Meeting the Paris Agreement and reaching net zero by 2050 implies ending coal-fired electricity generation worldwide by 2040. As a result, policymakers and investors are increasingly focusing on retiring coal assets before the end of a plant’s productive life.
According to a new report from Sustainable Fitch, the US and western Europe account for most of the planned early decommissioning, but the topic has been gaining traction in the Asia-Pacific (APAC) region.
The Sustainable Fitch report says APAC is home to most of the world’s coal-fired power generation capacity (with China alone accounting for over half) and therefore has a critical role to play in moving the global energy system away from coal.
The region is seeing global initiatives to reduce financing of new coal power and support its replacement with renewables, coupled with national pledges – as outlined in Nationally Determined Contributions (NDCs) – to reduce coal generation capacity in the coming years.
However, in reality, early coal retirement is in its early stages in APAC. Fast-growing power demand in the region’s emerging markets can disincentivise decommissioning projects that involve taking some electricity generation offline, even if – as is the case with many retirement schemes – the purpose is ultimately to replace it with renewables capacity.
No Early Coal Phase-Out in China
The report also points out there is no indication that a mass coal power generation phase-out in China will happen in the near term. China closed down many old plants over the past decade to fight overcapacity but since 2021- 2022 the policy focus has clearly switched to energy security.
The authorities in China have reaffirmed their stance on coal continuing to be an integral part of the electricity mix for now. The country has been expanding fossil fuel power capacity and coal mining production since 2022, although the report claims renewables capacity addition will outstrip coal with support from the authorities as they seek to reach their climate pledges.
In the longer term, once renewables capacity has grown sufficiently to provide a more reliable source of power, China could look at a massive round of accelerated and early coal asset retirement, with a gradual relegation of coal’s role to a back-up for renewables. The country is still likely to keep a certain amount of coal capacity, but these assets could become underused. This raises questions around the financing of new coal capacity in China.