Countries should move from coal to renewable energy without shifting to gas as a “transition” fuel to save money, as high gas prices and market volatility have made the fossil fuel an expensive option, analysis has found.
Natural gas has long been touted as a “transition” fuel for economies dependent on coal for their power needs, as it has lower carbon dioxide emissions than coal but requires similar centralized infrastructure, and gas-fired power stations take only a couple of years to build. Earlier this year, before Russia invaded Ukraine, the European Commission angered green campaigners by including gas as a “bridge” to clean energy in its guidebook for green investment.
High prices for gas, and the plummeting cost of renewable energies such as wind and solar power, have reversed that logic, according to analysis from TransitionZero. The cost of switching from coal to renewable energy has plunged by 99% since 2010, according to its report published on Tuesday.
The findings call into question the economic viability of the scores of gas and coal-fired power plants that are planned or under construction around the world. About 615GW of new gas plants, and 442GW of new coal-fired power stations, are planned for construction globally, according to the analysis.
Matt Gray, the co-founder of TransitionZero, said it no longer made sense to think of gas as a transition fuel, and countries should opt for renewables in place of coal. “Despite some regional variation, our analysis shows a clear deflationary trend in the cost of switching from coal to clean electricity,” he said. “Independent of Russia’s invasion of Ukraine, this trend will accelerate, presenting governments with an economic opportunity to protect electricity consumers from continued fossil fuel volatility.”
Many countries are reviewing their energy policies in light of Russia’s invasion of Ukraine – which has sent fossil fuel prices soaring and disrupted supplies – and may be considering a reversion to coal. The amount of power generated from coal rose 9% to a record high last year, even before the war in Ukraine, and if the coal-fired power stations now planned are built the world will have little chance of limiting global heating to 1.5C, according to a separate analysis published last month.
Gray said that although the economics were firmly in favor of renewable energy, governments must make some policy changes in order to realize the full benefits. These included making it easier to build windfarms and solar power, because acquiring planning permission can take up to 10 years in some regions; removing distorting incentives and tax breaks for fossil fuels; and ensuring electricity markets are properly functioning.
The analysis also found that the economics of moving from coal power to renewable energy, without using gas, were most favorable in Europe, where the price of coal has increased, in part because of EU policies and also because of Russia’s invasion of Ukraine.
In China and the US, however, domestically produced coal is cheaper than in Europe. Despite the lower price of renewables, China is still planning new coal-fired power stations, and the US could increase its coal use in response to higher demand for gas.
In Japan, the price of switching from coal to renewables is still higher, because of “discriminatory regulations and land-use constraints”, and in south-east Asia some countries subsidize coal and gas, distorting the economics of a switch to clean power.