Coal expansion plans up in smoke as Europe realises mistake

Just 12 of the 65 planned coal power stations have actually been built. [Shutterstock]

Substantial coal power expansion in Europe has been significantly scaled back over the last decade after utility companies realised they bet on the wrong horse, according to a new study by the University of Oxford.

Between 2005 and 2008, European utility companies announced plans to build at least 49 GW of new coal-fired capacity.

German firms planned at least 20 GW, while their British and Dutch counterparts said they would build 7 GW and 4 GW, respectively.

But 77% of that 49 GW has been cancelled, while a further 1.1 GW looks highly unlikely to ever materialise. Just 12 of the 65 planned power stations have actually been built. None of the UK’s planned capacity has come to fruition.

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A report by the University of Oxford’s Smith School of Enterprise and the Environment has revealed that this U-turn by European utilities is a result of poor forecasts and significant write-downs.

So much extra capacity was planned in the mid-2000s because of numerous factors. The study insists that the political environment in Germany, Poland and the Netherlands was favourable to new coal power.

The new German and Dutch plants only burn less-polluting bituminous coal and employ either efficient supercritical or ultra-supercritical generation technologies. Only 11 of the 53 cancelled projects planned to use similar cleaner tech.

Mid-2000s market conditions in the EU also suggested coal had a bright future. Raw material price was predicted to drop and electricity demand was expected to increase. GDP growth was also closely linked to increased energy demand.

But the post-2008 period was characterised by lower energy demand than what was predicted and overcapacity, due to increased generation expansion and increased renewable capacity.

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The study adds that other countries can learn from Europe’s misfire. Lead author of the report Ben Caldecott insisted that “the implication for Asian utilities and utility investors, where coal expansions are currently being considered, is crystal clear: bets on new coal don’t pay off.”

India recently announced that it has identified 5.5 GW of inefficient coal-fired power plants that can be retired. The country currently provides 195 GW of its 330 GW of installed power capacity through coal power. It has already retired about 4 GW over the last two years.

South Korea is also following suit. New President Moon Jae-In is following through on election pledges, announcing that ten coal-fired plants will close and no new capacity will be added to replace it.

Ben Caldecott added that European “company executives may have anti-coal protestors to thank for successfully campaigning to reduce or stop expansions in some countries. If they hadn’t, losses would have been even larger.”

Germany has promised to phase out coal power, in line with both national and EU objectives, but huge doubts remain over the timeframe and feasibility of the idea.

Cutting out coal has so far been an absent topic from Angela Merkel’s campaign to seek a fourth term as chancellor. Coal still provides 40% of German power demand and it has only been scaled back by 10% since the beginning of the millennium.

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