New data reveals that for the first time since the beginning of the Industrial Revolution, the world’s fleet of coal-fired power stations has grown smaller. With economies in Covid-19’s grip, more coal capacity was retired during the first half of 2020 than the amount that came online. Though terrible for the climate, make no mistake, King Coal’s reign isn’t ending just for environmental reasons. Coal has become bad for business and banks are starting to freeze investments. L. Michael Buchsbaum takes a deeper look in the first of his Playing Out of Coal series.

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Contracting coal

Its happening: New data from the Global Coal Plant Tracker (GCPT) produced by the Global Energy Monitor (GEM) shows that King Coal is finally being dethroned.

During the first half of 2020, the world’s overall coal generation capacity declined by over 2.9 gigawatts (GW). No doubt only a modest drop considering that the global coal fleet still has over 2,047 GW of power. But since the beginning of the millennium, coal generation has been growing by an average of 25GW every six months.

Indeed one of Covid-19’s many contributions to this challenging year has been to slow down new coal plant commissioning while pushing back “progress” on existing construction projects. This is happening simultaneously to massive energy demand drops that have in turn helped accelerate coal retirement plans –particularly within Europe– that were already in the pipeline.

Considering that coal mining and burning accounts for roughly 40% of global CO2 emissions and 0.3°C of the measured 1°C increase in global average heating, any coal-pause of any duration is clearly cause for a modicum of joy, particularly in a year when joy has been so hard to find.

Economics more than ethics

Fifty years of Earth Days and a growing environmental consciousness have gotten us far, but coal’s collapse is accelerating mainly because its business case is falling apart.

Given that over the past decade, the costs of solar and batteries have fallen by 85% and wind power by nearly half, many studies show that new renewable energy generation is cheaper than new coal in much of the world.

The Rocky Mountain Institute, Carbon Tracker and Sierra Club’s joint analysis, How to Retire Early: Making Accelerated Coal Phaseout Feasible and Just estimates that replacing the entire fleet of global coal plants with clean energy plus battery storage could be done at a net annual savings as early as 2022.

No longer financially competitive, many coal plants are steadily being idled or shifted into some form of “strategic” power reserve, going online only when other power isn’t available. Older coal plants have aged into the economic equivalent of the dinosaur dung they burn.

When a coal plant is no longer generating electricity that means it’s not generating any revenue either. Hence a wave of retirements: In the United States—which is by far and away the world’s largest cumulative contributor to greenhouse gases, over 5.4GW of coal was mothballed this year alone. Across Trump’s America,

renewable energy generation has surpassed coal.

Likewise in Britain, where the industrial revolution essentially began, for the first time in 138 years, the nation’s power was generated coal free.

Overall, the EU27 plus UK retired some 8.3GW of coal capacity throughout the first half of 2020. This happened despite the “powering-past-coal” Germany absurdly allowing Uniper’s new 1,100 MW Datteln hard-coal plant to come online.

Reports of coal’s demise remain premature

As David Fickling explains in Bloomberg, if one draws an imaginary line at Africa’s Nile River, moving west through the rest of Africa, encompassing Europe, and all of the Americas, coal consumption has dropped by a quarter over the past decade.

But east of the Nile is a very different story: “Consumption there rose by a quarter over the same period, and since the region already accounted for about 70% of coal demand, that has driven the global tally up by nearly 10%.”

Coal plant capacity increases as one moves across India through Asia. By far and away, China remains coal’s stronghold. Though the nation’s leadership has pledged before the UN to achieve peak carbon by 2030 and phase out emissions by 2060, it “is now home to half the world’s operating coal fleet” and it’s approved more new coal-fired power capacity through May of this year than in all of 2019.

The region also comprises the largest single concentration of new coal worldwide and the lion’s share of the nearly 400 new coal plants still under construction around the globe.

Dropping Global Coal Financing

Nevertheless, outside of Asia, GEM’s data suggests operating coal power capacity seemingly peaked in 2018 – a trend that looks to be holding. Why? Because banks are gradually curtailing the industry’s financing.

Recently, ABN Amro Bank of the Netherlands and France’s BNP Paribas have prohibited investments in both coal mining and coal-powered plants. German insurer Allianz has also not financed any coal projects since 2015 and British insurer Aviva has similarly ceased coal insurance and divested from its coal assets.

In New York, giant U.S. lender Citigroup pledged to cease financing new thermal mines or fund the expansion of existing operations. The bank also vowed to phase out by 2030 additional financing for companies that derive at least 25% of their revenue from thermal coal mining.

“The increasing focus by activists and elected officials on global warming and climate change has resulted in pressure being applied to banks to curtail their financial relationships with coal firms,” said David I. Kass, clinical professor of finance at University of Maryland, in an interview with the International Business Times.

The trend is growing. “Leaders in the field are mostly from Europe,” said Heffa Schuecking, director of German environmental NGO Urgewald, where banks “have adopted strong coal restriction policies and also set dates for a complete coal exit.” However banks in the U.S., Australia, Japan and China are “still lagging far behind and have up to now only taken ‘baby steps’ towards cleaning coal out of their portfolios,” she said. One entity moving aggressively, however, is Korea’s giant KB Financial Group that at the end of September announced it has decided to halt financing construction of coal-fired power plants as it cleans up its lending.

Nevertheless, meeting climate goals requires a much more rapid reduction in coal power, with generation falling by at least half this decade to limit warming to well-below 2°C.

Over the next few blogs, we will break down some of the regional specifics while detailing industry plans to stave off the inevitable.