New coal represents $600bn stranded asset risk

It is now cheaper to generate electricity from new renewables than from new coal-fired power stations in all major energy markets across the world, according to a report from the think tank Carbon Tracker. 

And, by 2030 at the latest, the data suggests it will be cheaper to build new wind or solar capacity than to continue operating coal at all. 

Analysts at Carbon Tracker looked at the economics of 95% of coal plants that are either operating, under construction or planned across the world. Some 6,700 units totalling 2,050 GW are currently running and 1,050 units (500 GW) are in various stages of the development pipeline. 

The total cost of all planned coal plants is nearly $640bn. Carbon Tracker has warned that governments and investors may never recover their investments in these facilities, as it can take 15 to 20 years to recoup construction costs. 

‘Proposed coal investments risk becoming stranded assets which could lock in high-cost coal power for decades,’ warns Matt Gray, Carbon Tracker’s Co-Head of Power and Utilities. ‘The market is driving the low carbon energy transition, but governments aren’t listening. It makes economic sense for governments to cancel new coal projects immediately and progressively phase out existing plants.’ 

With 100 GW of capacity in construction and 106 GW planned, there is $158bn in capital at risk in China, which still generates the majority of its power from burning coal. The country has 982 GW of existing coal power stations and 71% of these cost more to run today than building new renewables, according to Carbon Tracker. 

Strong carbon pricing mechanisms and years of significant investment in renewables mean that coal is close to becoming obsolete in the European Union. However, there is still $16bn in stranded asset risk – and 7.6 GW of coal in the pipeline – in the EU, largely in Poland and Czech Republic. 

Carbon Tracker has found that market forces will ultimately lead to the closure of coal plants in deregulated markets, where renewable energy developers will be able to capitalise on the growing price gap. But several governments around the world continue to sign off on new coal power stations because market regulations put them at an unfair advantage. 

Limiting global warming to 1.5°C – the more ambitious Paris Agreement threshold – will require global coal use in electricity generation to fall by 80% from 2010 to 2030. This means one coal plant needs to retire every day for the next 20 years, says Carbon Tracker.