Going directly from coal to renewables cheaper than going over the gas “bridge”

Going directly from coal to renewables cheaper than going over the gas “bridge”

New analysis released this week finds that it is now clearly cheaper for countries to switch from coal-fired generation to renewables than to switch from coal to natural gas as a gateway to renewables.

The new analysis from non-profit climate analysis group TransitionZero centers on the carbon price needed to incentivize a switch from coal, whether to natural gas or renewables.

And the conclusions are dramatic.

According to TransitionZero, the carbon price needed to incentivize a shift from coal-fired generation to renewables and battery storage is -$62/tC02 in 2022, compared to a carbon price of $235/tCO2 for carbon. natural gas.

“Despite some regional variation, our analysis shows a clear deflationary trend in the cost of switching from coal to clean electricity and calls into question the 615 GW of gas and 442 GW of coal on offer and under construction globally,” said Matt Gray, co-founder and analyst at TransitionZero.

“Regardless of Russia’s invasion of Ukraine, this trend will accelerate, providing governments with an economic opportunity to protect electricity consumers from the continued volatility of fossil fuels.

According to TransitionZero, carbon pricing is one of the most important policies that can be implemented to reduce a country’s emissions, increasing the operating costs of high-carbon fuels compared to low-carbon alternatives. carbon content.

The new Clean Carbon Coal Price Index (C3PI) introduced by TransitionZero highlights why it is better to skip natural gas and go straight to an electricity system based on renewable energy sources and energy storage.

Historically, the price of fuel switching has been analyzed through the production prices of coal and natural gas and was based on the assumption that natural gas has a lower carbon intensity than coal.

This, in turn, has seen natural gas used as a transition tool between coal and future renewable energy capacity.

However, given the International Energy Agency’s net-zero emissions scenario which predicts that no coal or fossil gas will be generated unabated by 2035 in advanced economies, and globally d ‘by 2040, the use of gas as a transition tool is unfeasible.

The analysis at the heart of the new C3PI then reveals that the switch from existing coal-fired generation to existing natural gas has so far averaged $235/tCO2 (USD) in 2022.

But the carbon price to go directly from existing coal to new solar PV or onshore wind plus battery storage averaged -$62/tC02.

As with most of these analyses, there is an overall fluctuation depending on the country considered.

“The cost of replacing coal with solar, wind and storage varies significantly by region,” said TransitionZero analyst Jacqueline Tao.

“In Europe, for example, the price of change is negative due to rising carbon prices resulting from ETS policy reforms, decades of political support for renewables and the invasion of Ukraine by the Russia, which led to a marked increase in the price of thermal coal.

“Japan, on the other hand, has one of the highest transfer prices due to discriminatory regulations and land use constraints, while China and the United States, despite being leaders renewable energy markets, lower domestic coal prices partially offset the benefits.

“Meanwhile, in Southeast Asia, costs are influenced by the subsidization of coal and gas, as well as the fact that renewable energy is a nascent industry compared to other countries.”

ZeroTransition recognizes that zero-carbon technologies are not somehow immune to fluctuations in the supply chain, but simply less likely to suffer from the same volatility as fossil fuels due to the fact that they have costs. marginals close to zero.

Nonetheless, the Index leads to three major policy reforms deemed by ZeroTransition to be necessary to deploy clean energy sources in a manner consistent with the Paris Agreement.

These include erasing market distortions and shutting down nearly 3,000 coal-fired units by the end of this decade; longer-term political security to reduce the risk of zero-carbon projects; and an urgent need to reform authorization processes.

“Our analysis calls for a number of recommendations, but to inform policy, a transparent flow of data is essential between stakeholders,” said Alex Truby, data scientist at TransitionZero.

“That’s why we’ve created our Coal to Clean Carbon Price Index, which we hope will be a useful tool to increase transparency and ensure reforms are put in place to align power generation with targets. of the Paris Agreement.”

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