New renewable energy is now cheaper than new coal plants "virtually everywhere," and the cost of renewables is already low enough to beat out well over one-third of existing coal capacity, according to a new report laying out a plan for retiring coal plants.
It is cheaper to build new renewable energy than to continue operating 39% of the world's existing coal capacity, a new report by the Rocky Mountain Institute, the Carbon Tracker Initiative and Sierra Club concludes from a new global investigation into over 2,500 coal plants. In How to Retire Early, released June 30, the organizations forecast that the share of uncompetitive coal plants will increase rapidly to 60% in 2022 and to 73% in 2025.
"Probably the most striking finding for us is that renewables plus storage is cheaper than nearly 40% of the existing coal fleet, which is quite remarkable, really, given how much coal there is in operation today and how much coal countries like China are considering building to help them stimulate economic growth on the back of the COVID-19 pandemic," Matt Gray, co-head of power and utilities at Carbon Tracker and one of the authors of the report, told S&P Global Market Intelligence.
The group defines uncompetitive coal plants as those where it costs more to continue to operate than the levelized cost to build and operate onshore wind or solar with four-hour storage rated at half the renewable capacity. The analysis included any applicable carbon taxes or similar costs as well as clean energy incentives, but does not add any unpriced health or environmental costs to the analysis.
"A faster transition from coal to clean energy is within our grasp, and we show how to engineer that transition in ways that will save money for electricity customers around the world while aiding a just transition for workers and communities," said Paul Bodnar, managing director at Rocky Mountain Institute in a news release about the report.
The report concludes that replacing coal with clean energy could save electricity customers around the world $39 billion in 2020 with annual savings quickly rising to as much as $141 billion in 2025. Phasing out and replacing the remaining competitive share of the global fleet would require about $155 billion in subsidies in 2020, but the figure drops to $80 billion in 2022 and $37 billion in 2025.
"In other words, the theoretical net cost to society of completing the coal-to-clean transition in 2020 would be $116 billion, but this figure drops below zero by 2022 and generates net financial savings of over $100 billion by 2025," the report states. "Those savings — which already exist for many geographies — can be captured and recycled to support a just transition for workers and communities."
The groups estimate that about 93% of global coal plants are insulated from renewable competition by long-term contracts and noncompetitive tariffs. In many cases, a more rapid phaseout of coal could be achieved by aligning the incentives of customers, taxpayers, coal plant investors and the communities that depend on the power plants, authors of the report concluded.
"We make the case that public finance institutions — green banks, multilateral and national development banks, and development finance institutions — have the mandate, capital, and expertise to create programs to deploy these innovative financial tools and help countries capture the economic opportunity of transitioning away from coal," the report states. "For the past decade, these institutions have been under pressure to end financing for new coal plants, and they have largely done so. In the next ten years, they should help take the lead in accelerating phaseout of the existing coal fleet."
The groups released the report the day after a separate coalition of organizations issued a national platform for pushing an economic transition in U.S. regions that have long been dependent on coal. According to a recent analysis of S&P Global Market Intelligence data, as of April 17, generators had 9,038 MW worth of capacity slated for retirement in 2020 and another 23,010 MW of coal capacity set to retire between 2021 and the end of 2025.
The groups wrote that governments and public finance institutions could play that role in transitioning away from coal by refinancing to fund the transition, reinvesting in clean energy, and providing transition financing for workers and communities. In the United States, using such a three-part approach could save customers up to $10 billion annually and phase out 79% of the 236 GW coal fleet that is uncompetitive today, the report states.
How to Retire Early also concludes the "opportunity is ripe to accelerate the coal-to-clean transition" in other parts of the world as well. The report specifically outlines opportunities to move away from coal in Europe, where coal has already declined significantly, and in developing countries like China and India where coal use has grown in recent years.
"The challenges [to retiring existing coal generation] are mainly regulatory and socioeconomic in nature," Gray said. "But, also, I think that the wider issue is that the prevailing economics are accelerating at a far greater pace than regulation can keep up with."