Carbon Tracker, an independent financial think tank based in the UK, published a new report Lignite of the living dead, analysing how a 2°C scenario (seeking to limit the rise in global warming in line with the Paris Agreement) might affect the valuation of coal-fired power plants in the EU. Carbon Tracker examined profitability of each of 619 coal units in the 28 EU countries. It compared business strategies of coal owners and EU Member States coal phase-out strategies with the International Energy Agency’s Beyond 2°C Scenario. The Report reveals a dilemma of coal utilities: to continue to invest in coal and to hope that governments will bail them out (in form of capacity and retirement payments), or divest and prepare for a low-carbon future.
Coal is the most carbon-intensive energy fuel in the EU's energy mix and coal-fired power currently makes up 26 % of total EU power generation. In light of the legal obligations arising from the Paris Agreement, Carbon Tracker emphasises need for an assessment of future profitability of coal power stations. To meet the objective of the Paris Agreement coal phase-out is needed no later than by 2030 in the OECD and EU28.
Moreover, Carbon Tracker points out that falling renewable energy costs, air pollution regulations and rising carbon prices will continue to undermine the economics of coal power in the EU, potentially making generation assets unusable by 2030. The Report found that 54% of coal power stations are cashflow negative and this could increase to 97 percent by 2030. Renewables are expected to be very competitive source of energy, since onshore wind and solar PV projects are projected to be cheaper than operating existing coal plants by 2024 and 2027 respectively.
According to Carbon Tracker, coal units operating in Germany could save €12 billion by phasing out coal by 2030. From the utilities perspective, RWE and Uniper could avoid losing €5.3bn and €1.7bn, respectively.
Carbon Tracker concludes that utilities should acknowledge and prepare for coal to be phased-out by 2030 due to combination of policy commitments in line with the Paris Agreement, technological progress resulting in falling costs of renewables and changing business models in the next decade. Phasing out coal power plants by 2030 could safe €22bn in losses.
The gLAWcal Team