Coal power generation in the EU has plummeted 19 per cent since the start of the year, according to analysis by Sandbag, but will the trend continue?
Are we witnessing an acceleration in the collapse in coal's fortunes across Europe?
Well, the latest energy data compiled by analyst Sandbag today certainly provides startlingly grim reading for those invested in that most CO2-intensive of fossil fuels.
According to the new analysis released today by the influential think tank, EU electricity generation from coal-fired power plants has plummeted by a massive 19 per cent since the start of this year, with falls in almost every country across the bloc.
"This is pretty unprecedented," Sandbag carbon and power analyst, Dave Jones, told BusinessGreen. "The last biggest fall in EU coal generation was 12 per cent in 2016."
Jones argues the shift away from coal in Europe is now happening very rapidly indeed, and even believes it possible that most of the electricity grid in many if not all member states could be almost rid of coal by as soon as 2030, or thereabouts.
"I don't think people realise how quickly this is being phased out," he says. "Europe's going to be out of coal faster than anyone thought."
And in further good news for environmentalists around half the drop in coal output has been replaced by wind and solar generation, although the other half is credited to a switch from coal to natural gas power. While coal power generation fell by around 50TWh, wind and solar increased by 30TWh, with gas output rising by the same amount, the analysis shows.
Nevertheless, with gas power far less emissions-intensive than coal power, should coal generation stick at its current lower level for the rest of the year, it will still make a sizeable dent in the EU's greenhouse gas emissions, perhaps helping to cut Europe's total emissions by 1.5 per cent. Sandbag estimates that compared to last year the reduction in coal power would save 65 million tonnes of CO2 if the current level of generation is sustained for the whole of 2019 - savings that amount to more than the entire annual emissions of Portugal.
What is more, the 19 per cent drop in coal power generation over only the past six months comes on top of a 30 per cent fall in coal generation between 2012 and 2018. And the shift is now being seen in almost every member state, too - particularly in Western Europe.
The story in the UK is well known, where the carbon floor price has helped push the grid towards a record number of days without any coal power whatsoever this year, as overall coal generation has fallen 65 per cent in 2019 so far. But Ireland is another country which has seen a huge drop in coal power, registering a 79 per cent fall since the start of the year, while in Spain coal generation is down 44 per cent, and in France it has plummeted 73 per cent.
Yet perhaps the biggest surprise is Germany, which since opting to move away from nuclear in the wake of the Fukashima Daiichi disaster in Japan in 2011, has become heavily reliant on coal power. However, according to Sandbag, Germany saw a drastic fall in coal generation in recent months, with output plummeting 22 per cent since the start of the year.
Crucially, Sandbag argues the relatively warm weather this year to date has had little impact on coal's fortunes, as the resulting drop in demand for power was "more than offset" by a 30TWh fall in hydroelectricity generation in France.
But it is no coincidence that in more developed Western European countries where the strongest gains have been made for wind and solar generation, there has simultaneously been the biggest falls in coal power output, the analysis suggests. And, moreover, in Eastern European countries where renewables deployment has been lower, there has been a far less notable reduction - if any at all - in coal generation since January. Wind and solar, and the declining costs associated with these technologies, appears to be playing a key role in pushing coal off the grid.
The story all this data tells us is clear, then: coal power is on the wane in Europe. But is the trend set to continue, and if so, how quickly?
Aside from renewables, another key driver for the shift away from coal has undoubtedly been the surging carbon price in the EU's emissions trading system (ETS), which has been climbing steadily over the past 18 months thanks to a series of policy reforms and hit a record high of €28 per tonne earlier in July. That has played a key role in the switch from coal to gas, but according to Jones, the trend is likely to only be temporary as it accounts for existing excess gas power, rather than Europe building any more gas power capacity. The coal-to-gas-switch in Europe has likely already peaked, he argues, which could spell more good news for renewables.
"Where you've got the coal-gas switch that's happened in Europe, it's a bit of a one-off because you can't increase it year-on-year as there are no extra gas plants being built," he explains. "It's just an opportunistic thing that has happened with existing gas plants that have been unused."
The long and short of it is that thanks to the higher carbon price and competition from renewables coal plant profitability is collapsing, which makes operating a coal fired power plant far less economically viable than it was even a few years ago. Only three per cent of the EU's coal plants closed in 2018, but Jones argues that the rest of Europe could soon be about to follow in the footsteps of the UK in 2016, when a sudden flurry of coal plant shut downs were announced.
"The economics have basically collapsed in the same way as they did in the UK a few years ago," Jones explains. "Now you're in that situation on the continent as well, where you are not actually seeing the closures yet, but for the first time we've had that collapse in profitability of coal plants, which is a bit of a starting point for what might happen in terms of closures. It's only a small number [of coal plant closures] at the moment, but as soon as those economics change, those closures could start happening quite quickly."
Much, however, will depend on whether policy measures allow the current rapid trend away from coal to become the new norm. With a strong policy push for ambitious clean energy and decarbonisation targets at EU level, crucial investment signals would be provided for greater wind and solar development across Europe, and particularly in Eastern Europe and coal-reliant countries such as Poland and Bulgaria, Sandbag argues. After all, with transport and industry moving towards electrification there is likely to be rising demand for power, and unless the renewables rollout keeps up the pace, it will struggle to push coal completely off the grid.
But with the new EU Commission, Council, and Parliament leaders just bedding in, news of coal's collapse will perhaps provide greater optimism and evidence that a potential net zero emissions target for the entire bloc is eminently achievable should the shift towards cleaner sources of energy continue. That could help the new EU Commission President Ursula von der Leyenm to push for an increase in the EU's current 2030 emissions reduction ambition to as high as 55 per cent, as she has promised.
"You can see the new European Commission President coming in and basically promising to do her best to bring that from 40 per cent to 50-55 per cent," says Jones. "If you really start believing coal can be phased out by 2030, it really impacts the ambition you can go towards for the 2030 target, which is really encouraging."
But were the rapid shift away from coal to continue along current trends right across Europe, what message would this send to the rest of the world? It is no secret the coal sector is struggling in the US, where there have been a number of coal casualties in recent months due to increasingly tough economics associated with the fossil fuel. Major investors are increasingly backing away from thermal coal, putting pressure on global mining giants such as BHP and Rio Tinto to do the same. Yet in parts of Asia which are rapidly developing, coal plants are still being built and planned in the pipeline today.
Jones argues that Europe's example could well send an important signal that could have a crucial ripple effect throughout the world.
"If you do see coal continuing to collapse, Europe could ultimately completely be out of coal by 2030, or probably dominantly out of coal by 2030," Jones says. "That does send a huge message to the rest of the world, not just around building new coal plants but also around existing facilities, for a clear move away from them."
Nothing is certain though, as it will not be economics alone which defines the future for coal power. If there is a political or structural need for electricity from existing plant, even if coal plants become financially unviable, there could well be incentive for governments to try and ensure some coal generation stays online. The pressure is on new EU leaders and green businesses, then, to ensure clean, efficient forms of energy are there to pick up the slack left by retiring coal and gas assets.
"The question is how quickly will utilities start to actually close coal plants? How will governments react to the fact that the economics have changed so much?" Jones asks. "Governments have got to find a way to actually help this transition, and to oil the wheels of that transition to enable these coal plants to shut by encouraging investment in other technologies, making sure they come offline without the lights going out, and making sure they're dealing with transition issues so that no-one is left behind."
