Coal Developers Risk $600 Billion As Renewables Outcompete Worldwide

run than building new renewables.

·  In India $80 billion is at risk, with 37GW of coal power in construction and 29GW planned. It has 222GW of existing coal capacity and half – 51 percent – costs more than new renewables.

·  In the EU $16 billion is at risk on 7.6GW of new coal power, primarily in Poland and the Czech Republic. However, it has 149GW of operating coal capacity and 96 percent costs more than new renewables.

·  The U.S. has 254GW of coal capacity and nearly half – 47 percent – costs more than new renewables. No new coal is planned.

·  In South East Asia 78GW of coal power is planned or in construction at a cost of $124 billion, but by 2030 it will be cheaper to build new renewables than continue operating existing coal plants.

The report will provide ammunition for the growing number of investors pressing financial institutions and companies to align their portfolios with the Paris climate agreement.

This month, Sir Christopher Hohn, the billionaire hedge fund manager and co-founder of the Children’s Investment Fund Foundation (CIFF), called on major EU and UK central banks and financial institutions to end financing of coal and threatened to sue Barclays, HSBC and Standard Chartered if they continue financing new coal projects (see “Billionaire Chris Hohn Threatens to Sue Coal-Financing Banks,” Financial Times, 3 January 2020).

“Coal is the single largest source of greenhouse gas emissions globally and the risks of its continued use in the power sector are not being adequately addressed by regulators and the financial system,” he said in a statement on the CIFF website.

Coal is closest to becoming obsolete in the EU thanks to a strong carbon price and years of investment in renewable energy. Excellent renewable energy resources in the US, low capital costs in China and least-cost policymaking in India, mean they are not far behind.

South east Asian countries lag behind because immature energy markets make it hard to attract global finance, and governments in China, Japan and South Korea continue to support investment in coal power.

The report finds that 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, it notes that several governments around the world continue to incentivize and underwrite new coal power because market regulations put coal at an unfair economic advantage. In some regulated and semi-regulated markets they also allow the high cost of coal to be passed on to consumers through bills, or they use taxpayers’ money to subsidize coal operators so they can sell power for less than it costs to produce.

Sriya Sundaresan, co-head of power and utilities and co-author, said: “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.”

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 which allow renewables to deliver maximum value to their energy systems.

It  warns: “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.”