- The current global energy crisis is accelerating the energy transition to renewables.
- Most crucial in this transition is the move away from coal, which in emerging markets is responsible for 33% of global CO2 emissions.
- Yet part of this transition needs to involve repurposing the oldest and most inefficient coal power plants into renewable energy assets.
- The levelized cost of electricity for new installed renewable energy has been steadily decreasing and, in 77% of instances, is cheaper than coal power.
As the energy transition gains speed, the transition away from coal to renewable energy sources will play a vital role accelerating it, especially in Emerging Markets and Developing Economies (EMDEs), which are home to 75% of the world’s coal power.
The phasing out of coal will also be fundamental to meet net-zero goals by 2050 globally. As highlighted by the IEA, all unabated coal needs to be phased out by 2040 to be on track to achieving net zero by 2050.
The transition represents an opportunity and an obligation—an opportunity to transition to renewable energy and create new pathways in EMDEs, and an obligation to phase out coal in a way that is fair to the planet and to the communities and people impacted.
The Coal to Renewables Toolkit
At its’ latest Annual Meeting in Davos, the World Economic Forum, in collaboration with Accenture, launched the Coal to Renewables Toolkit, featuring a set of real-life case studies on how to transition from coal to renewables—from technology, financing and “just transition” perspectives. The objective of the toolkit is to accelerate the coal to renewables transition in EMDEs by sharing leading practices and insights on how the change can be delivered, as well as showing evidence that the transition is, indeed, possible.
Among many others in the toolkit, EDP’s “just transition” case study brings to life the multistakeholder approach taken to repurpose Sines’ coal power plant in Portugal to a hydrogen hub, without letting go of any employees, while helping suppliers to work toward the same goal.
The toolkit is part of a wider initiative within the World Economic Forum’s Energy, Materials and Infrastructure Platform, bringing together coal power producers from around the world which together represent 754 GW of installed coal power capacity, corresponding to 45% of all coal power installed in EMDEs.
Why coal to renewables transition is key in EMDEs
Home to three-quarters of the global coal installed capacity, equivalent to 1,500 GW of coal, coal in EMDEs is responsible for 33% of global CO2 emissions. An additional 500 GW of coal capacity is expected to be built in EMDEs in the next 10 to 15 years. With an average lifespan of 40 to 50 years, if these coal power plants were to see through their lifetime, there would still be operating coal power plants in the 2070s. This all poses a threat to achieving net zero globally by 2050.
However, coal power has been and will continue to play an important role in powering the economic development of EMDEs, as well as providing jobs and energy security for those EMDEs that mine coal domestically.
The opportunity: pairing coal phase out with renewables growth
Nevertheless, the levelized cost of electricity (LCOE) for new installed renewable energy has been steadily decreasing and, in 77% of instances, is cheaper than coal power. This figure is expected to increase to 99% by 2030.
The inversion of the cost trajectories of coal power and renewables is key, as phasing out coal or avoiding building out new coal requires ramping up sufficient clean energy infrastructure to make up for the phased-out capacity.
The ability to replace such capacity on the same site as the decommissioned coal power plant, i.e., repurposing coal power plants into renewable energy plants, brings additional benefits. Among these benefits include enabling the reuse of existing land, leveraging existing interconnection lines, re-employing the workforce, and reusing some key equipment assets.
However, it is important to highlight that not all coal is the same. While for the older, more inefficient plants it makes sense to decommission and replace with renewable energy, in other instances with more recent, efficient plants, it may instead make sense to upgrade and retrofit them to further reduce their emissions.
The toolkit brings the opportunity to life
Despite being still a nascent practice, repurposing coal power plants with renewable energy has been successfully deployed from a technology, financing and just transition perspective across a number of companies and geographies. The toolkit brings these together to demonstrate that the transition is not only feasible but can be beneficial for all stakeholders involved.
From a technology standpoint, the variety of renewable technologies that coal power plants have been repurposed into shows that different repurposing strategies may be pursued, depending on the local circumstances, company priorities, renewable quality resource, grid stability requirements and reskilling potential. The technologies we have highlighted include coal to solar, to solar and storage, to wind, and to green hydrogen.
“Coal repurposing is increasingly seen as a beneficial approach to accelerate the retirement of coal power”, says Roberto Bocca, Head of Energy, Materials and Infrastructure Platform at the World Economic Forum, “The Coal to Renewables Toolkit will help coal power producers and nations identify relevant practices to successfully transform coal assets into the clean energy infrastructure needed for the energy transition.”
While coal phase out and repurposing in developed markets has been led by private companies with the support of publicly funded schemes (e.g., reverse auctions in Germany), public financing is often an issue in EMDEs. Hence, the financing section of the toolkit features concessional financing schemes such as the Asian Development Bank’s Energy Transition Mechanism and the Interamerican Development Bank’s Carbon Reduction Bonus, which combine private sector financing, with multilateral development banks’ financing rates.
Finally, for the coal transition to be sustainable and beneficial for all stakeholders involved, it also needs to be “just”. The toolkit brings together a range of inspiring stories, including EDP’s multistakeholder reskilling scheme “Futuro Ativo” to support repurposing of its largest coal plant into a hydrogen hub, the U.S. Just Transition Fund’s Blueprint for Transition, an open-access resource for affected communities and the Latrobe Valley Authority’s locally led community transition schemes.
License and Republishing
Valentin de Miguel, Senior Managing Director for Strategy & Consulting Lead for Growth Markets, Accenture