAN combined.

Coal is also a major fuel source in cement production, taking approximately 200 kg of coal to produce one tonne of cement; about 300–400 kg of cement is needed to produce one cubic meter of concrete.34 Four nations produce 85% of ASEAN cement.35 Jakarta is one of the fastest growing cities, in terms of construction, in the world, and Indonesia is now the largest cement producer in the bloc, producing over 65 Mt and growing 9–12% per year. Thailand has seen nearly 20% yearly cement output growth that will be bolstered by an average annual construction growth of close to 5% through 2020.36 Vietnam has been ASEAN’s largest cement producer and now wants to utilize more coal in production because of high local availability. By 2020, Vietnam’s cement industry will have a capacity of 130 Mt. Over 5% annual GDP growth has Malaysia consuming over 20 Mt of cement a year. Overall, ASEAN cement production growth is expected at 7–8% per year.37

Jakarta is one of the world’s fastest growing cities.

Jakarta is one of the world’s fastest growing cities.


Unprecedented urbanization in ASEAN and around the world means coal will continue to play a fundamental role in the production of electricity, steel, and cement. As recognized by the Center for Strategic and International Studies, “the question is not about whether to continue using coal, but how to make it compatible with international and national climate goals.”38 The commercialization and deployment of the next generation of clean coal technologies—such as CCS, SC/USC advanced coal-fired power plants, and integrated gasification combined-cycle technologies—will propel ongoing environmental improvement and steady progress toward the ultimate goal of near-zero emissions.39

Increasing ASEAN car production would increase steel demand in the region.

Increasing ASEAN car production would increase steel demand in the region.

Clearly, the ASEAN region is increasing coal-fired power capacity to meet its energy needs. Lacking international support, less efficient, higher-emissions plants will be built, and these plants will not be CCS ready. IEA explained these risks in its 2014 “World Energy Investment Outlook”:40

If development banks withhold financing for coal-fired power plants, countries that build new capacity will be less inclined to select the most efficient designs because they are more expensive, consequently raising CO2 emissions and reducing the scope for the installation of CCS.

Thus, as ASEAN and other regions develop and urbanize, there is an opportunity to ensure that the coal-fired power capacity being built, which will operate for decades, is equipped with the state-of-the-art high-efficiency, low-emissions technologies.


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The author can be reached at or followed on Twitter @judeclemente


The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.
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