About 42% of the world’s coal-fired generating stations are losing money today, and 56% will be by 2030, according to a new analysis by Carbon Tracker.
The industry’s immediate challenge is that coal prices have been surging over the last three years, while “muted power prices” cut into generators’ profitability, Bloomberg Technology reports. And “while coal prices are forecast to fall 13% by the end of the next decade, the cost of emitting carbon dioxide is set to double in Europe and is forecast to jump in China, which is introducing an emissions trading market,” the news agency adds, citing the report. “Those factors mean the cost of running coal plants will exceed what they can earn.”
European Association for Coal and Lignite (Euracoal) Secretary General Brian Ricketts, who famously warned his members after the Paris conference that they “will be hated and vilified, in the same way that the slave traders were once hated and vilified,” now says governments are introducing support measures to stop fossil generating plants from closing too quickly.
“Depressed wholesale electricity prices are a problem for the entire conventional power industry—nuclear, hydro, coal, gas, but not subsidized renewables, which are of course the reason for the low wholesale prices—their income coming from outside the market,” he told Bloomberg. (Ricketts may have missed last month’s Bloomberg New Energy Finance report that showed unsubsidized wind and solar with storage undercutting fossil generators on price.)
The industry’s woes could be compounded if future reality exceeds the relatively cautious assumptions in the Carbon Tracker report. “Other big causes of the losses at coal plants are rules designed to limit air pollution as well as competition from wind and solar generation,” Bloomberg notes. “Carbon Tracker’s analysis assumes existing rules stay constant. It doesn’t assume a big increase in other climate measures.”
Even so, the assessment may be a reality check on the International Energy Agency’s most recent World Energy Outlook, which shows coal retaining a prominent spot in the global energy mix through 2040. With China restarting construction on many of the coal plants it had previously suspended, the World Coal Association foresees the fuel driving economic development in emerging economies for decades to come.
“The Chinese are actually ramping up plans to build more coal,” said Carbon Tracker senior analyst Matthew Gray, although countries with limited price competition among energy sources might end up with higher costs and angry consumers if they follow that lead. In jurisdictions like the United States and the European Union with competitive energy markets, coal investors may end up losing money.