Europe's Coal-Fired Plants Face Tough Times: IEEFA
One-third of Europe's large-scale coal and lignite-fired power plant capacity —108 separate plants—face costly air-quality upgrades or closure as a result of new European Union emissions limits, according to a report published May 8 by the Cleveland, Ohio-based Institute for Energy Economics and Financial Analysis (IEEFA).
"These regulations will further undermine and in many cases shatter the fragile economics of coal generation across the EU compared with gas and renewables," said Gerard Wynn, a London-based IEEFA energy finance consultant and a co-author with Paolo Coghe of the report, Europe's Coal-Fired Power Plants: Rough Times Ahead: Analysis of the Impact of a New Round of Pollution Controls.
"Owners will either have to make significant investment and technical changes in just four years, or decide to close the plants altogether or significantly restrict their operating hours," added Wynn.
The new standards, described in a "best available techniques reference document" (Bref) for large combustion plants, are to be implemented by 2021.
Major markets such as Poland and seven key operators are especially exposed to what Wynn calls a "cough-up, wind-down or shut-down" compliance choice. The seven – Poland’s PGE and Tauron, Enel/Endesa, EDF, Czech CEZ, the UK’s Drax and Greek PPC – account for more than half of the 108 plants, the report found. Czech firm EPH’s strategy of buying up such distressed plants, plus lignite mines to supply them, “is working in the short term” but carries risk post-2021, it noted, although its UK coal plant is being replaced by gas.
Gas-fired generation – coal’s main generating competitor at the margin – has benefited from a sharp and sustained drop in international gas prices and has consistently seen its operational margins increase at the expense of coal generation, the report notes.
The 108 plants most at risk, with a combined 187 gigawatts of thermal capacity, include about 35% of all larger coal, lignite and biomass power plants, by capacity, and 18% of the total across Europe. They were defined as those at least 40% above the new Bref emissions limits, using the latest publicly available emissions data. The report also says that RWE and Uniper have been “throwing good money after bad” by investing heavily in ageing UK coal units.
The report makes four specific recommendations: better support for cleaner technologies in eastern Europe; an end to policies that reward ageing and highly-polluting plants; recognition by Enel and subsidiary Endesa that Bref is an opportunity to close such plants by 2021; and for utilities to stop reducing operating hours of such plants and consider their outright closure.
No coal at all was used in UK power generation on Friday 21 April.
Mark Smedley