By 2030, 800 coal-fired power plants will be replaced with photovoltaic installations

Currently, coal-fired power plants with a capacity of about 2,000 gigawatts produce 15.5 billion tons of carbon dioxide every year. According to the IEA(International Energy Agency), emissions must reach zero by 2040 to limit global warming to 1.5 degrees Celsius. However, closing coal-fired power plants comes with significant costs, especially when those plants are still in debt or tied to long-term power purchase agreements.

Profitable transition options

The Institute for Energy Economics and Financial Analysis (IEEFA) has identified more than 800 coal-fired power plants in emerging countries that could profitably be closed and replaced with solar PV installations by the end of the decade. Of these, approximately 600 were built more than 30 years ago and have already paid off their debt, while the remaining 200, built between 15 and 30 years ago, could also be replaced at a profit.

Constant challenges

However, obstacles remain, especially fossil fuel subsidies, which inflate the value of existing assets. Replacing the newest plants will pose a greater financial challenge, especially in countries that continue to build new coal-fired power plants, such as Vietnam. Environmental groups have also criticized financing the transition, arguing that it involves paying polluters not to pollute.

A solid regulatory framework is needed

Paul Jacobson, lead author of the report, highlights the need for “a hook of well-defined, contractual and bankable transactions to transition from coal to clean energy.” It also emphasizes the importance of introducing “safeguards” to avoid unfavorable incentives that prevent companies building new coal-fired power plants from using transitional financing mechanisms.
One enriching perspective that emerges from this analysis is the possibility of reconciling the imperatives of energy transition and economic profitability. By judiciously exploiting opportunities to replace old coal-fired power plants with cost-effective photovoltaic installations, emerging countries could make significant progress in reducing their carbon footprint while maintaining economic competitiveness.