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Celebrating two years of reporting on the industry’s progress toward net zero
New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
The world must move quickly to significantly reduce CO2 emissions from coal in order to avoid severe impacts from climate change, a new report from the International Energy Agency (IEA) has said. It has called for immediate policy action to mobilise massive financing for clean energy alternatives and to ensure secure, affordable and fair transitions, especially in emerging and developing economies.
The report shows that the overwhelming majority of current global coal consumption occurs in countries that have pledged to achieve net zero emissions and that, far from declining, global coal demand has been stable at near record highs for the past decade. If nothing is done, emissions from existing coal assets alone could tip the world over the 1.5°C limit.
Every future pathway for the global energy sector that avoids severe impacts from climate change involves early and significant reductions in coal-related emissions. The report states there is no one single approach to putting coal emissions into decline. It identifies Indonesia, Mongolia, China, Vietnam, India and South Africa in particular as countries where dependencies are high and transitions likely to be most challenging. A range of approaches tailored to national circumstances is essential, the report says.
Today, there are around 9,000 coal-fired power plants globally, representing 2,185 GW of capacity. Their age profile varies widely by region, from an average of over 40 years in the US to less than 15 years in developing economies in Asia. Industrial facilities using coal are similarly long lived, with investment decisions set to be made this decade that, to a large degree, will shape the outlook for coal use in heavy industry for decades to come.
Coal transitions are complicated by the relatively young age of coal power plants across much of the Asia-Pacific region. If operated for typical lifetimes and utilisation rates, the existing worldwide coal-fired fleet, excluding under construction plants, would emit more than the historical emissions to date of all coal plants that have ever operated, the IEA has found.
A massive scale up of clean sources of power generation, accompanied by system-wide improvements in energy efficiency, is key to unlocking reductions in coal use for power and to reduce emissions from existing assets. In a scenario in which current national climate pledges are met on time and in full, output from existing global unabated coal-fired plants falls by about one-third between 2021 and 2030, with 75% of it replaced by solar and wind. This decline in coal output is even sharper in a scenario consistent with reaching net zero emissions by 2050 and limiting global warming to 1.5°C. In the ‘Net Zero by 2050 Scenario’, coal use falls by 90% by mid-century.
An important condition to reduce coal emissions is to stop adding new unabated coal-fired assets into power systems. New project approvals have slowed dramatically over the last decade, but there is a risk that today’s energy crisis fosters a new readiness to approve coal-fired power plants, especially given the report’s finding that around half of the 100 financial institutions that have supported coal-related projects since 2010 have not made any commitments to restrict such financing, and a further 20% have made only relatively weak pledges.
Governments can provide incentives for asset owners to adapt to the transition. Favourable economics for clean electricity generation on their own will not be enough to secure a rapid transition away from coal for power generation. Coal plants are often shielded from market competition, in some cases because they are owned by incumbent utilities, in others because private owners are protected by inflexible power purchase agreements. The IEA analysis shows that outside China, where low-cost financing is the norm, the weighted average cost of capital of coal plant owners and operators is around 7%. Refinancing to bring this down by 3% would accelerate the point at which owners recoup their initial investment, clearing a path for one-third of the global coal fleet to be retired within 10 years.
Powering past coal
In related news, the latest report from the Powering Past Coal Alliance (PPCA) has found that over 75% of coal-fired generation capacity in the OECD (Organisation for Economic Co-operation and Development) and European Union is on track to close by 2030. It also says that the scale of proposed new coal power plants has collapsed globally by the same amount since 2015. Both these dynamics are approaching tipping points that will accelerate an ‘irreversible transition away from coal power and towards clean electricity’, the report states.
The report also notes that despite the short-term crunch and energy security concerns arising from Russia’s invasion of Ukraine, over a long-term trajectory, coal is ‘firmly on the way out’. However, it says there are still plans for almost 300 GW of new coal power capacity globally, with around 197 GW slated to be built in China.
‘Accelerated retirements within the OECD and the collapse in the scale of new project proposals in the rest of the world have been counteracted by the ongoing expansion of the coal fleet in China,’ the PPCA says. However, it adds that many of these proposed projects may eventually be cancelled.
The PPCA concludes that for deep and rapid reductions in global coal emissions, an immediate end to the building of new unabated coal power plants, rapid scaling up of clean power and the retirement of existing coal fleets will be required in advanced economies by 2030 and globally by 2040.