July 21, 2024
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Coal-Fired Power Plants in Emerging Countries Could Be Replaced Profitably – IEEFA

More than 800 coal-fired power plants in emerging countries could be decommissioned and profitably replaced by cleaner solar energy starting from the end of the decade, according to research released on Monday.

Though only a tenth of existing coal plants are scheduled to shut down by 2030, the Institute for Energy Economics and Financial Analysis (IEEFA) suggests that more could close if efforts are made to identify opportunities.

“The key problem here is a lack of a pipeline of well-defined, contracted, bankable coal-to-clean transactions,” said Paul Jacobson, lead author of the report.

Currently, around 15.5 billion metric tons of carbon dioxide are generated every year by 2,000 gigawatts of coal power.

The International Energy Agency (IEA) states that emissions need to reach zero by 2040 to keep temperature rises within the threshold of 1.5 degrees Celsius.

However, decommissioning coal plants is costly, especially if they are still paying off debt or tied to power purchase agreements (PPAs) that commit them to supplying electricity over decades.

Governments have been looking for solutions to finance the transition, including the Asian Development Bank’s Energy Transition Mechanism. However, only a small number of projects have proceeded so far.

The 800 viable transition targets identified by IEEFA include around 600 plants built thirty years or more ago, many of which have repaid debts and are no longer tied down by lengthy PPAs.

With profit margins for renewables now sufficient to cover the cost of replacing coal plants, decommissioning the remaining 200 plants built between 15 and 30 years ago could also be affordable.

However, obstacles remain, such as fossil fuel subsidies that inflate an asset’s value.

Decommissioning newer plants will be a bigger financial challenge, particularly in countries still building new capacity, including Vietnam. Environmental groups have criticized transition financing for paying polluters not to pollute. Jacobson noted that “guardrails” are required to avoid creating perverse incentives.

“Companies that continue to build new coal power plants while seeking concessions to build renewable energy should not be allowed to use that to benefit from this,” he said.

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