Spanish companies could lose close to €1 billion due to declining coal consumption

Apocalypse Now

Four out of five coal power stations in the European Union are not profitable and could lose €6.6 billion just this year because of this, according to a study titled “Apocalypse Now” published on Thursday by Carbon Tracker.

The report warns investors and policy-makers to prepare for a complete coal phase out by 2030 since without major subsidies the industry will not survive growing competition from solar, wind, and natural gas energies, which are temporarily cheaper.

This study indicates that governments will face “difficult challenges if they seek to support coal in the long term”. In this scenario, they “will be forced to choose between destroying shareholder value, depleting fiscal resources or undermining economic competitiveness.”

“The economics of coal generation in the EU are becoming untenable for operators without significant subsidies from the state," said the report. "Phasing out coal in a timely, cheap and just way will require considerable foresight.”

Spain could phase considerable losses

The “Apocalypse Now” study analyzed all coal power stations in the EU and concluded that Germany will be the most affected by the coal decline, followed by Spain and the Czech Republic.

Germany’s lignite and coal power plants could lose up to €9 billion. However, the country’s coal commission proposed a gradual coal phase out by 2038.

Spain, which has yet to establish a deadline for the phase out, is facing losses of up to €992 million. Meanwhile, the Czech Republic has also not established a deadline and could lose €899 million.

For its part, the United Kingdom set the deadline for 2025 and stands to lose €732 million.

Germany’s RWE AG will experience the greatest losses since according to the study it could lose about €975 million, or 6% of its market capitalization.

Prague-based EPF Group could lose up to €613 million, while Greek PPC risks losses of about €596 million.

Coal in free fall

“Apocalypse Now” indicates that the combination of strict regulations against air pollution, declining renewable power prices, and the rise of carbon prices are making coal less and less attractive.

In 2017, 46% of the EU’s coal capacity was running at a loss. But now, the fraction has increased to 79%.

The report warns that shareholders could take increasingly legal actions if governments start to put more pressure on utilities to move forward with uneconomic coal project.

Possible subsidies

Carbon Tracker, financed by a series of European and U.S. foundations, argues that the governments should offer loans to fund the closure of coal-fired power plants, on the condition that utilities use those funds to build renewables and in turn repay the debt from future sales of power.

In this model, utilities would always hire local workers and use some of their profits to help the communities transitioning off of coal and other fossil fuels.

Gray said that consumers, investors, workers, and local communities stand to benefit from turning the page on a dirty energy source. “Getting off coal is cheap and can be a win-win.”

Coal power plants with profits

However, some coal power plants across the EU are expected to obtain profits, including facilities that receive significant subsidies in Poland and efficient services in Germany and the Netherlands.

Also, some plants in Italy, the Czech Republic, and Slovenia could take advantage of the high prices of wholesale energy.

According to “Apocalypse Now”, investments in technology should increase to meet the strictest standards of air quality in the EU as of 2021.

Several countries like Poland still depend on coal for most of their energy generation.

Finally, some coal plant operators sustain that coal is here to stay for several decades more because renewable energy is intermittent and is not a stable energy provider.

For more information, check Energía16

See also: No major oil company is investing to support climate goals

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