Over 40 per cent of world’s coal plants now loss-making, analysis finds

More than 40 per cent of world’s coal plants already running at a loss, making new renewables projects ever more competitive, Carbon Tracker analysis finds

A sizeable chunk of the world’s coal-fired power plants are already running at a loss, and in many cases it would be cheaper to build new sources of renewable energy than keep running them, according to a new analysis by the influential Carbon Tracker think tank.

The latest research from the NGO has today found that over two-fifths – 42 per cent – of the world’s coal power stations are currently loss making thanks to high fuel costs, with consumers and taxpayers mostly picking up the bill to keep them running.

If carbon pricing and air pollution regulations further drive up costs for coal plants in the future at the same time as renewables costs continue to fall, then the percentage operating at a loss could rise to 56 per cent by 2030 and 72 per cent by 2040, the study estimates. It adds that future regulations could also serve to make coal power even more unprofitable.

Meanwhile, it suggests that by 2030 it will be cheaper to build new renewables than to continue to operate 96 per cent of today’s existing and planned coal plants. Already, it said, 35 per cent of the world’s coal plants are currently more costly to operate than building new renewable power generation.

Carbon Tracker said it would therefore make economic sense to close coal plants down in line with the Paris Agreement, potentially saving the world’s biggest economies hundreds of billions of dollars.

By shutting coal plants instead of pursuing business as usual plans, it estimates China could save $389bn, the EU could save $89bn, the US could save $78bn, and Russia could save $20bn.

Co-author of the report Matt Gray, head of power and utilities at Carbon Tracker, said the findings underlined the huge financial risks faced by investors in coal power projects. “The narrative is quickly changing from how much do we invest in new coal capacity to how do we shut down existing capacity in a way that minimises losses,” he said.

The findings are based on an in-depth analysis of the profitability of 6,685 coal plants worldwide, representing 95 per cent of all operating capacity and 90 per cent of capacity currently under construction. The data is available through a new coal power economics online portal which was launched today by Carbon Tracker.

The UN’s Intergovernmental Panel on Climate Change (IPCC) has said at least 59 per cent of the coal power worldwide must be retired by 2030 to limit global warming to 1.5C and stand a chance of avoiding the worst impacts of climate change. A growing number of countries, including the UK and Canada, have also set deadlines to shut down all their coal power plants.

And investors are responding to the escalating risks faced by cola firms.

Just this week, France’s state public financial institution Caisse des dépôts et consignations (CDC) – which manages assets of more than €150bn – announced it would no longer invest in companies that derive more than 10 per cent of their business from coal.

Often described as the investment arm of the French state, CDC said it would launch a new fossil fuel survey of companies in which it is a shareholder early next year as part of its continuing commitment to “massively” reduce its exposure to risks associated with the low carbon transition.

Carbon Tracker’s analysis warned that utilities and their shareholders who remain invested in coal power are exposed to stranded asset risks in liberalised markets, such as in Europe and the US, where power generators are subject to competition. As a result, increasing numbers of coal plants will be forced to shut down in many of these markets unless they can secure government subsidies or a delay or reduction in environmental regulations, it said.

However, in more regulated markets such as China, India, and Japan coal is sheltered from competition, meaning long-term backing for coal could threaten such countries’ economic competitiveness and public finances, the think tank warned.

Sebastian Ljungwaldh, Carbon Tracker energy analyst and co-author of the research, said countries should ban investments in new coal power where it is cheaper to build new renewables and gas, and implement a coal phase out where new renewables are cheaper than keeping coal plants running.

The latter situation, he explained, already appeared imminent in Germany and the US, where solar PV and onshore wind has undercut coal in power auctions this year.

“Our analysis shows a least-cost power system without coal should be seen as an economic inevitability rather than a clean and green nicety,” he said.

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