As the world vehemently calls for reducing fossil fuels to meet the 1.5 degree temperature goal, a new analysis has claimed that the world needs to close nearly 3,000 coal units, or around one unit per day, from now until 2030 for meeting this level.
According to Global Energy Monitor (GEM), over 20,67,713 megawatts (MW) of unabated coal capacity is in operation, said the analysis by Transition Zero, an organisation that supports investors, governments, companies and civil society seeking to manage the decline of fossil fuels and support the shift to zero carbon growth opportunities.
RETIRING COAL UNITS
Stating that operating coal units are at present on average 314 MW in size based on GEM data, the analysis says that this equates to 2,925 coal units, or nearly one unit every day, until 2030, which will need to be retired, retrofitted or converted to meet the 1.5 degree climate target. In the analysis, the authors say that 3,19,549 MW in total was retired with an average unit age of 38 years from 2010 to 2020. While there were a record number of retirements in 2020, there needs to be more than a threefold increase in the amount of capacity closed from 2010 to 2020 to meet a 1.5 degree target. The average age of the world’s existing fleet is currently 22 years, meaning stranded assets from premature closures are all but inevitable.
The analysis also notes that half of the world’s coal plants are in China and the nation has already shown an ability to act decisively and comprehensively to decarbonise its electricity grid. Amidst the rumours that President Xi Jinping will not attend COP 26, China implemented a policy with globally significant an ability to act decisively and comprehensively to decarbonise its electricity grid. Amidst the rumours that President Xi Jinping will not attend COP26, China implemented a policy with globally significant climate implications. The National Development and Reform Commission (NDRC) released Notice No. 1439, which requires all of China’s coal plants to sell their electricity in wholesale markets. In short, China is using the energy crisis to accelerate its deregulation agenda, which means their fleet of power plants will be subject to market forces.
ECONOMIC INCENTIVE TO REPLACE PLANTS NOT GREATER
Thermal coal is considered cheap and plentiful with no supply chain issues. Global natural gas and thermal coal prices are currently increasing precipitously as European and Asian buyers fight over the marginal cargo. These moves are pushing electricity prices to record levels and compromising security of supply in China, as coal plant owners refuse to operate to stem losses from inflexible tariff regulations. Prior to the energy crisis, coal was already becoming uncompetitive, due to deflationary trends in renewable energy. Transition Zero analysis says new investments in wind and solar are cheaper than new coal in all major regions. Moreover, the cost profile of coal electricity has deteriorated to the extent that it is cheaper to build new renewable energy capacity than continue to operate coal plants. After accounting for the intermittent and variable nature of wind and solar, in 2020, 22% of operating coal capacity globally may cost more to operate than building new wind or solar facilities. The energy crisis has exacerbated this dynamic to the extent that 64% of coal capacity could cost more to operate.
After accounting for the intermittent and variable nature of wind and solar, in 2020, 22 per cent of operating coal capacity globally may cost more to operate than building new wind or solar facilities. The energy crisis has exacerbated this dynamic to the extent that 64 per cent of coal capacity could cost more to operate than new renewable in 2021. The growing disparity between the running cost of this black material and the total cost of zero-carbon alternatives could lead to significant savings for consumers.