Around 46% of the world's coal plants will be running at a loss in 2020, according to a new report from financial think tank Carbon Tracker found.
The report entitled Political Decisions, Economic Realities reveals that renewables and gas are already outcompeting coal worldwide. The report shows that if governments deregulate power markets to allow greater competition, the percentage of unprofitable coal plants will be far bigger with expectations of a 52% rise by 2030.
The report warned that China, which produces and consumes about half of the world's coal, may be planning to build more coal plants to stimulate its economy in the wake of coronavirus (COVID-19), noting that China's National Energy Administration recently announced it was ready to relax rules on coal power investment.
"Building new coal and propping up the existing fleet with stimulus money would be throwing good money after bad. Faced with the need to invest billions in their economies and create new jobs, governments should be planning for a green recovery by incentivizing the closure of coal and spending on a major expansion of low-cost, clean renewable power," Matt Gray, Carbon Tracker co-head of power and utilities and co-author of the report said.
"China and other governments may be tempted to invest in coal power to help their economies recover after the COVID-19 pandemic, but this risks locking in high-cost coal power that will undermine global climate targets," Gray warned.
It is already cheaper to generate electricity from new renewables than new coal plants in all major markets and it will be cheaper to build new wind and solar capacity than operating coal worldwide by 2030 at the latest, according to Carbon Tracker.
- China to see biggest loss
Currently, in deregulated markets most coal power is already unprofitable on an underlying basis, the report said providing the data that the rate of unprofitability in Germany was 90% and 82% in the U.K. in 2019.
However, the report found that government subsidies are driving plans to build nearly 500 gigawatts (GW) of new coal plants worldwide at a cost of $638 billion.
Unless policies change, 72% of them will still be cashflow on an underlying basis when they become operational.
In China, 59% of the country's existing 982-gigawatt (GW) coal fleet is running at an underlying loss and a further 206 GW is in the pipeline but 61% would enter the market with negative cashflow, the report revealed.
In Europe, which is mostly a deregulated market, 63% of the existing 146 GW coal fleet is running at loss and half of the planned 8 GW new coal plants would enter the market with negative cashflow.
Around 22% of the existing coal plants in the U.S. are unprofitable and no new plants are planned in the country.
- Governments responsible for transition to low-cost energy
The report advised that policymakers urgently deregulate power markets to create a negative investment signal for coal project developers while ensuring the most cost effective power generation technologies are built.
“Failure to do so could mean locking in 499GW of high-cost coal power for decades," the report warned.
"Building new coal may never recoup the investments because coal plants typically take 15 to 20 years to cover their costs," Carbon Tracker cautioned governments while asserting that their responsibility is to navigate the transition away from coal to low-cost energy aligned with the Paris Climate Agreement targets.
By Nuran Erkul Kaya