To save money, countries should switch from coal to renewable power without using gas as a “transition” fuel, according to an analysis, because rising gas prices plus market volatility have rendered fossil fuel a costly option.
Natural gas has historically been marketed as a “transition” fuel for economies that rely on coal for power generation because it emits less CO2 but needs similar centralized facilities, and gas-fired power plants may be built in a matter of years. Before Russia attacked Ukraine earlier this year, the European Commission enraged environmentalists by listing gas as a “bridge” to clean energy in its green investment guidebook.
According to TransitionZero’s data, high gas prices and falling costs of renewable energies like wind and solar power have flipped the logic. According to a report, the cost of transitioning from coal to renewable power has decreased by 99 percent since 2010.
The findings cast doubt on the economic sustainability of the many gas and coal-fired power stations planned or under construction throughout the world. According to the data, 615GW of new gas plants, as well as 442GW of the new coal-fired power plants, are slated for development globally.
Matt Gray, the co-founder of TransitionZero, believes that thinking of gas as a transition fuel no longer makes sense and that countries should instead choose renewables over coal. “Our analysis reveals a consistent deflationary pattern in the cost of transitioning from coal to clean power, notwithstanding some regional heterogeneity,” he said. “This tendency will accelerate regardless of Russia’s invasion of Ukraine, providing governments with an economic option to safeguard energy users from prolonged fossil fuel volatility.”
In light of Russia’s invasion of Ukraine, which has already sent fossil fuel prices skyrocketing and interrupted supplies, many countries are evaluating their energy policies and may be contemplating a return to coal. Even before the Ukraine conflict, coal-fired power generation increased by 9% to a new high last year, and should the coal-fired power plants already planned are built, the globe will have minimal chance of staying below 1.5 degrees Celsius, according to a second study published last month.
Although the economics are clearly in favor of renewable energy, Gray believes that legislative reforms are required to reap the full benefits. These entailed making it easier to install wind and solar farms because obtaining planning approval in some areas can take up to ten years; eliminating distorting incentives and tax advantages for fossil fuels, and ensuring that electricity markets function effectively.
The economics of switching from coal to renewable energy without utilizing gas was also shown to be most favorable in Europe, where coal prices have risen in part due to EU policy and in part due to Russia’s invasion of Ukraine.