Countries should switch from coal to renewables without switching to gas as a “transition” fuel to save money, as high gas prices and market volatility have made fossil fuel an expensive option, an analysis has found.
Natural gas has long been touted as a “transition” fuel for economies dependent on coal for their electricity needs, as it emits less carbon dioxide than coal, but requires similar centralized infrastructure, and power plants at the gas only take a few years to build. Earlier this year, before Russia invaded Ukraine, the European Commission angered environmental activists by including gas as a “bridge” to clean energy in its guide to green investments.
High gas prices and the falling cost of renewables such as wind and solar power have reversed that logic, according to analysis by TransitionZero. The cost of switching from coal to renewables has fallen 99% since 2010, according to its report released on Tuesday.
The results call into question the economic viability of the dozens of gas and coal-fired power plants that are planned or under construction around the world. About 615 GW of new gas-fired power plants and 442 GW of new coal-fired power plants are planned for construction worldwide, according to the analysis.
Matt Gray, co-founder of TransitionZero, said it no longer makes sense to consider gas as a transition fuel and that countries should switch to renewables instead 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. “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.”
Many countries are reviewing their energy policies in light of Russia’s invasion of Ukraine – which has driven up fossil fuel prices and disrupted supplies – and may be considering switching back to coal. The amount of electricity generated from coal rose by 9% to a record high last year, even before the war in Ukraine, and if the currently planned coal-fired power plants are built, the world will be unlikely to limit global warming to 1.5C, according to a separate analysis published last month.
Gray said that while the economy is strongly in favor of renewables, governments need to make policy changes in order to realize the full benefits. These include facilitating the construction of wind farms and solar energy, as obtaining planning permission can take up to 10 years in some areas; remove distortive tax incentives and breaks on fossil fuels; and ensuring the proper functioning of electricity markets.
The analysis also found that the economics of switching from coal-fired to renewables, without using gas, were most favorable in Europe, where the price of coal has increased, in part due to the policies of the EU and also because of Russia’s invasion of Ukraine.
In China and the United States, however, locally produced coal is cheaper than in Europe. Despite falling renewable energy prices, China is still planning new coal-fired power plants, and the United States may increase its use of coal in response to increased gas demand.
In Japan, the price of switching from coal to renewables is even higher, due to “discriminatory regulations and land use constraints”, and in Southeast Asia, some countries subsidize coal and gas, distorting the economy of a switch to clean energy.