In its report, Lignite of the Living Dead, Carbon Tracker looked at how a scenario for the EU’s 28 states that is compliant with limiting the rise in global warming to below 2°C might affect the valuation of coal-fired power plants in the coming years.
Carbon Tracker developed an “asset-level model” that determines a retirement schedule and explains the financial implications for investors. Currently, 54 percent of the EU’s coal-fired power plants are operating at a loss. In 10 years or so, fully 97 percent of the power plants will be losing money, reports The Guardian.
The death spiral has started
At the present time, 27 percent of the EU28’s coal-fired power plants are set to be phased out by 2030. However, according to the report, if all the coal-powered facilities were to be phased out by 2030 in keeping with the Paris Agreement climate pledges, the EU would avoid €22 billion ($26 billion) in losses.
Germany has the highest number of coal-powered plants losing money., and could save up to €12 billion ($14 billion) by closing them early. And while Europe is still heavily reliant on coal – It accounts for a quarter of all electricity production, the report points to several factors that are affecting the economic viability of coal-powered plants.
Many utility companies are overlooking many of these factors, including falling renewable energy prices, rising carbon prices, and especially, government policies aimed at reducing pollution and greenhouse gas emissions. Still others, according to the report, still believe in the “outdated and misguided assumptions about the economic viability of coal.”
“The changing economics of renewables, as well as air pollution policy and rising carbon prices, has put EU coal power in a death spiral,” said Matt Gray, Carbon Tracker analyst and co-author of the report. “Utilities can’t do much to stop this other than drop coal or lobby governments and hope they will bail them out.”
Lignite of the living dead
Carbon Tracker says that despite the common-sense argument they present in their report, this may not be enough to change the minds of coal-reliant utilities. According to the report, many companies still anticipate their governments will bail them out to guarantee a power supply, very similar to a proposal made by US Energy Secretary Rick Perry.
Other utilities are holding off closing their coal-powered plants, waiting for the “other guys” to close their plants first, hoping this will result in higher power prices. Even in the U.S., where President Donald Trump has been backing a so-far-failing revival of the coal industry, coal is in a deadly slump. In the last three years,30 gigawatts of coal capacity has been retired and coal power generation has declined by 13 percent.
And coal use across the globe has been in a decline since 2013, particularly in Asia and India. Four years ago, the International Energy Agency (IEA) forecast world-wide coal-burning electricity generation to grow by 40 percent. It has since revised that number to just 1.0 percent.
