Shortly after I published my post on the use of coal on the GB electricity system in Winter 2020, there was excitment after the G7 nations (United States, Britain, Canada, France, Germany, Italy and Japan) announced they would end state support for unabated coal-fired electricity generation by the end of this year. There were also commitments to provide financial support to developing nations in phasing out the use of coal in electricity generation.
“…We will phase out new direct government support for carbon intensive international fossil fuel energy, except in limited circumstances at the discretion of each country…”,
– G7 communiqué
This has been reported as “G7 countries to end state support for coal by the end of this year”, so I immediately wondered what this would mean for the last remaining British coal plant holding capacity market contracts. But on reading the actual text of the communiqué, it’s clear that it means absolutely nothing. All the G7 nations are committing to is not to deploy any new state funding for non-domestic coal-fired generation, and even then there are exceptions.
So the next question is how much the British government currently invests on overseas coal power development. This is less easy to answer. Officially, the government stopped providing new investment in overseas coal generation from January 2020, but subsequent investigations by the BBC and Greenpeace found that it was still providing financial support in the form of export guarantees provided by UK Export Finance (“UKEF”) to companies that are involved in global projects, some of which pertain to coal-fired electricity generation.
A mixed bag of coal phase-out ambitions
It’s also worth noting that while the G7 countries have made this commitment to stop providing state support to overseas coal plant, there is no agreement on the phase-out of coal in domestic electricity generation. The UK has made a commitment to close its coal power stations by October 2024, but until then, they will continue to benefit from state support through the capacity market.
Elsewhere in the G7, France and Italy have set exit dates for coal power of 2022 and 2025 respectively, although some coal is likely to continue to operate in France beyond that date for grid stability reasons. Germany is not expecting to phase out the use of coal power until 2038, and opened a big new coal plant last summer.
In Canada, all provinces are expected to have coal-free electricity systems by 2030. The US and Japan have yet to set a date for phasing out their coal use, but while the US has no plans to build any new coal plant, Japan is continuing to build coal-fired power stations, although a combination of the new efficiency rules and investor an backlash has also resulted in a number of projects being cancelled.
Outside the G7, 10 countries have more than 20 GB of installed coal generation capacity, and there are 8 countries worldwide that are continuing to add to their coal fleets. The countries likely to retain coal over the long term are those where coal and its related industries are major sources of employment, or where rapid growth in electricity demand makes it difficult to justify closure of economically and technically viable capacity.
Of all the G7 countries, Britain appears to be the most likely to meet its coal phase-out objectives. France and Italy may need to keep some plant online longer than hoped for local grid stability maintenance, while the remainder of the G7 has much further to go. Unlike France and Italy, Britain has no plans to convert its remaining coal plant to run on other fuels – they are expected to close and be de-commissioned.
But as noted in my previous post on this topic, coal is still an important part of Britain’s winter energy mix, and the closures will exacerbate our tight winter capacity margins leading to market price spikes and volatility. Removing coal from the generation mix is challenging, and the ease of the transition very much depends on the availability of alternative sources of generation at all times, and the absense of wider social and economic dependencies.
Coal use in electricity generation in the G7 countries
Britain
Comment: the GB system still relies on coal for up to 10% of it electricity on peak winter days. West Burton A is set to close in 2022 after its capacity contracts expire, while current indications are that Ratcliffe-on-Soar will remain open until the market closure date.
No of coal power stations: 2
Installed capacity of coal power stations: 4.1 GW
Coal generation in 2019: 6.9 TWh
Planned phase-out date: October 2024
France
Comment: the closure of the Fessenheim reactor last year saw France re-light its remaining coal plant early for the winter, and there is pressure for it to keep the 1.2 GW Cordemais coal plant open until 2024-25 to meet possible winter capacity shortages, or until the troubled new nuclear plant at Flamanville is completed. EDF is contemplating converting the plant to run on biomass, but with the prospect of tighter EU regulations on use, and the need to convince the government of the investment case, this may not go ahead. Unions recently called off a strike at the plant after receiving assurances it would not close in 2022, so it looks as if the official coal exit date will slip.
No of coal power stations: 3
Installed capacity of coal power stations: 2.5 GW
Coal generation in 2019: 1.6 TWh
Planned phase-out date: end 2022
Germany
Comment: The government has set up an auction system where hard-coal operators may offer capacity volume reductions in exchange for financial compensation, however, some of the successful plant in the auction have since been required to stay open by the grid operator on the basis that they are important for grid stability. Despite its plans to exit coal generation, a 1.1 GW coal-fired power at Datteln in the North Rhine-Westphalia region, opened in June last year. Exiting coal use is challenging in Germany, since the country decided to exit nuclear production following the Fukushima disaster in 2011. Despite a significant roll-out of renewable capacity, most renewable generation is located in the north of the country while industrial demand is primarily in the south. Lignite production remains a significant industry in Germany, with associated employment creating some political barriers to closure.
No of coal power stations: 145
Installed capacity of coal power stations: 48.3 GW
Coal generation in 2019: 171.4 TWh
Planned phase-out date: by 2038
Italy
Comment: Italy’s largest coal operator, Enel, is converting some of its coal plants into gas plants in order to ensure supplies and grid stability are not compromised. The conversion at the 2.4 GW Brindisi plant will be done in three phases: the first phase will be the installation of an open-cycle gas turbine the phase-out of coal. The second phase will be the installation of a second OCGT, and the third phase will be to convert the OCGTs to combined-cycle gas turbines.
No of coal power stations: 8
Installed capacity of coal power stations: 7.8 GW
Coal generation in 2018: 28.5 TWh
Planned phase-out date: by 2025
Canada
Comment: As in Italy, there is a plan to convert many of Canada’s coal plants to run on gas – some plants have been converted to run on dual-fuel. The province of Ontario has had coal-free electricity since 2014, with some of its coal plant being converted to run on biomass. Alberta expects to complete its phase out by 2023.
No of coal power stations: 14
Installed capacity of coal power stations: 8.3 GW
Coal generation in 2019: 53.8 TWh
Planned phase-out date: by 2030
United States
Comment: The USA has the second largest coal fleet in the world, but older plants are being rapidly retired. There are no new coal power plants under development in the US.
No of coal power stations: 252
Installed capacity of coal power stations: 233.6 GW
Coal generation in 2019: 958.7 TWh
Planned phase-out date: no specific date
Japan
Comment: Japan intends to decommission 31 GW thermal power capacity by 2030-31 and reduce the share of coal in the energy mix to 26%. It has set a new regulatory target to raise the efficiency of its coal fleet from 41% to 43%. Japan has a number of new coal plant under construction, but a combination of the new efficiency rules and investor backlash has also resulted in a number of projects being cancelled.
No of coal power stations: 87
Installed capacity of coal power stations: 47.9 GW
Coal generation in 2018: 336.3 TWh
Planned phase-out date: no specific date
Other large coal users
| Country | No of coal power stations | Installed capacity (GW) | Comment |
|---|---|---|---|
| Australia | 19 | 25.1 | Coal contributed 56% of electricity generation in 2019. Past coal closures have led to power prices spiking, so there are concerns about an orderly exit from coal in the future |
| China | 1,082 | 1,042.9 | China is home to half the world’s coal power generation. It is currently still adding new coal power plants, but the economics of these plants is poor due to overcapacity and low utilisation rates. China had previously set an intended cap of 1,100 GW of coal capacity by 2020, but this is at risk of being breached. China has however already retired over 100 GW of relatively older and smaller power plants |
| India | 281 | 229.2 | India has the world’s third largest fleet of operational coal power plants and has a pipeline of proposed new projects. But over recent years cancellations have increased, the economic case for coal has declined, and India is now adding more renewables than coal each year |
| Indonesia | 77 | 34.0 | Coal made up 38% of Indonesia’s electricity generation in 2020, a small increase on the previous year, despite ambitions to cut its share to 30% by 2025. To support this the government will stop approving new coal plant Despite the drop in coal’s share of the market, outright electricity generation from coal is expected to increase as the country’s electricity demand is set to grow in coming years |
| Poland | 50 | 30.2 | Poland is the only European Union state to refuse to commit to net zero by 2050, saying that it needs more time and money to transition its economy from coal to cleaner energy sources. In February, the government approved an energy policy that targets a reduction in coal’s share of the power generation mix from 72% in 2020 to 56% in 2030 |
| Russia | 85 | 44.8 | Russia has the world’s second largest coal reserves after the US, but most of its coal power stations are based on out-dated technologies. Coal mining and related industries are major employers and the country is currently upgrading railway infrastructure to improve coal logistics, particularly to support exports to Asia. Russia was one of just 8 countries worldwide building new coal generation capacity |
| South Africa | 19 | 41.9 | South Africa relies on coal for more than 85% of its electricity. The fleet is aging, and blackouts are common, and air pollution is a significant issue, however environmental targets are frequently missed and there are significant problems of corruption |
| South Korea | 22 | 36.4 | The South Korean Ministry of Energy and Industry recently finalised its plan to reduce the share of coal in the electricity mix from 40.3% in 2019 to 29.9% in 2030. 24 state-owned coal units a capacity of c 18 GW will be converted to run on gas by 2034 |
| Ukraine | 21 | 22.3 | Ukraine is considering reducing its coal-fired capacity to 2.5 GW by 2030. The country’s coal mining industry has been severely compromised by military action in the Donbass region with many coal mines being flooded. As a result coal imports have grown. The country’s energy plan cites the development of domestic coal extraction as a strategic goal which may conflict with environmental objectives |
| Vietnam | 25 | 20.3 | The latest draft of Vietnam’s power development plan calls for reducing coal-fired electricity generation from 34% in 2020 to 27% in 2030. There will be no additional development of new coal-fired power (other than the plant already under construction / under investment promoted for operation during 2021-2025) |
Sources: Global Energy Monitor, E3G, Argus Media, SP Global, OECD, CarbonBrief
Coal demand appears to be soaring at the moment due to underperfoming renewablez and tight gas supply. Prices are flirting with post Fukushima highs at over £80/tonne for API2 benchmark. Despite that, and despite the soaring carbon prices, coal power is being dispatched. Power prices are soaring.too. This in high summer when demand us low and we have peak contribution from solar. It could be a grim winter before perhaps some relief when Nordstream II comes on stream. In Germany by law households have preferential access to gas during shortages. That means more role for coal for generation. There is a real prospect of enery shortages, and a certainty of much higher bills. Perhaps the anti fossil fuel stance of governments will be shown up as folly.
So following your comment I took a look at generation data so far for summer 21 (well, to the end of June) and was surprised to see coal contributing as much as 5% of demand even in the summer (and those max coal contributions were in late June and not early April, so properly in the summer). This chart is interesting showing just how variable wind has been so far this summer…varying from 194 MW to 14,202 MW (by settlement period).
I think Germany is in real trouble – deciding to exit nuclear was a bad decision, but realistically the worst decision across Europe has been a failure to build new nuclear in a timely fashion. We’re seeing the limits of trying to extend the lives of aging reactors, and while I think GB will escape genuine energy shortages, I am certain that high winter prices and high price volatility will be the dominant trend of the next few years.
This article in the Wall Street Journal (which I was happy to contribute to) discusses some of the dynamics of global coal use: https://www.wsj.com/articles/coal-shows-its-staying-power-as-economies-bounce-back-11625650381?mod=hp_lead_pos11