92% of new coal power plants will lose money, study finds

Some 92% of new coal power plants in countries planning the majority of the world’s new facilities will be uneconomic to run, costing the public $150bn, finds a new report from the financial think tank, Carbon Tracker.

The report, ‘Do Not Revive Coal’, says consumers and taxpayers will ultimately foot the bill because these countries either subsidise coal power or prop it up with favourable market design, power purchase agreements or other forms of policy support.

Five Asian countries are responsible for 80% of the world’s planned new coal plants, endangering Paris climate goals despite the availability of cheaper renewables.

China, India, Indonesia, Japan and Vietnam plan to build more than 600 new units with a combined capacity of over 300GW, ignoring calls from UN Secretary General Antonio Guterres for all new coal plants to be cancelled. He said phasing out coal from the electricity sector is the "single most important step" in tackling the climate crisis.

"These last bastions of coal power are swimming against the tide, when renewables offer a cheaper solution that supports global climate targets. Investors should steer clear of new coal projects, many of which are likely to generate negative returns from the outset," said Carbon Tracker’s head of power & utilities, Catharina Hillenbrand Von Der Neyen.

As well as modelling the financials of 80% of planned new coal, Do Not Revive Coal evaluates the economics of 95% of operating coal plants at the boiler level worldwide: over 6,000 operating units accounting for around 2,000 GW.

The same five Asian countries also operate nearly three quarters of the current global coal fleet, with 55% in China and 12% in India.

The report warns that around 27% of existing capacity is already unprofitable and another 30% is close to breakeven, generating a nominal profit of no more than $5 per MWh.

Worldwide, $220bn of operating coal plants are deemed at risk of becoming ‘stranded’ – meaning unable to generate an economic return – if the world meets the Paris climate targets.

The report finds that around 80% of the operating global coal fleet could be replaced with new renewables with an immediate cost saving. By 2024, new renewables will be cheaper than coal in every major region, and by 2026 almost 100% of global coal capacity will be more expensive to run than building and operating new renewables.

Growing competition from renewables, coupled with increased regulation, is likely to drive continued falls in coal plant usage, undermining their profitability. The report notes that coal plant economics are highly sensitive to utilisation and just a 5% annual reduction to the conservative base assumptions in its analysis would see global coal unprofitability almost double to 52% by 2030 and rise to 77% by 2040.

"Coal no longer makes sense financially or environmentally. Governments should now create a level playing field which allows renewables to grow at least cost, using post-COVID stimulus spending as an opportunity to lay the foundations for a sustainable energy system," added Hillenbrand Von Der Neyen.

Image: A coal-fired power plant in The Netherlands (Adrem68/CC BY-SA 4.0) 

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