Lignite of the Living Dead:

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1 Lignite of the Living Dead: Below 2 C scenario and strategy analysis of EU coal power A fair transition away from coal 11 th April 2018 Laurence Watson Data Scientist Power & Utilities

2 Outline 1. Introduction 2. Coal power in the EU 3. Stranded value 4. Economic factors affecting coal 5. Political factors affecting coal

3 Introduction: who we are A team of financial specialists making climate risk real in today s financial markets Our research on unburnable carbon and stranded assets has started a new debate on how to align the financial system in the transition to a low carbon economy. 3

4 Coal power in the EU 155 GW of coal plant Around ¼ of total electricity generation Paris-compliant scenarios see no EU coal by 2030 Already seen large disruption: Between the five largest utilities lost over 100bn in value 4

5 A Paris compatible pathway 5

6 Main offenders - lignite plants in the EU Source: Sandbag Climate Campaign 6

7 Bełchatów 7 Bełchatów Lignite Power Plant,Poland by Phil MacDonald released under Creative Commons Attribution; Non-Commercial; Share-alike Licence

Lignite of the Living Dead Our assumptions: Fuel price by country and fuel Electricity tariff by country Both assumed flat out to 2030 Carbon price rising to 20

8 Lignite of the Living Dead Our assumptions: Fuel price by country and fuel Electricity tariff by country Both assumed flat out to 2030 Carbon price rising to 20 by 2030 Evaluated pollution control technologies at plant level Higher fixed costs for lignite Lower efficiency with age Ongoing capital additions and maintenance 8

9 Gross profitability (GW) Profitability of coal plants Gross profitability of operating EU coal fleet in : ~50% of EU coal fleet is cash flow negative Cumulative coal capacity (MW) Source: Lignite of the Living Dead, Carbon Tracker (2017) 9

10 Gross profitability (GW) Profitability of coal plants 40 Gross profitability of operating EU coal fleet March 2018: ~66% of EU coal fleet is cash flow negative Cumulative coal capacity (MW) Source: Lignite of the Living Dead, Carbon Tracker (2017) 10

11 Gross profitability (GW) Profitability of coal plants Gross profitability of operating EU coal fleet : ~100% of EU coal fleet is cash flow negative Liberalised power markets phase-out coal through economics Cumulative coal capacity (MW) Source: Lignite of the Living Dead, Carbon Tracker (2017) 11

12 Stranded value ( m) Findings: Stranded Value in the EU Stranded value EU coal power owners Since most coal generation in the EU is loss-making, utilities could save money by retiring coal power in accordance with the Paris Agreement Source: Lignite of the Living Dead, Carbon Tracker (2017) 12

13 Findings: Stranded Value in the EU Source: Lignite of the Living Dead, Carbon Tracker (2017) 13

14 Companies respond 14

15 Performance Our theory of change for existing coal power Coal power is economically obsolete 14 New dispatchable renewables outcompetes operating existing coal Inflection point 3. 8 New renewables outcompetes operating existing coal New renewables outcompetes new coal Inflection point 1. Inflection point Time Source: Carbon Tracker illustration 15

16 /MWh Inflection point 1 RE already outcompetes coal 200 EU LCOE of power generation technologies in Wind - Onshore PV - utility CCGT Hard coal Wind - Offshore Nuclear Gas turbine CCS CCGT CCS coal Based on data from BNEF and IEA as well as Carbon Tracker assumptions. Source: Lignite of the Living Dead, Carbon Tracker (2017) 16

17 /MWh Inflection point 2 New RE is going to outcompete operating coal 70 EU: LCOE of wind and solar versus operating cost of 2024: New wind coal cheaper than operating coal Onshore wind LCOE : New solar PV cheaper than operating coal Solar PV LCOE Coal operating cost (cash+foc+env) 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) 17

National coal phaseouts Announced: France: 2021 Sweden: 2022 UK: 2025 Italy: 2025 Austria 2025 Finland: 2030 Denmark: 2030 Portugal: 2030 Considering: Germany

18 National coal phaseouts Announced: France: 2021 Sweden: 2022 UK: 2025 Italy: 2025 Austria 2025 Finland: 2030 Denmark: 2030 Portugal: 2030 Considering: Germany Ireland Slovakia Source: Beyond-Coal Campaign No coal: Belgium (since 2016), Iceland, Norway, Albania, Switzerland, Latvia, Lithuanian, Estonia 18

19 Why do uneconomic plants keep running? Hedge against future gas price increases In hope of future capacity or retirement payments Try to outlast competitors Not allowed to close (e.g. Iberdrola in Spain) Sometimes large costs for closure & cleanup (particularly if there is a captive mine) 19

20 Health impacts: SO2 20

21 For more information please visit: If you are interested in knowing more, please get in touch:

22 IED & BREF 70% of operating coal capacity is non-compliant with BREF 22

23 IED & BREF EU Coal Plants 23

Photo: Karpov. Wind in power 2009 European statistics. February 2010 THE EUROPEAN WIND ENERGY ASSOCIATION

Photo: Karpov. Wind in power 2009 European statistics. February 2010 THE EUROPEAN WIND ENERGY ASSOCIATION Photo: Karpov Wind in power 29 European statistics February 21 1 WIND IN POWER: 29 EUROPEAN STATISTICS Contents Executive summary 29 annual installations Wind map 29 Wind installations 29 Power capacity