Supporting Developing Countries in their Transition from Coal to Clean Energy
Coal is the world's most dominant energy source, generating 34 percent of global electricity in 2020. Although the COVID-19 pandemic caused a four percent drop in coal demand, corresponding to 220 million tons, coal consumption is rising. It remains the cheapest and most profitable energy source in many countries. Despite the widespread recognition of coal’s negative impact on climate change, the coal-based generation capacity remains approximately 2,000 GW worldwide. While the transition towards clean energy sources continues, the progress is slow given the scale of the challenge and limited affordable alternatives. This issue disproportionately affects developing countries that rely on coal for their national energy needs and are trapped in carbon-intensive energy systems with no apparent way out. Closing coal mines in these countries is key to achieving the energy transition. However, the dependence of these countries on coal means that the closure of coal mines will have significant social, economic, and political challenges. The sustainable and effective closure of coal mines requires a programmatic, long-term approach that considers jobs, skill sets, and environmental and financial issues.
The key to successful and logical coal phase-outs lies in developing regional transition strategies. There is also an opportunity to leverage kick-start projects that strengthen local and regional institutions and expand social protection, education, and economic innovation programs to protect the poor and train personnel for the new jobs created during the transition. However, many developing countries lack the capacity and funding to plan and actualize these initiatives, which means that they cannot progress in the coal sector transition. In 2010, the World Bank Group ended the direct financing of new utility-scale coal-fired power projects. Since then, the institution has supported national, regional, and local authorities to develop clear roadmaps for the transition, focusing on governance structures, the welfare of people and communities, and the remediation and repurposing of former mining lands and coal-fired power plants.
ESMAP’s Supporting Coal Regions in Transition program helps governments in developing countries begin their transition away from coal through coal mine closure and coal plant repurposing. Support includes, but is not limited to, knowledge exchange, assistance in developing roadmaps for transition, designing pathways to preserve and grow human capital by developing comprehensive social protection packages to protect families impacted by the transition, creating re-skilling and job transition programs, and presenting potential pathways for economic transition. The key priority of the program is to support governments and ensure that communities are protected during the phasing out of coal as the country transitions towards cleaner energy sources.
The program provides support through three main workstreams:
- Country Engagement: This workstream supports the development of roadmaps for client countries transitioning away from coal. In 2021, this type of technical assistance was performed to support the governments of Bosnia and Herzegovina, India, Indonesia, Morocco, Serbia, South Africa, and Ukraine.
- Peer-to-Peer Dialogue: This workstream focuses on enabling governments in coal regions to share lessons learned from their projects and participate in peer-to-peer learning with other government officials and international experts. The key activity under this workstream is the Platform in Support of Coal Regions in Transition in the Western Balkans and Ukraine, also known as the WBUA Platform Initiative. The platform convenes governments in coal regions to:
- Share knowledge and compare experiences in preparing for the energy transition.
- Participate in twinning arrangements to encourage peer-to-peer learning with European Union member states.
- Benefit from paced, individual learning through the Coal Regions in Transition Academy.
- Receive technical assistance to develop roadmaps for transition.
- Access financing for transition projects and programs.
This World Bank leads this effort in partnership with the European Commission, European Bank for Reconstruction and Development, Energy Community Secretariat, Government of Poland, and the College of Europe.
- Knowledge and Stakeholder Engagement: This workstream focuses on creating knowledge products to support to energy transition operations. In 2021, the program completed two knowledge products: the Socioeconomic Transition in the Appalachia Coal Region Case Study and the Future of Jobs in Coal Regions.
Between 2020 and 2021, the Supporting Coal Regions in Transition program worked on several projects, including but not limited to:
- Exploring Closure Sustainability: The World Bank’s 2018 report Managing Coal Mine Closure: Achieving a Just Transition for All featured lessons learned from 11 former World Bank investment projects on coal sector transition alongside new evidence from China, Netherlands, the UK, and the US. The program is now finalizing a comprehensive set of good practice technical standards on global coal mine closure. These standards aim to serve as a guide to the planning and implementation of sustainable closure projects.
- Ukraine-Poland Twinning: The program also designed twinning knowledge-sharing activities between the Polish and Ukrainian coal regions featuring a virtual study tour. Formal training sessions are delivered via the Coal Regions in Transition Learning Academy, led by the College of Europe and the World Bank, with support from the European Commission.
- Retirement and Repurposing in South Africa: South Africa is the largest producer of coal in Africa and one of the largest coal producers in the world. Its state power utility produces 95 percent of the nation’s electricity, the bulk of this coming from coal-fired capacity. ESMAP mobilized US$ 5 million to support the closure and repurposing of four plants.
- Coal Plant Repurposing Report: In August 2021, the program published a report entitled Coal Plant Repurposing for Ageing Coal Fleets in Developing Countries. This report presents a detailed cost-benefit framework for examining the value proposition of repurposing coal plants for three applications: solar energy generation, battery energy storage, and synchronous condenser, which produces fast reactive power essential for maintaining system security. In addition, the report applies the rationale to a representative 1,000-megawatt (MW) coal plant in India, finding a solid economic rationale for repurposing.