China and other nations could be burdened with uneconomic and climate unfriendly coal power for decades if they build new capacity to stimulate their economies in the wake of the COVID-19 pandemic, a move China appears to be already considering, Carbon Tracker warns in a new report today.

The financial think tank finds that 46% of global coal plants will be running at a loss in 2020, rising to 52% by 2030. However, renewables and gas are already outcompeting coal worldwide and if governments deregulate power markets to allow greater competition the percentage of unprofitable coal plants will be far higher.

Political Decisions, Economic Realities warns that China, which produces and consumes about half the world’s coal, may be planning to build more coal plants to stimulate its economy in the wake of COVID-19, noting that its National Energy Administration recently announced it was ready to relax rules on coal power investment.

Globally governments are propping up expensive coal plants: 90% of coal capacity which is operating, in construction or planned is in countries with regulated or semi-regulated markets where coal power generators are implicitly or explicitly subsidised. By contrast, in deregulated markets most coal power is already unprofitable on an underlying basis – 90% in Germany and 82% in the UK in 2019.

Matt Gray, Carbon Tracker co-head of power and utilities and co-author, said: “China and other governments may be tempted to invest in coal power to help their economies recover after the COVID-19 pandemic, but this risks locking in high-cost coal power that will undermine global climate targets.

“Building new coal and propping up the existing fleet with stimulus money would be throwing good money after bad. Faced with the need to invest billions in their economies and create new jobs, governments should be planning for a green recovery by incentivising the closure of coal and spending on a major expansion of low-cost, clean renewable power.”

Carbon Tracker revealed last month that it is already cheaper to generate electricity from new renewables than new coal plants in all major markets. By 2030 at the latest it will be cheaper to build new wind or solar capacity than continue operating coal worldwide.

Global coal use in electricity generation must fall by 80% below 2010 levels by 2030 to limit global warming to 1.5°C, according to analysis of recent research from the UN’s Intergovernmental Panel on Climate Change. Decarbonisation of the global energy system can grow the global economy and create up to 28 million jobs by 2050, according to IRENA, the International Renewable Energy Agency.

However, Carbon Tracker’s latest report finds that government subsidies are driving plans to build nearly 500GW of new coal plants worldwide at a cost of $638 billion, and unless policies change 72% of them will still be cashflow positive on an underlying basis when they begin operation.

The report says China should reconsider plans to spend $158 billion on 206GW of new coal power because “renewable energy and battery storage are more viable and sustainable sources of economic growth”.

The virus will not change the underlying profitability of China’s coal plants but the economic downturn caused by the outbreak risks relaxing the planning process and environmental regulations associated with any future investment.

Guest post from Carbon Tracker