‘Death spiral’: half of Europe’s coal plants are losing money

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Author: David Carrington

Posted on: Guardian | 8th of December 2017

 

More than half of the European Union’s 619 coal-fired power stations are losing money, according to a new report. As a result, the industry’s slow plans for shutdowns will lead to €22bn in losses by 2030 if the EU fulfils its pledge to tackle climate change, the report warns.

Stricter air pollution rules and higher carbon prices are set to push even more plants into unprofitability, according to the analysts Carbon Tracker, with 97% of the plants losing money by 2030. Furthermore, rapidly falling renewables costs are on track to make building new wind and solar farms cheaper than continuing to run existing coal plants by the mid 2020s.

Utility companies continue to run lossmaking plants in the hope that competitors will close their plants first or that governments will provide subsidies in return for guaranteed power, though the European commission wants to ban such payments. In Spain, the government has banned Iberdrola from closing its last coal plants, claiming it is concerned over energy security despite the country’s overcapacity in electricity.

Coal in Europe is in a “death spiral”, according to Carbon Tracker, with seven nations including the UK already having announced the end of coal power by 2030 or earlier. At the UN climate change summit in November, the launch of a new alliance of 19 nations committed to phasing out coal rapidly was greeted as a political watershed. “The time of coal has passed,” said the UK’s climate minister Claire Perry.

Until recently European utilities were strong performers, beating Europe’s Stoxx 600 index by 60% between 2000 and 2010. But since then, the utilities have plunged 20% in value as the rise of renewable energy and government policies radically reshaped the market.

Carbon Tracker analysed the revenues and operating costs of all the EU’s coal plants and found 54% are already loss making today. All coal power must be phased out if the EU is to meet the goals of the global Paris climate change agreement, but the current business plans of the utilities would see just a quarter of plants closed.

The new report estimates that closing all the plants by 2030 will avoid losses of €22bn for the plant’s owners, either shareholders or governments. Germany hosts the largest number of unprofitable coal plants and the losses avoided by early closure there total €12bn, with both RWE and Uniper highly exposed. Plans put forward to close German plants have been delayed by the failure of talks to form a new coalition government.

“The changing economics of renewables, as well as air pollution policy and rising carbon prices, has put EU coal power in a death spiral,” said Matt Gray, co-author of the Carbon Tracker report. “Utilities can’t do much to stop this other than drop coal or lobby governments and hope they will bail them out.”

Gray said coal-fired electricity capacity could be replaced by cheaper renewables, with building new onshore wind and solar PV projects projected to be less expensive than operating existing coal plants by 2024 and 2027 respectively. “That is a striking finding, something that would have been unimaginable five years ago,” he said. “The energy consumer deserves the lower cost options.”

However, Brian Ricketts, secretary-general at the industry group Euracoal, said coal was needed to keep the lights on in Europe because renewable energy is unreliable and said “price gouging” could be expected from gas operators without competition from coal.

Ricketts said government subsidies for clean energy now dominate the market: “Traditional economics, based on supply, demand and market equilibrium, has all but disappeared. Our preference would be to see decarbonisation take place under the economically efficient EU emissions trading system.”

Supporters of renewables reject the charge that renewables are unreliable, pointing out the lack of blackouts despite the fast rising proportions of green energy on grids and plunging coal use, and also the dropping cost of battery storage. The UK, where coal use will end by 2025, has gone from 40% of coal-fired electricity to 2% since 2012. The EU’s emission trading scheme has been criticised for providing far too many carbon permits, meaning the carbon price is low.

The expected coal use across the globe in coming decades, particularly in Asia, has fallen sharply recently. In 2013, the International Energy Agency expected world-wide coal-burning to grow by 40% by 2040 – it now anticipates just 1% growth.

 

Read at: https://www.theguardian.com/environment/2017/dec/08/death-spiral-half-of-europes-coal-plants-are-losing-money 

 

 

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