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2,000 gigawatts in 20 years

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Presentation on global coal plant phase-out at IEEFA energy finance conference (March 13, 2018).

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2,000 gigawatts in 20 years

  1. 1. IEEFA Energy Finance 2018 March 12-14, 2018 2,000 gigawatts in 20 years Matt Gray Analyst – Power & Utilities
  2. 2. 2 Outline 1. Global coal phase-out outlook i. New investments ii. Existing assets 2. How to shut down 2,000 gigawatts in 20 years i. Market liberalization ii. Environmental regulation iii. Investor engagement 3. Future Carbon Tracker work
  3. 3. 3 Today there is 2,000 GW of coal in operation and over 400 GW planned or under construction Source: CoalSwarm (2012-2018), Carbon Tracker (2018) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2012 2013 2014 2015 2016 2017 2018 Capacity(GW) Global coal power capacity pipeline 2012 to 2018 Proposed Construction Operating Despite recent progress, wasted capital and asset stranding are still huge issues for coal power
  4. 4. 4 Wasted capex: today’s planned coal capacity represents $540b of misallocated capital Source: CoalSwarm (2018), Carbon Tracker (2018) Coal capacity build today will unlikely recover capital costs if Paris temperature goal is enforced - 20 40 60 80 100 120 140 160 180 SE Asia Non-EU Europe East Asia Africa and Middle East South Asia Latin America EU28 Eurasia US$(billions) Overnight investment cost of planned and construction capacity in 2018
  5. 5. 5 Stranded assets: 2,000 gigawatts of existing coal will need to be retired within 20 years 0 2,000 4,000 6,000 8,000 10,000 12,000 2016 2019 2022 2025 2028 2031 2034 2037 2040 Grossgeneration(TWh) IEA scenarios for global coal generation Beyond 2-degree scenario (B2DS) Business as usual scenario (BAU) (2010-2017: ~200 GW retired) Source: Energy Technology Perspectives, IEA (2017) To comply with Paris, 100 GW has to be retired every year until 2040!
  6. 6. 6 Source: Lignite of the Living Dead, Carbon Tracker (2017) How to replace 2,000 gigawatts in 20 years 1. Market liberalization – EU example -40 -30 -20 -10 0 10 20 30 40 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 Grossprofitability(GW) Cumulative coal capacity (MW) Gross profitability of operating EU coal fleet in 2017 2017: ~50% of EU coal fleet is cash flow negative
  7. 7. 7 Source: Lignite of the Living Dead, Carbon Tracker (2017) How to replace 2,000 gigawatts in 20 years 1. Market liberalization – EU example -50 -40 -30 -20 -10 0 10 20 30 40 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 Grossprofitability(GW) Cumulative coal capacity (MW) Gross profitability of operating EU coal fleet 2017 2018 March 2018: ~66% of EU coal fleet is cash flow negative
  8. 8. 8 Source: Lignite of the Living Dead, Carbon Tracker (2017) How to replace 2,000 gigawatts in 20 years 1. Market liberalization – EU example -50 -40 -30 -20 -10 0 10 20 30 40 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 Grossprofitability(GW) Cumulative coal capacity (MW) Gross profitability of operating EU coal fleet 2030 2017 2018 Liberalised power markets kill coal through economics 2030: ~100% of EU coal fleet is cash flow negative
  9. 9. 9 Source: Chasing the Dragon? (Updated data) Carbon Tracker (2018) How to replace 2,000 gigawatts in 20 years 1. Market liberalization – China example Liberalized power markets drive efficiency gains through increased utilization Lower prices Less capacity 0 10 20 30 40 50 60 70 0 200 400 600 800 1,000 US$/MWh Coal capacity (GW) Operating cost of China's coal-fired capacity Operating cost of existing coal units Coal capacity needed with 70% capacity factor Total coal capacity with 47% capacity factor
  10. 10. 10 How to replace 2,000 gigawatts in 20 years 2. Regulation – US example Operating cost is based on a capacity weighted average. Learning rate of 20% for solar and 5% for wind. Capacity additions based on IEA B2DS. Source: No Country for Coal Gen, Carbon Tracker (2017) 2021: New wind cheaper than operating coal 2023: New solar PV cheaper than operating coal 0 10 20 30 40 50 60 70 $/MWh US: LCOE of wind and solar versus operating cost of coal Onshore wind LCOE Solar PV LCOE Coal operating cost (cash+FOC+ENV) Push policies: Capacity mandates drive RE cost down Pull policies: air pollution regulation drive coal costs up
  11. 11. 11 How to replace 2,000 gigawatts in 20 years 2. Regulation – EU example Operating cost is based on a capacity weighted average. Learning rate of 20% for solar and 5% for wind. Capacity additions based on IEA B2DS. Source: Lignite of the Living Dead, Carbon Tracker (2017) 0 10 20 30 40 50 60 70 €/MWh EU: LCOE of wind and solar versus operating cost of coal Onshore wind LCOE Solar PV LCOE Coal operating cost (cash+FOC+ENV) 2024: New wind cheaper than operating coal 2027: New solar PV cheaper than operating coal Push policies: Capacity mandates drive RE cost down Pull policies: air pollution regulation and CO2 pricing drive coal costs up
  12. 12. 12 How to replace 2,000 gigawatts in 20 years 3. Investor engagement – US example Source: No Country for Coal Gen, Carbon Tracker (2017) Two thirds of US coal capacity is regulated, making it highly profitable and thus could lose billions if the US complied with the Paris Agreement 0 2,000 4,000 6,000 8,000 10,000 Strandedvalue($m) Below 2oC stranded value for US coal power investors Regulated % Merchant %
  13. 13. 13 How to replace 2,000 gigawatts in 20 years 3. Investor engagement – EU example Source: Lignite of the Living Dead, Carbon Tracker (2017) -6,000 -5,000 -4,000 -3,000 -2,000 -1,000 0 1,000 Strandedvalue(€m) Below 2oC stranded value for EU coal power investors Since most coal generation in the EU is loss-making, utilities could save money by retiring coal power in accordance with the Paris Agreement
  14. 14. 14 How to replace 2,000 gigawatts in 20 years Future CTI work Developing a global coal power economics portal for:  Tracking the competitiveness at asset- level  Company-level analytics for investor engagement  Public education and activism
  15. 15. For more information please visit: www.carbontracker.org @carbonbubble If you are interested in knowing more, please get in touch: mgray@carbontracker.org

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