China and other nations could be burdened with uneconomic and climate unfriendly coal-fired power for decades if they decide to build new coal capacity rather than renewables to stimulate their economies in the wake of the coronavirus pandemic, warns Carbon Tracker in a new study.
The financial think-tank finds that some 46% of global coal plants will be running at a loss in 2020, rising to 52% by 2030. However, renewable energy and gas are already outcompeting coal worldwide and if governments deregulate power markets to allow greater competition then the percentage of unprofitable coal plants will be far higher.
In a report entitled Political Decisions, Economic Realities, Carbon Tracker warns that China, which produces and consumes about half the world’s coal, may be planning to build more coal plants in order to stimulate its economy following the pandemic, noting that the country’s National Energy Administration recently announced it was ready to relax rules on coal power investment.
“Building new coal and propping up the existing fleet with stimulus money would be throwing good money after bad,” says Matt Gray, Carbon Tracker co-head of power and utilities and co-author of the report.
“Faced with the need to invest billions in their economies and create new jobs, governments should be planning for a green recovery by incentivising the closure of coal and spending money on a major expansion of low-cost, clean renewable power.”
Global coal use in electricity generation must fall by some 80% below 2010 levels by 2030 in order to limit global warming to 1.5deg C, according to analysis of recent research from the United Nations’ Intergovernmental Panel on Climate Change.
Carbon Tracker finds that government subsidies are driving plans to build 499GW of new coal plants worldwide at a cost of $638bn. It says China should reconsider plans to spend $158bn on adding 206GW to its existing 982GW of coal capacity because “renewable energy and battery storage are more viable and sustainable sources of economic growth”.
The think-tank says coronavirus will not change the underlying profitability of China’s coal plants, but the economic downturn caused by the outbreak risks relaxing the planning process and environmental regulations associated with any future investment.
“Policymakers urgently need to deregulate power markets to create a negative investment signal for coal project developers and to ensure that least-cost power generation technologies are built. Failure to do so could mean locking in 499GW of high-cost coal power for decades,” says the report.
Several analyst groups and the International Energy Agency have expressed concerns in recent weeks that the collapse in global oil markets could lead to capital-constrained energy companies rethinking their pledges to transition to clean energy.