Coal flexibility in Southeast Asia: a stepping stone, not a destination

Summary

Coal flexibility — the ability of coal plants to reliably turn their output up and down more flexibly to match demand — may offer short-term grid support in Southeast Asia, but its relevance depends on specific system and plant-level conditions, and should still be viewed as an interim alternative to retirement.

A range of factors need to align for coal flex to be cost-effective and strategic: high renewable penetration, grid constraints, and well-located candidate plants to address these two factors on a changing grid.

In markets with slower clean energy deployment and fewer system constraints (such as Indonesia and Peninsular Malaysia) coal flexibility is unlikely to deliver significant transition benefits without accelerated VRE growth.

A stepping stone toward coal phase-out

Southeast Asia is home to one of the youngest coal fleets in the world, the result of two decades of rapid, baseload-focused capacity expansion. While most countries in the region have pledged to reach carbon neutrality between 2050 and 2060, coal remains deeply embedded in centralised planning. Long-term power purchase agreements continue to pose significant barriers to early coal retirement and broader power system decarbonisation.

Against this backdrop, the economics of renewable energy are shifting fast, and in ways that will require a fundamental shift in how power systems are planned and operated. In markets such as Vietnam, Thailand, and the Philippines, solar and wind power are expanding rapidly, delivering electricity at prices that increasingly undercut both existing and planned fossil fuel generation. Governments across the region are setting more ambitious renewable energy targets for the coming decade.

As renewables grow and the retirement of coal assets remains sluggish, the role of coal in Southeast Asia’s power systems is still being re-evaluated. One option under consideration is coal flexibility — the idea that existing plants could be repurposed from traditional baseload duty to a grid-supporting role where they operate more dynamically, adjusting output in response to variable demand and renewable supply, which could help stabilise the grid amidst the transition to higher shares of variable renewable energy (VRE).

TransitionZero examined the role of coal flexibility in the energy transition in its recent technical note for the Coal Transition Commission (CTC): “From Flex to Phase-Out". The technical note found that coal flexibility is highly context-dependent, suitable only for specific plants, and should be considered only after a full assessment of system needs and cleaner flexibility alternatives, especially given the limited funding for coal phase-out initiatives. In markets with large, relatively young coal fleets — such as Indonesia and Vietnam, where early retirement remains difficult — repurposing plants for grid support can be considered a short-term option but will need to be assessed and implemented with clear guardrails to avoid misuse. 

In this blog series, we will examine the dynamics shaping coal flexibility and the broader coal-to-clean transition in Southeast Asia, starting here, with a brief introduction to the concept. 

What is coal flexibility?

Coal flexibility refers to the ability of coal plants to operate reliably at varying load levels, and to respond dynamically to system requirements. Unlike conventional baseload operation — where plants run continuously at or near full capacity — flexible coal units adjust their output in response to fluctuations in grid demand and renewables generation across hours in the day and seasons in the year.

There are two main types of flexibility:

Seasonal flexibility

This involves adjusting coal generation to match seasonal variations in electricity demand and the availability of alternative, cost-competitive energy sources. For example, coal plants may run more during dry seasons when hydropower output is low, or less during windy or rainy seasons when renewables are abundant. Similarly, coal dispatch can be reduced during periods of elevated coal prices.

In much of Southeast Asia, coal plants already provide this form of flexibility. Grid operators routinely optimise coal dispatch based on seasonal changes in hydropower availability, coal and gas prices, and overall demand. These adjustments are reflected in plant annual capacity factors and generally do not require retrofits or technical modifications. 

Intra-day flexibility

To integrate large shares of VRE effectively, power systems must increasingly rely on intra-day flexibility, where units can ramp output up and down within hours, or even minutes. Most coal units possess some degree of inherent operational flexibility, though capabilities vary by design, age, and maintenance conditions. Intra-day coal flexibility will generally require system upgrades and operational adjustments that differ from the status quo. In some cases, it may also require asset-level retrofitting. Given this level of requirement, it is therefore the focus of our analysis. 

What would intra-day flexibility look like?

To put it simply, three technical parameters determine flexibility within daily operations:

1. Minimum load is the lowest output level at which the coal unit can operate stably. A lower minimum load allows units to remain online while enabling renewables to supply electricity, and to ramp up faster compared to a cold start, when needed.
2. Ramp rate is the speed at which a coal unit can increase or decrease its output, typically expressed as a percentage of nominal load per minute. Faster ramping enhances responsiveness to renewable generation variability.
3. Start-up time is the time required to bring a unit from shutdown to minimum load, or cold start. The shorter the start-up time, the easier it would be for the coal unit to cover sudden VRE shortfalls.

Retrofitting solutions – such as modifications to boilers, turbines, and control systems – typically target improvements across these three parameters to provide load-following support, contribute to grid balancing, and reduce VRE curtailment.

Is coal flexibility aligned with Southeast Asia’s energy transition agenda?

Coal flexibility was first adopted by developed countries such as Germany and Poland, primarily to extend the operational usefulness of ageing coal units while alternative energy sources were being developed. 

In Asia, however, the rationale has been different. Countries with relatively young and still growing coal fleets, such as China and India, have promoted or mandated flexibility retrofits to accommodate the rapidly expanding solar and wind power capacity. For Southeast Asia, the motivation is similar. Coal flexibility is being explored as a transitional measure, to help the region’s young and sizable coal fleet operate more compatibly with VRE while reducing emissions – rather than as a means to prolong coal utilisation.

Crucially, repurposing coal assets for load-following and flexible operation should be viewed as an interim strategy, not a substitute for retirement. Even if suitable and implemented, it should not be used to justify extending the operational lifetime of existing coal plants.

What factors make coal flexibility viable?

Viewed through this lens, the suitability of coal flexibility in any market depends on both system and plant-level conditions, such as:

1. High or growing shares of VRE: In power systems where existing solar and wind capacity is substantial – or where credible near-term expansion is expected – greater system flexibility will be needed to integrate VRE effectively. In instances where VRE has increased to the point of being frequently curtailed due to inflexible generation, making select coal units more flexible so they adjust output based on VRE generation could reduce this dynamic.
2. High demand growth with near-term capacity gaps: In fast-growing markets where demand outpaces new generation and transmission development, flexible coal units could help bridge short-term reliability gaps during the transition.
3. Grid congestion and curtailment: Curtailment sometimes occurs when electricity cannot be delivered from where it is generated to where it is needed, often due to transmission constraints or inflexible generation. This has been the case in southern Vietnam where the deployment of solar and wind farms over a short period of time has led to localised grid congestion and regular curtailment. In such cases, more flexible operation of nearby coal plants could help accommodate VRE until grid reinforcements and expansion are completed.
4. Limited alternative sources of flexibility: Where there is little or no dispatchable power generation, underdeveloped demand-side response, or minimum transmission and interconnection, temporarily using existing coal units for flexibility may represent a cost-effective stopgap.
5. Coal units requiring minimal retrofitting: Depending on their design, age, and maintenance conditions, retrofitting needs and costs will vary by plant. To serve as a near-term, time-bound grid balancing measure, retrofits should be modest to avoid long implementation timelines, extended cost-recovery periods, and complex compensation mechanisms. 

Screening Southeast Asia’s coal-reliant power markets against these criteria suggests that Vietnam might be a strong near-term candidate for coal flexibility, given the high VRE penetration, reported grid bottlenecks and curtailment issues, and relatively modern coal fleet. In contrast, for Indonesia and Peninsular Malaysia, unless solar and wind deployment accelerates significantly within the next three to five years, coal flexibility is unlikely to deliver meaningful energy transition benefits for their power systems. 

As the power system in Southeast Asia transitions, so too will the role coal plays. This analysis offers a framework for assessing when and where coal flexibility could make sense, based on system and operational readiness. But this is only one part of the picture. Legal constraints, policy direction and financing limitations will ultimately shape what is possible in practice, topics that we will explore further in this series.

This is the first in a three-part series exploring the potential of coal flexibility in Southeast Asia. Part II will delve deeper into the state of play, policy frameworks and guardrails needed for proper implementation in the region, and Part III will feature a case study simulating coal flexibility in Malaysia.