The study suggests that utilities in Europe could lose 6.6 billion euros ($7.3bn) this year alone from inefficient and highly polluting facilities.
The report, Apocoalypse Now, recommends to policymakers and investors that coal should be fully phased out by 2030.
Importantly, the research demonstrates that the coal industry cannot survive without major subsidies, amidst competition from affordable solar and wind power – in addition to cleaner and cheaper natural gas.
The combination of strict air pollution regulations, falling renewable prices and rising carbon prices is making coal energy more and more unpalatable. In 2017, 46 percent of EU coal capacity was running at a loss. But now, the fraction has increased to 79 percent.
Matt Gray, co-author of the report and head of Power & Utilities at Carbon Tracker, said: “EU coal generators are haemorrhaging cash because they cannot compete with cheap renewables, and this will only get worse as carbon prices rise.”
RWE, Germany’s second-largest electricity producer, is the firm looking at the greatest losses from coal – potentially 975 million euros ($1.08bn), or six percent of its market capitalisation.
Prague-based EPH could lose 613 million euros ($681m), and PPC, in Greece, risks the loss of 596 million euros ($663m), according to the report.
The press release accompanying the report said governments will face “intractable problems if they seek to support coal in the long term because they 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”.
“The economics of coal generation in the EU are becoming untenable for operators without significant subsidies from the state,” said the report. “Phasing out coal in a timely, cheap and just way will require considerable foresight.”
The report said the transition away from coal should minimise the odds “of a disorderly or delayed exit from value destruction or societal instability”.
But to be sure, some coal-fired power plants remain profitable, including a number in Poland that already receive significant government subsidies, as well as efficient units in the Netherlands and elsewhere. Some coal-fired power plants in Italy, Slovenia and other countries also benefit from high wholesale power prices.
Yet the report warns that shareholders could increasingly take legal action if national governments begin to put more pressure on utility companies to move forward with uneconomic coal projects.
Carbon Tracker – which is funded by a range of European and US foundations – argues that governments should loan money to fund the closure of coal-fired power plants, on the condition that utilities use those funds to build renewables and in turn repay the debt from future sales of power.
In this model, utilities would always hire local workers and use some of their profits to help the communities transitioning off of coal – and other fossil fuels.
Gray said that consumers, investors, workers and local communities stand to benefit from turning the page on a dirty energy source. “Getting off coal is cheap and can be a win-win.”