Making coal power look like a worthy candidate for taxpayer support in a Europe moving to low carbon generation is no easy trick. A recent study tried to pull off this illusion and failed miserably, explains Dave Jones.
Dave Jones is a carbon and power analyst with climate think tank Sandbag.
The trick of the magician is diversion. The aim is to distract the audience for long enough to make them believe the impossible is true.
Black is white and white is black. In the case of the European coal sector, the aim is to prove that “black is green”.
And something akin to a poor magic show is going on in Eurelectric with their latest attempt to show that handing over taxpayer money for decades to keep the European coal sector on its feet is in fact the best way to support the decarbonisation of European electricity, with no increase in emissions.
But the conjuring is so obvious, the trick falls flat.
To be clear, coal power – despite producing under 25% of Europe’s electricity – is responsible for around four-fifths of the European power sector’s C02 emissions.
This is the main reason why the International Energy Agency now says that Europe must be completely coal-free by 2030 if it wants to honour its climate commitments under the Paris Agreement.
Climate Analytics, meanwhile, has calculated that Europe will overshoot its 2-degree-compliant carbon budget by 85% if all coal power plants continue operating to the end of their lifespan by 2050.
So how on earth does this new study manage to conclude, not only that coal power plants should stay open in Europe, not only that they should receive taxpayer money but that they should receive taxpayer money (through capacity mechanisms) to extend their lifetimes for up to 20 years?
And that all this is compatible with radical EU decarbonisation plans. The trick takes five moves.
Move 1: Present a very out-dated picture of renewable generation.
Unsubsidised renewables are happening across Europe: there are examples of unsubsidised offshore wind, onshore wind, and solar across Europe.
Even the cloudy UK opened its first unsubsidised solar farm this week. This will put pressure on increasing renewables targets, but countries are likely to build much more renewables capacity regardless of targets, simply because they are cheap.
The potential of wind alone is amazing: Wind Europe’s 2030 high wind projection is around 500TWh higher than the Commission’s wind projection; compare this to last year’s total hard coal and lignite generation in Europe of 700TWh. To make the trick work you have to ignore all of this.
Move 2: Understate all the technologies that will fill in the gaps.
The UK and Ireland are the only countries with market-wide capacity mechanisms and can therefore provide insight into the real prices.
In last year’s UK auction, for example, three technologies undercut coal: new batteries, new peaking gas, and demand-response.
The auction price paid was €26/kW, which is significantly lower than the study’s cost assumptions for these technologies: €85/kW (for batteries in 2020), €55/kW (for peaking gas) and €35-€50/kW (for demand response). No-one should be fooled by this.
Move 3: Conjure up a falsehood of how the EU’s Emissions Trading System works.
The report claims that more coal will not lead to higher emissions. It says the ETS has a fixed cap, so industry will reduce their emissions, to offset more coal. But the ETS does not have a fixed supply because of the market stability reserve, so this claim is for the birds.
Move 4: Assume an incredibly low carbon price and emissions levels that aren’t Paris-compatible
To make coal look even slightly economically attractive as a back-up fuel, you still need to assume a very low carbon price (which incidentally is not what Eurelectric say they want, elsewhere).
The problem is that the emissions levels associated with such a low carbon price are totally inconsistent with the objectives of the Paris Agreement.
The study uses very low carbon price projections taken from the IEA’s New Policy scenario, rather than from the IEA 450 scenario (for 2 degrees), whose CO2 prices are three times higher by 2040. So, no rabbits out of hats here!
Move 5: ignore all real-world developments on capacity markets
The study assumes that all EU countries will have market-wide capacity mechanisms. But only two countries – the UK and Ireland – have them at the moment. Many other member states are opposed and nine member states have explicitly stated that they are a last resort.
In reality, most forward-looking experts agree that wholesale power market reforms will actually make capacity markets redundant.
Take any one of these tricks away and the game is up.
The truth is that coal power plants were built to last 40 years. Investing to extend their lives to 50 or 60 years fails every common-sense test there is going, whether on climate change, health, suitability of the electricity system, or economics.
Public subsidies after 2020 should be used to help modernise and decarbonise the electricity system, not to extend the lives of old, dirty, dangerous coal plants. In place of smoke and mirrors – let us have the light of day.