Decades-long power purchase agreements in Asia are keeping utilities reliant on coal-fired electricity, even as wind and solar generation becomes increasingly cost-effective. In Southeast Asia, between 50% and 100% of coal capacity is tied to contracts that have nine to 18 years remaining, according to the Powering Past Coal Alliance. China and India also maintain substantial long-term agreements, which in many cases result in renewable energy being underutilized. These contracts, often designed to secure stable revenue for coal operators, have unintentionally slowed the transition to cleaner energy sources.
Key Details
Coal’s share of power generation in Southeast Asia has grown to roughly 45% over the last decade, up from 35%, while global coal use has declined. Renewable energy accounts for only 26% of the region’s electricity output, significantly below the global average of 41%. In China, coal and gas-fired power output rose by 7.3% in October, and solar curtailment is projected to affect 21 provinces over the next ten years. Despite efforts to expand clean energy, India continues to sign new multi-decade coal agreements. Utilities and governments face financial penalties and fixed costs tied to these contracts, making early retirement of coal plants both politically and economically challenging.
Why It Matters
These long-term coal contracts create a structural barrier to the adoption of renewable energy. Even when wind and solar power are available, utilities are often forced to prioritise coal generation, slowing decarbonisation and reducing the economic efficiency of the grid. The contracts also risk creating stranded coal assets, which carry significant financial costs for both utilities and governments. At the same time, the continued reliance on coal in Asia contributes disproportionately to global carbon emissions, posing challenges to international climate targets.
Utilities benefit from guaranteed revenues and stable operations but are constrained by inflexible grid requirements. Governments are caught between energy security, employment concerns, and climate commitments. Renewable energy developers face project delays and curtailment because coal contracts dominate grid priorities. International climate bodies, including the Powering Past Coal Alliance and Ember, warn that these contract lock-ins undermine emissions reductions. Consumers also bear indirect costs, as utilities continue paying fixed charges for coal power even when cleaner, cheaper alternatives are available.
Global Implications
Asia’s continued dependence on coal has far-reaching global consequences. The high share of coal in the region’s power mix contributes significantly to global CO₂ emissions, delaying progress toward climate goals. The underutilisation of renewable energy can slow technological advancements and investment in clean energy worldwide. Economically, long-term coal contracts risk creating stranded assets that reduce the efficiency of energy markets, affecting regional and global energy stability. Moreover, reliance on imported coal for contracted power increases geopolitical and trade vulnerabilities, further complicating energy security in the region.
What’s Next
Analysts and climate researchers are calling for Asian utilities and governments to renegotiate or redesign power purchase agreements. Flexible contracts that prioritise renewable energy generation and allow grids to operate dynamically could break the existing coal lock-in. Without such reforms, coal dependence is likely to persist for many years, renewable energy will continue to be curtailed, and the economic and environmental costs of transitioning to cleaner energy will rise substantially. The next decade will be critical for Asia to align energy policy, infrastructure, and climate commitments.
Analysis
Decades-long coal contracts have created a structural rigidity in Asia’s power sector, where contractual obligations often outweigh the availability and cost advantages of renewable energy. This lock-in effect not only hampers the deployment of wind and solar power but also increases the financial risks for utilities and governments through stranded coal assets and fixed costs. The situation in China and India illustrates how major economies can experience renewable curtailment despite strong policy support for clean energy. Breaking this cycle requires a systemic approach that combines flexible contracting, proactive policy, and grid modernization. Failure to act will prolong Asia’s reliance on coal, delay emissions reductions, and increase the economic and environmental burden of the energy transition.
With information from Reuters.
