The incoming Netherlands government this week stated that it planned to end all unabated coal-fired power generation by 2030, in a new coalition pact, showing the deteriorating fortunes for coal power in Europe, and highlighting risks to life extension investments and distressed buys.
The coalition pact – here in Dutch – is significant because utilities in the Netherlands have commissioned three of Europe’s newest, most efficient coal power plants, all in 2015.
The case of the Netherlands was already a stark warning to investors in new coal-fired generation in Europe and further afield, given the massive write-downs by the affected utilities on the three power plants.
The write-downs, to around half their original value, indicate that the utilities, Engie, RWE and Uniper, will lose money. The impairments reflect the impact of massive growth in renewable power in neighbouring Germany, which has depressed wholesale power prices. The utilities also failed to foresee flat or falling electricity demand.
The Institute for Energy Economics and Financial Analysis (IEEFA) reported last year that the three utilities had made underpublicized impairments on the new power plants collectively worth billions of euros.
This week’s announcement highlights the risk to investing in both new and existing coal-fired power plants in Europe. It seems clear that investors will lose money building new coal power plants, in Europe.
Phaseout plans also highlight the risks to environmental upgrades of existing coal-fired power plants. New standards require coal power plants across the European Union to meet new, tougher limits for emissions SOX, NOX and mercury, from 2021.
Where power plants seriously exceed the limits (as is the case for more than 100 coal power plants), utilities will have to decide whether to close them, or invest significantly in environmental upgrades. Factors for utilities to consider will include coal headwinds like early retirements and phaseout plans, like those announced in the Netherlands and confirmed by Britain and Canada this week.
(This blog was first published by IEEFA here)