Coal developers risk wasting more than $600 billion because of cheaper renewables generation compared to new coal in all major markets, a report published by the financial think tank Carbon Tracker warned on Thursday.
The report; How to Waste Over Half a Trillion Dollars: The Economic Implications of Deflationary Renewable Energy for Coal Power Investments evaluates the economics of 95% of coal plants that are operating, under construction or planned worldwide.
It finds that over 60% of global coal power plants are generating electricity at a higher cost than what could be produced by building new renewables, and by 2030 at the latest, it will be cheaper to build new wind or solar capacity than continue operating coal in all markets.
"Renewables are outcompeting 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, Carbon Tracker co-head of power and utilities and co-author of the report.
However, as worldwide 499 gigawatts of new coal power is planned or already under construction at a cost of £638 billion, Carbon Tracker warns that governments and investors may never recoup their investment because coal plants typically take 15 to 20 years to cover their costs.
The report finds that falling costs of wind and solar power and the investment needed to comply with existing carbon and air pollution regulations means that coal is no longer the cheapest form of power in any major market.
"Investors should be wary of relying on continued government support for coal when a phase-out will save their voters billions and make their economies more competitive," said Sriya Sundaresan, co-head of power and utilities and co-author of the report.
The report calls on governments to deregulate so that renewables can compete with coal on a level playing field, cancel new projects and phase out existing coal fleets and introduce regulations that allow renewables to deliver maximum value to their energy systems.
"Failure to take these steps will exacerbate stranded asset risk and could result in overcapacity. This in turn will suppress power prices, create a negative investment signal for renewable energy and ultimately stifle the transition to a low carbon economy," the report warns.
By Firdevs Yuksel