Electrification Without Grid Reform Can Prolong Coal Dependence
During the Accelerating Coal Phase-Out discussion, Stephen Holland (Professor, University of North Carolina Greensboro; Research Associate, National Bureau of Economic Research) highlighted a critical but often overlooked issue: electrification does not automatically reduce emissions. Its climate impact depends on the power system supplying that electricity.
Electrification is widely seen as a cornerstone of decarbonization strategies. From electric vehicles to industrial electrification and digital infrastructure, shifting energy demand toward electricity is often presented as a direct path to lower emissions.
But electrification alone does not guarantee decarbonization. Its climate impact depends on the carbon intensity of the power system supplying that electricity. In regions where coal remains a major generation source—such as much of Southeast Asia, where coal still supplies roughly one-third of electricity (International Energy Agency, 2024)—poorly sequenced electrification could reinforce fossil generation rather than displace it.
Electrification’s Hidden Constraint: The Power Mix
Stephen Holland (Professor, University of North Carolina Greensboro; Research Associate, National Bureau of Economic Research) has studied how electrification interacts with power sector emissions, particularly in the case of electric vehicles.
Early research in the United States produced a surprising result. Electric vehicles, widely promoted as clean alternatives, were not always environmentally beneficial in regions where electricity generation depended heavily on coal.
“Running your electric car was effectively running on coal instead of gasoline,” Holland explained. “And in some parts of the country, that was actually dirtier.”
At the time, many regional electricity grids were still coal-heavy. As the grid decarbonized over time—through the expansion of natural gas and renewable generation—the emissions advantage of electric vehicles became clearer. The lesson was simple but important: the environmental value of electrification evolves with the electricity system.
Electrification therefore interacts with three key structural factors:
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Generation mix — the share of coal, gas, renewables, and other resources in the grid
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Dispatch order — which generation sources respond when demand increases
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Demand timing — when electricity is consumed during the day
When these elements are aligned with clean energy growth, electrification accelerates decarbonization. When they are not, electrification can prolong fossil generation.
The Importance of Marginal Emissions
To understand this interaction, policymakers must focus on marginal emissions rather than average emissions.
Marginal emissions — the emissions produced by the next unit of electricity generated — determine the environmental impact of additional electricity demand.
When new demand enters the grid, the system responds by dispatching the next available generator. If that generator is renewable energy, emissions fall. If it is coal or gas, emissions increase.
This dynamic makes timing and demand patterns critical. Holland highlighted several examples:
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Daytime electric vehicle charging can increase demand when solar generation is abundant, encouraging solar investment.
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Nighttime charging may rely more heavily on fossil fuel generation.
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Electrification that aligns with renewable output can reduce emissions across the system.
These dynamics illustrate why electrification policy must be coordinated with generation planning and electricity market design.
When Electrification Encourages Fossil Investment
Electrification also influences long-term investment decisions in the power sector.
When electricity demand grows, utilities and investors must build new capacity. Depending on market conditions and policy incentives, electrification can lead to very different outcomes:
Electrification can crowd in renewables when demand aligns with renewable production or when policies encourage clean investment.
But electrification can also crowd out renewables if new demand leads utilities to build additional fossil capacity to meet peak demand.
Holland described the risk clearly:
“If electrification leads to building new fossil capacity, that capacity will operate across many hours of the day, potentially increasing overall emissions.”
This dynamic is particularly relevant in Southeast Asia, where electricity demand is expanding rapidly and many coal plants are relatively young. Investment decisions made today will shape emissions trajectories for decades.
The Strategic Lesson: Sequence Electrification with Decarbonization
The central lesson emerging from the discussion is that electrification must be carefully sequenced with power sector decarbonization.
If electrification expands rapidly while coal remains dominant in the power mix, it can extend the operational life of coal plants. Rising electricity demand can strengthen the economic rationale for keeping those plants online.
Holland summarized the policy risk succinctly:
“Don’t let electrification rescue coal.”
Instead, electrification strategies should reinforce clean energy deployment. That requires coordinated action across several policy areas:
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Electricity market design that rewards low-carbon generation
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Renewable deployment policies that expand clean supply
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Demand-side flexibility, including smart EV charging
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Grid planning that integrates variable renewable energy
Electrification is most effective when it is treated as part of a system transformation rather than a standalone climate policy.
When properly aligned with clean energy deployment, electrification can accelerate the decline of coal. But without that coordination, it risks reinforcing the very infrastructure the transition seeks to replace.
Sources
International Energy Agency. Southeast Asia Energy Outlook 2024.