Transitioning coal plants to renewables in emerging economies shows profit potential, report says
A recent report by the Institute for Energy Economics and Financial Analysis shows that over 800 coal power stations in emerging economies have the potential to be profitably replaced by renewable energy.
The report found that renewable energy assets can generate substantial profit margins that not only cover the costs associated with closing coal plants but also ensure profitability for the power facility operators.
Investing in a coal-to-clean transition transaction, rather than solely decommissioning a coal plant, offers a highly attractive value proposition.
The report adds that only 10% of the world’s current coal power capacity is scheduled for decommissioning by 2030. However, more coal decommissioning transactions could be completed within the next three to five years.
Investors, governments, and philanthropic organizations should actively work to identify and seize these opportunities.
Governments have been actively seeking solutions to finance the transition, such as the Asian Development Bank’s Energy Transition Mechanism. However, only a limited number of projects have progressed.
Read more: CIF backs Philippines with $500 million investment plan for coal transition
Among the 800 viable transition targets identified in the report, approximately 600 were constructed thirty years ago or more. Many of these projects have already cleared their debts and are no longer constrained by lengthy Power Purchase Agreements (PPAs).
According to the International Energy Agency, four key pillars can deliver a credible pathway to 1.5 C and limit the impact of climate change:
- The decarbonization of electricity
- Reducing deforestation
- Tackling non-carbon dioxide emissions
- Carbon capture and storage (including atmospheric CO2 removal)
In 2023, 75 countries worldwide used a combined installed capacity of 2,082 GW of coal power, which emits approximately 15.5 gigatonnes of CO2 each year.
These emissions account for roughly 40% of the total 36.8 gigatonnes of CO2 released annually from all global energy-related activities. This makes coal power a significant contributor to global carbon emissions and highlights the urgent need to find solutions for reducing or eliminating these emissions.
Addressing the emissions from this large and critical sector is essential for achieving global climate goals and reducing the overall impact of energy-related activities on the environment.
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