Coal investors may lose $640m to renewable energy
New research by think tank Carbon Tracker Initiative has shown that nearly $640 billion investment in coal power capacity worldwide could be lost as power from renewables proves cheaper than electricity generated from new coal projects.
It also indicated that institutional investors are increasingly withdrawing from fossil fuel companies due to the risk that their assets will become stranded as tougher emissions-cuts targets discourage their use and renewable energy becomes even cheaper.
The report examined the economics of 95per cent of coal plants which are operating, under construction or planned worldwide.
Globally, 499 gigawatts (GW) of new coal power capacity is planned or under construction with an investment cost of $638 billion.
More than 60 per cent of global coal plants are currently generating electricity at a higher cost than could be produced by building new renewables.
By 2030 at the latest, it will be cheaper to build new wind or solar capacity than continue operating coal in all markets, the report said.
The capital recovery period for new investments in coal capacity is usually 15 to 20 years, making these investments risky.
“Renewables are out-competing coal around the world and proposed coal investments risk becoming stranded assets which could lock in high-cost coal power for decades,” said Matt Gray, co-author of the report and co-head of power and utilities at Carbon Tracker.
According to a major United Nations report in 2018, the share of coal power in electricity generation needs to fall to under 2per cent by 2050 for global warming to stay within a 1.5 degree Celsius limit.
Carbon Tracker said that in the European Union, 96per cent of the bloc’s 149 GW of operating coal capacity costs more than new renewables. On the whole, Europe has been reducing its dependency on coal due to higher carbon costs.
European Union investment of $16 billion is at risk on 7.6 GW of new coal capacity planned.
In China, the world’s biggest coal producer, $158 billion of investment is at risk, with 100 GW of coal capacity under construction and 106 GW planned.
China has 982 GW of existing coal power, and 71per cent of this costs more to run than building new renewables.
In India, $80 billion is at risk, with 37 GW of coal power under construction and 29 GW planned. Out of a total of 222 GW of existing coal capacity, 51per cent costs more than new renewables.
The United States has 254 GW of coal capacity, with 47per cent costing more than new renewables.
The report said market forces will drive coal power out of existence in deregulated markets, where renewable energy developers will take advantage of the growing price gap.
However, several governments continue to incentivize new coal capacity, allow the high cost of coal to be passed onto consumers, or subsidize coal operators.