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It is cheaper to build new solar power plants, and the competitiveness of coal-fired power plants may decline early.

View: 5422021/07/10  

A new study by Bloomberg Energy Finance (BNEF) points out that for most countries, it is cheaper to build and operate new utility solar power plants than to operate and maintain traditional power plants. This may make more fuel-efficient coal-fired power plants in India, China, and Europe be closed early.

The BNEF report pointed out that for countries that account for 46% of the world's population, including China, India, Germany, France, Italy, and Spain, the burden of developing solar and wind power generation will be lower than operating existing coal and gas power plants.

When the cost of renewable energy from solar and wind power generation is getting lower and lower, it may mean that when the life of a coal-fired power plant is over, there is no economic advantage to build a new coal-fired power plant, and this does not even take into account the impact of carbon prices and climate change. BNEF pointed out that this may lead to the early closure of most coal-fired power plants in India, China, and Europe.

According to BNEF, the current global average cost of solar energy (LCOE) is US$48 per MWh, while onshore wind power is 41MW. As China is the world’s largest carbon emitter and coal-fired power generation country, the LCOE of solar energy is now per MWh. 34 US dollars, 1 US dollars cheaper than the cost of operation and maintenance of coal-fired power plants.

Another big coal –consuming country shares the same condition. India’s solar LCOE is US$25 in MWh, and the average cost of operating and maintaining existing coal-fired power plants is US$26 in MWh. According to BNEF, the capacity of coal-fired power plants in India and China account for 62% of the world's total capacity, and carbon dioxide emissions also account for 44% of the global power sector, emitting approximately 5.5 billion tons of carbon dioxide each year.

Same conditions are true in Europe. These are mainly due to the carbon price in the EU emissions trading system. The soaring carbon price makes coal-fired power plants less and less cost-effective.

Among them, Germany is the EU’s largest emitter and an important user of coal-fired power generation. Today, the average cost of operating coal and gas-fired power plants is US$85 MWh, which is much more expensive than building and operating a new solar power plant and onshore wind power. The LCOE for large-scale solar and onshore wind power is US$50 and US$51 per MWh, but of course, offshore wind power is still more expensive than coal; in Spain and France, new solar power plants are more cost-effective, and LCOE is lower than operating coal power plants. The United Kingdom, Sweden, Poland and Brazil are dominated by onshore wind power.

However, the above examples are all countries that have no coal production or have begun to reduce coal production. For Australia, which already has abundant coal resources and is not affected by carbon pricing, or other natural gas producing countries, it is more cost-effective to continue operating existing coal-fired power plants and natural gas power plants. Economic factors alone are not enough to promote their coal transformation. According to a report by the Australian Commonwealth Scientific and Industrial Research Organization (CSIRO) at the end of 2020, Australia’s new solar LCOE will fall between US$26-30 per MWh ,while BNEF pointed out that the cost of coal-fired power generation is only US$21 per MWh.

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