There has been a concerted effort by the US gas industry to push LNG onto developing Asian nations. This has the potential to impact renewable energy investment across the continent, according to a March 22 report by the Institute for Energy Economics and Financial Analysis (IEEFA). 

In Bangladesh, the government is likely to scrap nine coal-based power projects, according to local media reports. Similarly, Vietnam's new draft long-term energy plan calls for reduced coal use and an increased focus on LNG, but at the expense of solar power development.  

The IEEFA report argues that developing Asian nations would benefit from a switch in focus away from more lengthy, large-scale hydrocarbon-fuelled power additions and towards grid and battery storage investment.

Replacing Bangladesh coal projects with LNG  

Bangladesh has a growing overcapacity problem in its electricity sector. Power plants receive capacity payments despite lying idle much of the time, pushing up the average cost of electricity. This risks the financial sustainability of the sector, as also demonstrated in Pakistan, where capacity payments are on course to reach $10bn/year by 2023, the IEEFA report said. 

Switching from coal to LNG will do nothing to solve the growing overcapacity issue in Bangladesh. Furthermore, a shift to LNG would expose Bangladesh to even greater fossil fuel price volatility, the report added. The high cost of LNG is already causing Bangladesh’s fossil fuel subsidies to increase unsustainably so as to avoid significant electricity price rises that could hold back its developing economy, it stated.

Bangladesh's five-year plan also notes fossil fuel subsidies have held back renewable energy development in the country. The nation’s Sustainable and Renewable Energy Development Authority (SREDA) is now recommending a new solar target to address this. 

SREDA’s draft National Solar Energy Roadmap recommends aiming for a high-deployment solar installation target of up to 30 GW by 2041. However, this target risks being crowded out by an increased focus on LNG-fired power investment, the report stated. 

India’s Reliance Power and Japan’s Jera in early March achieved financial closure for their proposed gas-fired power generation project in Bangladesh. The pair will build, own and operate a 750-MW combined-cycle gas turbine power plant at Meghnaghat, Narayanganj, located 40 km southeast of Dhaka. US-based power giant GE will be providing its gas turbine technology for the project.  

This expansion in gas-based power projects is expected to ramp up Bangladesh's fossil fuel imports. The country is expected to double its fossil fuel imports to 32mn tons of oil equivalent between 2020 and 2030, with LNG and coal accounting for most of the growth, Wood Mackenzie wrote in a note last year. Bangladesh has two floating LNG import terminals. 

Switching from coal to LNG will do nothing to solve the growing overcapacity issue in Bangladesh, IEEFA argues, adding that the shift would expose Bangladesh to even greater fossil fuel price volatility.  

LNG pushing out solar in Vietnam’s new power plan 

In Vietnam, there has been a major addition to renewable energy installation. However, solar power development is now at risk from the increased focus on LNG, IEEFA said. 

Like Bangladesh, Vietnam has been scaling back coal-fired power as more banks distance themselves from coal finance and due to the very long development timeframes of such projects. South Korea’s GS Energy Corp along with Vietnamese venture capital fund, VinaCapital, recently said they would invest $3bn to develop a gas-based power plant in a southeast Asian country. 

Demand for LNG in Vietnam’s power sector is expected to reach 8.5mn metric tons/year by 2030, the country's industry and trade ministry said in September last year. The ministry expects demand for LNG in the power generation sector to reach 1.2mn mt/yr by 2025. Vietnam currently does not import any LNG. In June last year, PetroVietnam Power, a subsidiary of state-run PetroVietnam, announced plans to build four new gas-based power plants. 

There has been a spate of announcements in the recent months by US companies about their plans to invest in Vietnamese LNG and gas-to-power projects. ExxonMobil and Japanese joint venture Jera teamed up in October last year to establish a gas-to-power project in Hai Phong city. In the same month, AES Corp and state-run Petrovietnam Gas signed an agreement to develop the Son My LNG terminal in Vietnam.

GE signed a $1bn agreement in November with Genco3 pertaining to the development of the Long Son 3.6-GW gas-to-power project located in Vung Tau province, including a 3.5mn metric tons/year LNG terminal. 

The IEEFA report, however, argues that new LNG-fired power proposals are more challenging to execute than coal power.  “The need for new associated, additional infrastructure – regasification, storage, pipelines, and market development – means new LNG-fired power proposals can’t be implemented at the rate suggested by the many sponsors promoting overambitious targets for their project’s development milestones,” the report says. 

Notwithstanding this, Vietnam’s latest draft long-term power plan (Power Development Plan VIII) sees increased LNG-fired power ambitions crowding out solar, the report states. A total of 18 GW of LNG-fired power is now planned to be added by 2030 while solar additions are capped at just 2 GW. 

Asia to benefit from switching from fossil-fuelled power 

Like Bangladesh, Vietnam would benefit from a switch in focus away from more lengthy, large-scale fossil-fuelled power additions and towards grid and battery storage investment. This would enable a continuation of Vietnam’s solar and wind development progress rather than a curtailment, IEEFA says. It would also enable the nation to optimise investments in the renewables plus storage technologies that are expected to see sharply declining costs over the coming decade. 

Japan – which has been a major promoter of its own coal-fired power technology – now appears to be backing away from further coal power development in Vietnam, IEEFA said. Most recently, Mitsubishi Corp pulled out of the Vinh Tan 3 coal power proposal as it and other Japanese trading houses withdraw from thermal coal power and mining activities globally. 

In addition, the Japan Bank for International Cooperation (JBIC) has stated it will no longer finance coal power projects overseas. 

"However, if the emphasis switches to LNG, Vietnam will face much the same set of risks it faced when its focus was on coal, with the added problem of increased fuel price volatility and massive new investments required to build a full value-chain of LNG infrastructure," IEEFA said. 

In Bangladesh, the Japan International Cooperation Agency (JICA) signed an agreement this month to assist with the development of the nation’s new long term power and energy plan. JICA – which financed Bangladesh’s long-delayed Matarbari coal power plant and is considering funding another – has stated its work on the plan will promote a “transformation to a low or zero carbon energy system”. 

Given LNG’s full lifecycle greenhouse emissions are comparable to that of coal-fired power, it will be hard for JICA to justify a focus on LNG in Bangladesh’s new power and energy plan, rather than on renewables, the report said, adding developing Asian nations do not need growing fossil fuel subsidies dialling up stress on government finances and necessitating power tariff hikes that impact consumers and businesses. 

"Instead, nations like Bangladesh and Vietnam will be better served by ever-cheaper modern technology that can reduce the cost of electricity generation and support their development. That means the focus must be on cheaper renewable energy," the report says.