Costs for switching from coal to renewables has plunged: TransitionZero
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On March 15, 2022, power workers inspected photovoltaic generation equipment at the 35-MEGAwatt “fish light complementary” power plant in Binhai New Area of Haian City, East China’s Jiangsu Province.
Future Publishing | Future Publishing | Getty Images
Although record-high prices for coal and natural gas have pushed prices up for both consumers and businesses, there may be some silver lining.
According to findings of climate analytics firm TransitionZero, it is now cheaper to switch from coal to clean energy, compared to switching from coal to gas — thanks to the falling cost of renewables and battery storage, coupled with the rising volatility of gas prices.
Jacqueline Tao (an analyst at TransitionZero) stated that “the carbon price required to incentivize switching from coal generation to solar energy for storage has dropped to a positive price.”
She explained to CNBC that “essentially, that means you can switch to renewables at cost savings.” “Street Signs Asia”On Wednesday
Report claims that switching from coal-to-renewable energy is now cheaper than switching from gas to coal.
Its use Coal to Clean Carbon Price Index — or C3PI project — the company measured the carbon price level it takes to motivate 25 countries to switch fuels, from existing coal to renewables such as new onshore wind or solar photovoltaics plus battery.
Average 2022 carbon price change, regional breakdown
| Region | Coal-to-gas ($/tCO2) | Coal-to-clean ($/tCO2) |
| Average global weighted | 235 | -62 |
| China | 40 | 11 |
| EU | 288 | -90 |
| India | 64 | 38 |
| Japan | 69 | 59 |
| South Korea | 90 | 38 |
| Philippines | 44 | 57 |
| U.K. | 216 | -98 |
| U.S. | 15 | 50 |
| Vietnam | -27 | 23 |
Source: TransitionZero
They found that the average amount of carbon dioxide produced in coal has dropped to $62 per ton, which is the minimum price for incentivizing the transition to cleaner energy. It’s $235/tCO2 that they would need to incentivize them to move from coal-to-gas.
This puts a question mark on the role of natural gases as “bridge fuels” for transitioning from coal-fired power to cleaner energy sources like solar, wind and other renewables. Because gas is lower in carbon than coal, it was traditionally considered to be a bridge between coal and renewables.
The coal-to-clean carbon price varies across regions, and the picture isn’t “as rosy” in Asia compared to the European Union due to differences in market structure and fuel price mechanisms, Tao said.
In Southeast Asia, countries such as Vietnam and Indonesia still have to transition directly from coal-fired power plants. Tao says that these countries are behind in transitioning to renewable energy because of fossil fuel subsidies to domestic coal- and gas producers.
Climate risk insurance
Tao stated that renewable energy not only saves money but also “enhances energy security concerns.”
She told CNBC that investing in renewables is a way to hedge against the risks of climate change.
Banks find it increasingly risky lending to fossil fuel assets due to concerns that they could become stranded assets down the line because of the global energy transformation,” she said.
“That will lead to limited upstream supplies, so we expect tighter markets for gas and other fossil fuels that can be subject to demand shocks and increased supply.”
She added that fossil fuel infrastructures may face physical risk as a consequence of extreme weather events and climate change.
“We believe investing in renewable energie now could provide a hedge.”
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