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European coal plants forecast to lose €6.6bn in 2019

Report says coal-fired power struggling to compete with cheap renewables and gas.

Four in five of Europe’s coal-fired power plants are unprofitable, with the potential for €6.6bn of losses in total for their owners this year, according to a new report.

EU coal generators are “haemorrhaging cash” because they cannot compete with cheap renewables and gas, said Matt Gray of Carbon Tracker, the think-tank that compiled the report. “Unless there’s dramatic changes, then these losses could be sustained.”

Coal-fired power has been hit by the rising price of EU carbon credits — allowances that industries must buy if their CO2 emissions are above a certain level. The cost of these credits has tripled since 2017 to more than €25 per tonne of CO2.

Carbon Tracker said its findings are a warning to investors and policymakers to prepare for the closure of coal-fired power across the continent by 2030. Of the EU’s 154.4GW of coal capacity, 45 per cent is already scheduled to shut down by 2030, with 13 member states committed to a complete phasing out by then, according to lobby group Beyond Coal Europe. Seven countries have made no commitment at all on coal-fired power.

With coal-fired power stations losing money, policymakers will face “intractable problems” if they support them in the long-term, the report said, because: “[Governments] will have to choose whether to: pass costs to the utilities and destroy shareholder value; pass costs to consumers and push bills up; or fund them from debt or taxes.”

Germany, Europe’s largest coal consumer, looks most vulnerable to losses, the report found, forecasting that power company RWE would lose €975m from its coal-fired power stations this year. Utilities in Spain and Czech Republic are also exposed.

In January, Germany’s coal commission recommended eliminating all coal-fired power stations by 2038 but there is resistance to an earlier target, given the country is also planning to phase out nuclear power by 2022.

Berlin has agreed to spend €40bn until 2038 — much of it in coal mining communities — to cushion the economic blow: coal currently accounts for 40 per cent of electricity generation.

“The German government plan is to phase out coal by 2038, but it’s [likely] it’ll be earlier simply because of market forces,” said Claudia Kemfert at the German Institute for Economic Research.

But Max Gierkink at Cologne-based Institute of Energy Economics was sceptical that coal would be eliminated by 2030 — because nuclear power is also being phased out and because creating renewable energy infrastructure could take time.

There are also insufficient incentives to build the gas powered plants needed to replace coal-fired generation at peak times, he said. There are parts of Europe where coal-fired plants will continue to be profitable, the report said.

Polish plants could make total profits of €631m in 2019, thanks to subsidies and higher wholesale electricity prices than elsewhere in Europe. This is largely because the Polish government has not encouraged competition from lower cost renewables and is reluctant to import more gas from Russia.

Source: Financial Times