HSBC funds emerging research on ‘repowering’ coal plants with clean energy
DISCUSSIONS on the early retirement of coal-fired power plants in South-east Asia often hit a snag when it touches on the financial viability of such transactions.
That is because many coal phase-out projects require financiers to compensate the owners of these coal assets for their loss in return for closing the plants earlier before their original retirement date.
However, a non-profit group has proposed a way to improve the financial viability of such projects by repurposing existing coal plants to produce clean energy. It calls this “repowering”.
A White Paper – funded by HSBC and published by Repower Initiative – estimates that repowering an existing coal fleet could save up to 35 per cent of the project’s upfront costs, compared to developing a clean-energy power plant from scratch.
The cost savings come from capitalising the site’s existing power infrastructure such as turbines or grid connectors.
This could involve reusing the grid connection to transmit power from wind and solar projects, or powering existing steam turbines with renewable technologies that produce high heat, among other options, said the White Paper which was published on Thursday (Jun 6).
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Depending on the location and condition of the coal plants, some assets can be repurposed minimally while others can be fully repurposed over time.
Repurposing power plants not only minimises the problem of leaving these assets stranded, but it also continues to be a source of employment for communities that were already reliant on the plant for income.
Reusing an existing site may also have a lower environmental impact than going for a greenfield development of a clean-energy project.
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Speaking at a presentation of the White Paper, Dr Staffan Qvist, who is founder of international consultancy Quantified Carbon (QC) and oversees the Repower Initiative, said that repowering is essentially turning a coal power plant into a clean energy power plant in stages, “while retaining as much of the original investment that was made as possible, saving as much time and money as possible”.
When asked if repowering involves competing with other coal phase-out ideas being discussed, Dr Qvist replied that it serves to complement and augment existing plans. “So you’re still phasing out coal, we’re not changing any of that. Maybe we can even do it faster with this. So the phase-out remains, it’s just what happens to the assets once you stop burning coal. The plan right now is there isn’t really a plan for most of it. You just kind of walk away or clean up the site. So it’s kind of a negative on the balance sheet,” he added.
The White Paper recommended that repowering should be included in plans to refinance existing coal plants for their early closure, as investments into new clean energy capacity will further improve the economic viability of coal phase-out transactions.
New capital investments should prioritise projects that can deliver both clean energy capacity as well as early closure of repurposing of coal plants as this will ensure both emissions reduction and economic development.
The research paper also suggested that there is a need to start mapping all existing coal-power plants and the available options for repowering at each site.
While repowering is still not part of the mainstream conversations around coal phase-out, Dr Qvist noted that work has begun in Poland to pursue coal repowering projects.
Given that Asia is the region with the largest number of coal fleets, Repower Initiative has also started discussions with organisations in China, India, Indonesia, South Korea and Japan.
Indonesia had even integrated repowering coal as part of its national energy policy, said Dr Qvist. He pointed out that coal plant owners who are interested in repurposing their assets after the phase-out of coal, must start planning for how they can be reused at the early stages of the project. Thinking of repowering the plant after it is shut off will pose more challenges.
When asked if plant owners who incorporate repowering options into their phase-out plans would be able to attract better financing, Sunil Veetil, regional head of commercial banking sustainability at HSBC Asia-Pacific, said that the bank examines the risk and sustainability considerations based on relevant guidelines and regulations. “Each plant is unique, so the bankability of individual projects will depend on that analysis,” he noted.
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