Carbon Tracker analysis shows new renewables projects cheaper than new coal plants in all major markets
Investors in new coal power plants risk being left with around $600bn of stranded assets, as fossil fuel generating plants are increasingly outcompeted by new renewables projects.
That is the latest stark warning from think tank Carbon Tracker, which today published a new report highlighting how uneconomic coal plants are fast-becoming.
The report found over 60 per cent of global coal power plants are already generating electricity at higher cost than it could be produced by building new renewables. "By 2030 at the latest it will be cheaper to build new wind or solar capacity than continue operating coal in all markets," it added.
"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, in the same week as US Republicans stepped up efforts to keep uneconomic coal power plants open and operating, Gray warned too many governments were ignoring how low cost renewables were transforming the energy market.
"The market is driving the low-carbon energy transition but governments aren't listening," he said. "It makes economic sense for governments to cancel new coal projects immediately and progressively phase out existing plants."
The report also highlighted how a global coal power phase out is essential to deliver on the goals of the Paris Agreement. It notes how limiting temperature increases to 1.5C will require global coal use in electricity generation to fall by 80 per cent from 2010 to 2030, which would mean one coal plant retiring every day until 2040.
The report warns governments and investors may never recoup their investment because coal plants typically take 15 to 20 years to cover their costs.
Titled How to waste over half a trillion dollars: The economic implications of deflationary renewable energy for coal power investments, the report evaluates the economics of 95 per cent of coal plants that are operating, under construction or planned worldwide, taking in 6,696 operating units and 1,046 units in the pipeline.
It concludes that the "falling costs of wind and solar power and the investment needed to comply with existing carbon and air pollution regulations mean that coal is no longer the cheapest form of power in any major market".
Specifically, China has $158bn of planned assets at risk, with 982GW of existing coal power assets of which 71 per cent costs more to run than building new renewables.
In India a further $80bn of investment is at risk, while the EU is investing $16bn in new projects, primarily in Poland and the Czech Republic, and the in South East Asia $124bn of new coal plants are planned despite the fact that by 2030 it is expected to be cheaper to build new renewables than continue operating existing coal plants.
The US currently has no new coal plants planned thanks to intense competition from renewables and gas, but of the 254GW of coal capacity that is currently operating nearly half is thought to cost more than new renewables.
A number of governments are considering measures to support an increasingly uncompetitive coal industry. But Sriya Sundaresan, co-head of power and utilities at Carbon Tracker and co-author of the report, 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 will also further fuel recent calls from investor groups for regulators to ensure listed firms are reporting on climate and stranded asset risks.
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.
"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.