Affordable renewable energy is putting US$640bn coal investments at risk, new research shows

GLOBAL – Nearly $640 billion of investment in coal power capacity worldwide is at risk because it is cheaper to generate electricity from new renewables, research by Carbon Tracker Initiative showed has revealed.

The report examined the economics of 95% of coal plants which are operating, under construction or planned worldwide.

It noted that institutional investors are increasingly withdrawing from fossil fuel companies due to the risk their assets becoming stranded as tougher emissions-cuts targets discourage their use and renewable energy becomes even cheaper.

Globally, 499 gigawatts (GW) of new coal power capacity is planned or under construction with an investment cost of $638 billion, the report noted.

It also noted that more than 60% of global coal plants are currently generating electricity at a higher cost than could be produced by building new renewables.

According to the report, by 2030 at the latest, it will be cheaper to build new wind or solar capacity than continue operating coal in all markets.

The capital recovery period for new investments in coal capacity is usually 15 to 20 years, making these investments risky.

 “Renewables are out-competing 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, co-author of the report and co-head of power and utilities at Carbon Tracker.

According to a major U.N. report in 2018, the share of coal power in electricity generation needs to fall to under 2% by 2050 for global warming to stay within a 1.5 degree Celsius limit.

Carbon Tracker said that in the European Union, 96% of the bloc’s 149 GW of operating coal capacity costs more than new renewables. On the whole, Europe has been reducing its dependency on coal due to higher carbon costs.

The report noted that China, the world’s biggest coal producer, $158 billion of investment is at risk, with 100 GW of coal capacity under construction and 106 GW planned.

China has 982 GW of existing coal power, and 71% of this costs more to run than building new renewables.

In India, US$80 billion is at risk, with 37 GW of coal power under construction and 29 GW planned. Out of a total 222 GW of existing coal capacity, 51% costs more than new renewables.

The United States on the other hand, has 254 GW of coal capacity, with 47% costing more than new renewables.

The report said 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, several governments continue to incentivize new coal capacity, allowing the high cost of coal to be passed onto consumers, or subsidize coal operators.

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