Report: Closing Coal Plants Would Save US $10bn a Year

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Energy consumers in the US could be paying an extra $10bn a year by 2021 to prop up ageing coal power plants, according to a new study which argues cheap gas and renewable energy will soon undercut the cost of running most existing coal power plants.

Analysis released today by Carbon Tracker suggests phasing out coal-fired power in the US would save billions in energy costs, cut emissions, and protect investors from regulatory risk.

The paper, entitled No Country for Coal Gen: Below 2C and Regulatory Risk for US Coal Power Owners, argues that by the mid-2020s it will be cheaper to build new combined cycle gas turbines (CCGT) than continue running 78 per cent of existing coal-fired power stations.

The analysis flies in the face of promises made by US President Donald Trump, who has pledged to spearhead a resurgence in US coal.

“Cheap gas and renewables are here to stay and will continue to undermine the economics of coal,” Matthew Gray, senior analyst at Carbon Tracker and co-author of the report, said in a statement. “President Trump has pledged to revive the industry but the reality is that phasing out coal power in line with the Paris Agreement will save consumers billions and make the US economy more competitive.”

Over the last two years the wholesale value of US coal has plummeted, mainly due to an abundance of relatively cheap shale gas flowing from the Southern States.

But many existing coal power plants in the US enjoy state support to continue running, and Carbon Tracker warns this bill will rise to $10bn a year by 2021 based on current market trends. State support could prove equivalent to 10 per cent of household energy bills in Kentucky, nine per cent in Indiana, and seven per cent in Michigan and Wyoming.

More worryingly for investors, the report also warns coal plant investors are exposed to £185bn of risk as regulators start to look more closely at the cost and climate impacts of running coal plants. Early closure of plants in line with targets set out under the Paris Agreement could result in $104bn of ‘stranded assets’ by 2035, it warns.

Investors should start planning their exit strategy from coal now, moving instead to back lower-carbon technologies such as renewable energy, the report advises.

Trump has vowed to exit the Paris Agreement, but formal US withdrawal from the Treaty will not come until the end of his stint in the White House prompting speculation that the decision will become an election issue in 2020 with Democrats likely to seek a swift return to the pact.