The coal industry is declining across the European Union according to research published today (16 March).
The global coal boom is going bust, one study said, with more coal plants being retired than built. Another report warned investors of the risks of backing inefficient coal plants that are likely to be stranded if a legally binding global carbon target is agreed in Paris this December.
Worldwide, one in ten coal plants at risk of being stranded – left idle because their energy is not wanted – are in the EU.
Analysis by Carbon Tracker also identified major financial risks for investors in coal producers around the world. $112 billion worth of investments in future coal mine expansion and development was not needed under lower demand forecasts.
The findings were dismissed by Brian Ricketts?, the secretary general of Euracoal, a trade industry group. He said coal plants in Europe were too old and badly needed modernisation, adding this “should be happening everywhere to improve efficiency and reduce emissions.”
Environmental campaigners today called on the European Commission to explain its strategy on coal. In its Energy Union communication, launched on 25 February and set to be discussed by EU leaders this week in Brussels, there is no mention of the fossil fuel.
No action on coal would mean either a high carbon lock-in – which could scupper international efforts to keep global warming below two degrees – or unnecessary, stranded plants and infrastructure, they said.
Darek Urbaniak, energy policy officer at WWF European Policy Office, said: “A lack of a clear strategy to tackle coal in Europe can only be a losing strategy.”
Oxford divestment debate
The internationally renowned Oxford University is today (16 March) mulling whether to divest from its coal and tar sands investments, after two years of pressure from students, part of a global campaign. The University later announced it was deferring its decision until May, sparking protests.
Should it ultimately decide to divest, Oxford will be the latest high profile public institution to shed polluting fuels from its portfolio. It has a £3.8 billion (€5.34 billion) endowment.
The organisers of the worldwide divestment campaign claim that about 200 institutions, with a combined asset size of over $50 billions have committed to divest their fossil fuel assets. They include Stanford and Glasgow universities.
Support has grown as the public becomes increasingly aware that fossil fuel companies have discovered three times more fuel than can be safely burned without serious risk to the climate.
The International Energy Agency (IEA) and others have warned that, in order to keep levels of global warming within the internationally agreed two degree target, no more than one-third of proven reserves of fossil fuels can be consumed before 2050.
The United Nations Climate Change Conference in Paris this December aims to make that target legally binding. The EU, US and China have signalled their determination to reach a deal.
The EU’s strategy for the conference was published at the same time as the Energy Union communication. While Energy Union was developed to strengthen the EU’s resilience to shortages, it has developed to include the fight against climate change.
Boom and bust
For every new coal plant built since 2010 worldwide, two proposals to build have been shelved, a Sierra Club and CoalSwarm report found. The rate was “significantly higher” in Europe, according to Boom and Bust: Tracking The Global Coal Plant Pipeline.
But even if the global trend continues, the remaining one-third will account for nearly all of the greenhouse gases that can be emitted before climate change exceeds 2 degrees, the report said.
From 2003 to 2014, the amount of retired coal-fired electricity capacity in the EU was 22% higher than new capacity, the study, published today (16 March) found. Since January 2010, seven coal-fired plants were stopped in the EU, against just one completed proposal.
Over the past ten years and across the EU’s 28 member states 14.5k MW of capacity was added, compared to 17.5k MW retired.
That is on trend with the US and China, although Poland and the Balkans were singled out as two areas defying the global slowdown. Turkey, Vietnam and Indonesia were also proposing new stations.
“What’s striking is how quickly the business climate has turned against coal since 2012,” said Ted Nace, executive director of CoalSwarm. “Because these projects require large capital outlays, they’re vulnerable to rising perceptions of risk.”
The EU has continued on its decade long drop in coal-fired generating capacity. A spike caused by low prices, high gas costs, and the partial shutdown of German nuclear plants was not a coal renaissance, the Internal Energy Agency said in December last year.
A number of EU policies are driving the closure of coal-fired power generation, said the WWF’s Urbaniak. 35GW of capacity have been closed by the Large Combustion Plant Directive, and this may increase by the end of 2015. The Industrial Emissions Directive has the potential to close up to 40GW of Europe’s remaining 150GW of coal-fired capacity by 2023.
Emissions Performance Standards for CO2 from the power sector could drive the closure of the most-polluting infrastructure and provide a clear investment signal for the decarbonisation of the power sector by complementing the Emissions Trading System, added Urbaniak.
Luke Sussams, senior researcher of the Carbon Tracker Initiative, said existing coal-fired power plant capacity would swallow four-fifths of the two-degree carbon budget over its lifetime, leaving no room for burning the world’s oil and gas.
“This fundamental contradiction means investors must assess their exposure to coal plants that are most at risk of becoming stranded in a carbon-constrained world, and steer clear of funding any new coal plants altogether,” he warned.
The Stranded Assets Programme at the University of Oxford’s Smith School of Enterprise and the Environment identified the least efficient “subcritical” coal-fired power stations in the world.
Those plants are at the most risk of becoming stranded assets due to their carbon intensity and contribution to local air pollution and water use, its report, Stranded Assets and Subcritical Coal: The Risk to Companies and Investors, said.
The average subcritical coal-fired power station generates 75% more carbon pollution than the most up-to-date type of coal-fired power station. They also use 67% more water, and create significant amounts of air pollution.
One out of ten subcritical plants worldwide are in the EU. Nations with the largest amount of subcritical generation are Germany with 34%, Poland with 21% and the UK with approximately 13% of the EU total.
In Poland, almost the entire coal fleet is rated subcritical. European Council President Donald Tusk, chairing Thursday’s summit of EU leaders, is Poland’s former prime minister.
To limit global emissions to a level consistent with a two-degree future the IEA estimates that around a quarter of all subcritical coal-fired power stations worldwide will need to be closed by 2020.
Ben Caldecott, lead author and director of the Stranded Assets Programme said, “Subcritical plants are typically older and more expensive to operate. Consequently, closing these plants down may represent a sound choice for budget-constrained policymakers looking for cost-effective ways of tackling pollution.”
The study analysed the world’s 100 largest subcritical company portfolios. Governments own 59%. 39% of total global subcritical capacity is in China, 21% in the US, 10% in the EU, and 9% in India.
German utility RWE is estimated to generate the largest share of subcritical coal in Europe, followed by E.ON and Vattenfall.
E.ON, Germany’s largest power supplier, announced in December last year that it would spin off its fossil fuel assets into a separate company. It said its new strategy would focus on renewables.
In October 2014, Swedish state energy firm Vattenfall said it intended to sell its German lignite mines and plants, because they were “incompatible with the company’s climate change goals”.
Brian Ricketts is secretary general of industry association Euracoal. He said that Europe built its industrial base on coal earlier than the USA, China and other Asian economies.
Many coal-fired power plants were built in the 1960s, 1970s and 1980s and now need replacing, he said. That was happening in member states such as Germany and Bulgaria.
“But replacement and modernisation should be happening everywhere to improve efficiency and reduce emissions, but it isn’t because EU policy favours subsidised sources of energy such as wind and solar,” Ricketts told EURACTIV.
“For an investor in coal, EU policy over the next five years looks uncertain and unpredictable, never mind the 25-30 years needed for a return on a coal project,” he said.
Ricketts pointed out the Stranded Assets and Subcritical Coal report was sponsored by the Generation Foundation which itself receives annual distributions from the Generation Investment Management LLP. The LLP stood to benefit from the closure of plants, he claimed.
“The question not addressed by the authors is, ‘What is best for citizens?’. In South Africa, the legitimacy of the government depends on lifting millions out of poverty; affordable electricity from coal is part of that mission,” he said.
“In Europe, we can do better – matching the performance of Japan’s coal-fired fleet would be a good starting point,” Ricketts added.