“Coal phasedown” a year on from COP26

China’s wind and solar growth is in hyperdrive

China is home to over half of the world’s coal generation. The country pledged to peak coal use by 2025, but that could happen sooner.

China leads the world on solar and wind deployment and the scale of the country’s short-term plans is extremely ambitious. When added up, the provincial targets on wind and solar in the 5-Year Plan reach 874 GW to be built across 2021 to 2025. In comparison, the global cumulative installed capacities of wind and solar are 825 GW and 850 GW respectively, as of the end of 2021.

Barring an extraordinary new use for thousands of terawatt-hours of power, that clean power will reduce coal power. 

That’s despite China building new coal power plants. It’s not clear how many coal power plants are being built right now (it might be a lot) but these do not signal a return to coal power at the expense of renewables growth. Rather they are aimed at meeting peak demand. Coal plants will be running much less often, and it won’t be long before the build-up of clean power puts coal into permanent decline. 

That China’s manufacturing is skewed towards exporting clean energy products is another signal of long term direction. This summer, China was exporting $4 billion a month of solar panels alone — placing even more strategic importance on the clean transition for China’s economy.

EU and US look to phasedown coal *and* gas

What’s more, the European Union is set on reducing gas use across the whole economy, not just in the power sector. Its REPowerEU package proposes cutting overall gas use by 56% from 2020 to 2030. 

It can’t be said that coal is making a comeback in Europe. Plans to return coal plants remain relatively limited and temporary. Even if these plants ran throughout 2023, they would generate 60 TWh of coal-fired electricity — enough to power the EU for about a week — resulting in a year-on-year increase in EU power sector emissions of four per cent. 

Coal power in Europe is only likely to be higher in 2022 than in 2021 because of large year-on-year falls in hydro generation caused by 1-in-500-year droughts, and temporarily reduced nuclear generation caused primarily by major outages at French plants. Wind and solar filled part of that gap, but coal was needed to fill the rest. Coal power will likely fall again next year as hydro and nuclear levels recover and wind and solar continue to grow.

Coal at COP27

In the wider pool of coal-reliant countries, there haven’t been many big new headline announcements…. yet. Ongoing discussions have seen countries start to work out what “coal phasedown” means for them, and COP27 may bring more details.

Just Energy Transition Partnerships

Progress has been made with the Just Energy Transition Partnership to provide financial assistance to phase down coal in South Africa, first announced at COP26. An initial financial plan is now agreed. It is likely this model will be copied, at least in part, for other countries as the G7 steps in with funding. 

Indonesia is likely to announce a deal at COP27, following negotiations over the last 12 months; and potentially also Viet Nam. While India is another candidate for this kind of financing, there are expectations that the country will wait until it hosts G20 next year. However, it’s likely there are discussions already happening behind the scenes. 

The details will be vital; these partnerships could represent critical initial steps towards what will be complex national energy transitions that need international support. They won’t be enough in themselves, but they are a powerful starting point that could spark more momentum.

No New Coal

On new coal, there is also good news. Abroad, China’s coal investments have started to wane, following up on their pledge to “not build coal-fired power plants abroad” made last year. It is likely that more countries will add their name to the “No New Coal” pledge during COP27, in part because China’s financing is no longer available.

Arguably the biggest climate success since the Paris Agreement in 2015 has been the reduction in the global pipeline of new coal power plants by over three quarters. This was a critical step to avoiding some of the worst IPCC scenarios of 4 degrees or more. Putting China’s energy strategy aside, global progress on this is on track, with no backsliding.

2030 ambition

The future of coal phasedown is, in part, determined by how serious countries are about keeping heating to 1.5 degrees.

Perhaps the most critical announcement needed from COP27 is for governments to lay out their ambition for what to achieve through to 2030. Right now, Nationally Determined Contribution (NDC) plans for 2030 put the world on track for global heating of 2.5 degrees. As of the 23rd September, only 24 of the 193 Parties to the Paris Agreement had submitted new NDCs since COP26; though all pledged to provide updates by the end of this year. 

Where does that leave us?

The latest data shows both global coal and gas power generation — and therefore global power sector emissions — are close to setting new records in 2022. How close that might be is hanging in the balance. However, we think it’s unlikely that coal power will rise by 2% this year, as forecast by the IEA. 

It’s clear that to have kept global heating to a minimum, the step up in clean power investment should have come much quicker. But because electricity generation is a lagged metric, the step change in clean power investment is only just beginning to be reflected in generation and there is a big shift coming.

With maturing industries like solar, growth would be expected to slow down, but it is in fact speeding up. It took five years from 2010 to 2015 to double the amount of solar installed in a year. And then only four years to double between 2015 to 2019. Now the team at Bloomberg New Energy Finance are forecasting 2022 installations will be double those in 2019 – a doubling in just three years. 

Did Russia’s war speed up the transition to clean power? Without a doubt. Fortunately, the answer to the energy crisis is the same answer as to the climate crisis. 

The clean power boom could actually mean a faster phasedown of coal than we might have expected a year ago. And, with gas now in the crosshairs, this means there will be a more sustainable transition from coal into clean electricity, rather than wasting time with gas. And perhaps, for the first time ever, the prospect of an approaching phasedown in fossil fuel power across both coal and gas has emerged.

Acknowledgements

Cover photo

Dinodia Photos/ Alamy stock image