More than half of the coal-fired power stations in the EU are lossmaking and almost all will be by 2030, according to a study that says the fossil fuel faces a “death spiral” in Europe.
Analysis of more than 600 power plants by Carbon Tracker, the climate think-tank, estimates that €22bn of losses could be avoided by phasing out coal in the EU by the end of the next decade.
The research comes ahead of a climate summit to be hosted by French president Emmanuel Macron in Paris on Tuesday aimed at building on the international agreement on emissions cuts struck in the same city two years ago.
However, there are divisions within Europe over how fast to withdraw from coal — the most carbon-intensive of the main forms of power generation — as governments balance their climate commitments with the need for energy security.
Coal plants still provide the backbone of the electricity system in parts of Europe but they are facing increasing economic headwinds from regulatory measures to reduce emissions , as well as rising competition from renewable power.
Some 54 per cent of EU coal plants are already running at a loss, according to Carbon Tracker, and this will increase to 97 per cent by 2030 if European governments take the action needed to meet their climate targets under the Paris agreement.
It will be cheaper to build new onshore wind and solar capacity than to operate existing coal plants in the EU by 2024 and 2027, respectively, the study found. This is because of the falling cost of renewable technology coupled with more stringent air pollution standards due in 2021 and rising “carbon prices” levied on CO2 emissions.
“The changing economics . . . has put EU coal power in a death spiral,” said Matt Gray, Carbon Tracker analyst and co-author of the report. “Utilities can’t do much to stop this other than drop coal or lobby governments to hope they will bail them out.”
Only 27 per cent of existing coal capacity is scheduled to be closed by 2030, according to Carbon Tracker’s analysis of operators’ publicly declared plans.
Utilities are keeping lossmaking plants open for a variety of reasons, said Mr Gray, including hopes of higher power prices in future and reluctance to take on the cost of closure and clean-up. Political intervention to protect jobs in the power sector and in coal mining was also a factor in some places, he added.
Mr Gray said this was a risky strategy likely to destroy value for investors and increase costs for bill payers in the long run.
Proposals for higher EU-wide renewable energy goals were passed in the European Parliament last week after fierce debate between those favouring rapid phase-out of coal and others wanting a slower transition.
Several western European nations, including the UK, Denmark and the Netherlands, have already committed to close all their coal plants by 2030 or earlier. But Poland and other central European countries remain heavily dependent on the fuel.
Germany, which has the biggest fleet of coal plants in Europe, accounting for about 40 per cent of its power capacity, is caught between the two camps. The timetable for ending coal-fired generation has been a sticking point in Angela Merkel’s stalled efforts to build a coalition government.
Many large European utilities, such as Enel of Italy and Vattenfall of Sweden, have been reducing exposure to coal but often by selling their plants rather than closing them.
EPH, a privately owned Czech company, has been among the most prolific buyers, building a portfolio of coal and gas plants across Europe at knockdown prices. Daniel Křetínský, the Czech billionaire who controls EPH, told the Financial Times that “for the next at least 10, probably 20 years” Europe would still need fossil fuels to supplement less reliable wind and solar power.
Mixed signals over the future of coal was encapsulated by the Spanish government’s move last month to stop Iberdrola, the country’s largest utility, from closing its last two coal power stations because of energy security concerns.
Mr Gray said such concerns were unfounded because a combination of low-cost renewables, advances in battery storage technology, increased energy efficiency and more sophisticated demand management would keep the lights on without coal.
“Those utilities who expect to operate their coal units beyond 2030 are putting their assets on a collision course with these megatrends,” his report said.
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