Energize Weekly, December 5, 2018
Coal-fired power plants around the world are quickly becoming unprofitable, with 42 percent already operating in the red—a number that is projected to grow to 72 percent by 2040, according to Carbon Tracker.
“Over the long-term coal power will become a net liability,” said the London-based financial think tank, which is focused on clean energy transition.
The Carbon Tracker study analyzed the financials of 6,685 coal plants around the world—95 percent of global capacity— assessing profitability based on operating costs, investments to meet environmental standards and carbon pricing where such levies are in place. Profitability was defined as revenues minus long-run operating costs.
The average worldwide short-term cost for operating a coal plant was $44 a megawatt-hour (MWh). For the U.S., the cost was $36 a MWh. In China, the operating cost was $47 a MWh. Average wind energy prices in the U.S. in 2018 were $20 a MWh, accord to federal data.
“We expect a combination of renewable energy costs, air pollution regulation and carbon pricing to result in further cost pressures and make 72 percent of the fleet cash flow negative by 2040,” the report said.
The study calculates that there are $267 billion in coal plant stranded asset risk and that the U.S. could save $78 billion and the European Union $89 billion by closing plants in line with the Paris climate accord.
“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 minimizes losses,” Matt Gray, head of power and utilities at Carbon Tracker, said in a statement.
The study outlines three “inflection points” that utilities and investors need to track to provide least-cost power and avoid stranded assets:
- When new renewables and gas outcompete new coal
- When new renewables and gas outcompete existing operating existing coal
- When new firm (or dispatchable) renewables and gas outcompete operating existing coal
The analysis says that by 2025, renewables will pass the first inflection point and that the U.S. has already passed it, and the EU will hit it in 2019. The second inflection point could be reached for most capacity by 2030.
“The challenge for policymakers at this point is no longer whether renewable energy will be the least cost option, but rather how to integrate wind and solar to maximize system value,” the report said.
Carbon Tracker projects a 31-year phaseout for coal globally and 17 years for the U.S.
It is now cheaper to build new renewable generation than run 35 percent of the coal plants in the world, a share that is expected to grow to 96 percent by 2030.
“Our analysis shows a least-cost power system without coal should be seen as an economic inevitability rather than a clean and green nicety,” Sebastian Ljungwaldh, Carbon Tracker energy analyst, said in a statement.
