42% of global coal power plants run at a loss, finds world-first study

Two-fifths of the world’s coal power stations are already running at a loss, finds Carbon Tracker in a unique study released today which challenges the need for new coal generation and shows that it makes economic sense to close plants in line with the Paris Climate Agreement.

The financial think tank has carried out the first global analysis of the profitability of 6,685 coal plants worldwide, representing 95% (1900GW) of all operating capacity and 90% (220GW) of capacity under construction. The UN’s Intergovernmental Panel on Climate Change says at least 59% of coal power worldwide must be retired by 2030 to limit global warming to 1.5°C and many countries have set phase-out dates.

Carbon Tracker finds that:

• 42% of global coal capacity is already unprofitable because of high fuel costs; by 2040 that could reach 72% as existing carbon pricing and air pollution regulations drive up costs while the price of onshore wind and solar power continues to fall; any future regulation would make coal power still more unprofitable;
• it costs more to run 35% of coal power plants than to build new renewable generation; by 2030 building new renewables will be cheaper than continuing to operate 96% of today’s existing and planned coal plants.
• China could save $389 billion by closing plants in line with the Paris Climate Agreement instead of pursuing business as usual plans; the EU could save $89 billion; the US could save $78 billion; and Russia could save $20 billion.

Matt Gray, head of power and utilities at Carbon Tracker and co-author of the report, said: “The narrative is quickly changing from how much do we invest in new coal capacity to how do we shut down existing capacity in a way that minimises losses. This analysis provides a blueprint for policymakers, investors and civil society.”

The report warns that utilities and their shareholders are exposed to stranded asset risk in liberalised markets, such as much of Europe and parts of the US, where power generators are subject to competition. Coal plants will be forced to shut unless they can secure government subsidies or a delay or reduction in environmental regulations.

Image: Carbon Tracker

Carbon Tracker says governments should phase out coal in an orderly manner and develop plans to close the least economic plants first. When it is cheaper to build new renewables and gas than to build new coal power, they should ban investments in new coal power. This point has already been reached in Europe, the US, India and parts of Latin America.

Read the full report for commentary on individual countries and a more detailed table which also lists the three companies most exposed in each country.