Meeting the low-carbon targets in the Paris Agreement will require one average-sized coal plant to close each day between 2020 and 2040, according to a new analysis by Carbon Tracker.
That conclusion, based on data in the CoalSwarm database, means recent divestment announcements by major fossil financiers like HSBC and Allianz are “wholly inadequate” to comply with the Paris goals, writes analyst Matt Gray.
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“The maths behind this statement is simple,” Gray writes. “There is currently around 2,000,000 megawatts (MW) of unabated coal capacity in operation. [‘Unabated’ means coal generation with no significant carbon capture.] After accounting for retirements and additions, we expect there to be around the same amount of capacity in operation by 2020.” The International Energy Agency’s Beyond 2.0°C scenario assumes a full phaseout of coal without carbon capture and storage (CCS) by 2040.
According to CoalSwarm, “operating coal units are currently on average 297 MW. This equals to around one coal unit every day until 2040 which needs to be retired, retrofitted with CCS, or converted to biomass to meet the Paris goals.”
As a point of comparison, Gray notes that 240,000 MW of coal capacity went offline between 2010 and 2017. The average age of those units was 46 years. Now, “there needs to be a near-threefold increase in the amount of capacity closed to meet the temperature goal in Paris. The average age of the existing fleet is currently 22 years, meaning many closures will cause painful impairments,” with utilities in the European Union and elsewhere taking financial losses on relatively new assets.
To stay true to the Paris goals and get a complete picture of the financial risks utilities face, Gray says investors must demand “asset-level retirement schedules” from coal operators. Otherwise, “announcements from investors about halting new coal investments are tantamount to shuffling chairs on the Titanic,” he writes, citing HSBC’s announcement as a case in point.
“Truth be told, those investors who are still financing new coal capacity are either getting rent-seeking subsidies or are due a rude awakening as economic forces and public awareness put coal in a death spiral.”
Gray’s blog post appeared just a week before the U.S. Energy Information Administration projected that countries in and around the Middle East will add 41 gigawatts (GW) of new coal capacity in the next decade.