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Retiring more than 800 coal-fired power plants around the world could be profitable, research team says

A panoramic view of the Hoa Binh Hydropower Plant, a state-owned utility company owned by Vietnam Electricity Corporation, in Hoa Binh province, Vietnam, on June 4, 2024.

A panoramic view of the Hoa Binh Hydroelectric Power Plant, a state-owned utility company owned by Vietnam Electricity Corporation, in Hoa Binh province, Vietnam, June 4, 2024. Image source: Reuters

More than 800 coal-fired power plants in emerging countries are likely to be retired from the end of the century and profitably replaced by cleaner solar power, research showed on Monday.

The Institute for Energy Economics and Financial Analysis (IEEFA) said that despite plans to close one-tenth of existing coal-fired power plants by 2030, more could be closed if efforts are made to find opportunities.

“The key issue here is the lack of a clear, contracted, bankable pipeline of clean coal deals,” said Paul Jacobson, the report’s lead author.

2,000 gigawatts of coal power generates approximately 15.5 billion tons of carbon dioxide per year. The International Energy Agency says emissions need to reach zero by 2040 if temperature rise is to be kept within the 1.5-degree Celsius threshold.

But decommissioning is costly, especially if the plants are still paying off debt or tied to power purchase agreements (PPAs) that promise they will deliver power for decades.

Governments have been looking for solutions to pay for the transition – including the Asian Development Bank’s Energy Transition Facility – but only a few projects have made progress.

The 800 viable transformation goals identified by IEEFA include about 600 that were established three decades ago or more, many of which have paid off their debt and are no longer tied to lengthy power purchase agreements.

With renewable energy’s profit margins now sufficient to cover the cost of replacing coal plants, retiring the remaining 200 plants built 15 to 30 years ago is also affordable, although obstacles remain, including fossil fuel subsidies that drive up asset values.

Decommissioning new plants will be a greater financial challenge, especially in countries such as Vietnam that are still building new capacity.

Environmental groups have criticized bridge financing for paying polluters to prevent pollution. Jacobson said “guardrails” were needed to avoid perverse incentives.

“Companies that continue to build new coal plants while seeking to build renewable energy concessions should not be allowed to exploit this to their advantage,” he said.

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