Renewables

TransitionZero: switching straight to renewables is now cheaper than coal-to-gas shift

TransitionZero switching straight to renewables is now cheaper than coal-to-gas shift

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Published

May 16, 2022

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Published:

May 16, 2022

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Switching from coal straight to solar and wind energy and battery storage would enable electricity producers in the European Union (EU) to save USD 90 per ton of CO2 on the carbon price on average, whereas using natural gas as a transitional fuel would cost them USD 288 per ton of CO2, according to a research by TransitionZero, a climate analytics non-profit organization. At the global level, a coal-to-clean energy switch would enable savings of USD 62/tCO2 on average, compared with the cost of USD 235/tCO2 for those who opt for a coal-to-gas switch.

Analysts from TransitionZero therefore recommend minimizing gas investments and moving directly to renewable energy and battery storage. Gas, which is widely seen as a transitional fuel, is no longer a viable bridging tool due to factors including price volatility, supply shortages, and Russia’s invasion of Ukraine, according to the report.

Gas is no longer a viable transitional fuel as the carbon cost of switching to renewables has dropped 99% since 2010

At the same time, the research found that the carbon cost of switching to renewable energy and storage has dropped by as much as 99% since 2010.

The carbon price to switch from coal to clean energy in 2022 in China is estimated at USD 11/tCO2, compared with USD 40/tCO2 for a coal-to-gas transition, according to the report. In India, green energy would cost power producers USD 38/tCO2, compared with a carbon price of USD 64/tCO2 for switching to gas.

The cost of replacing coal with renewables varies greatly among different regions in the world, as a coal-to-gas switch remains cheaper in the US

However, there is considerable regional variation in the carbon price needed to replace existing coal with renewable energy and battery storage. The savings that can be achieved in the UK, for example, are remarkable, at USD 98/tCO2, compared with USD 216/tCO2 for gas, but in the US, the coal-to-gas option remains cheaper, at USD 15/tCO2, compared with USD 50/tCO2 for green energy.

“The cost of replacing coal with solar, wind and storage varies greatly amongst different regions. In Europe for example, the price of switching is negative due to rising carbon prices from policy reforms to the ETS, decades of policy support for renewable energy, and Russia’s invasion of Ukraine, “according to Jacqueline Tao, analyst at TransitionZero.

Policy reforms are required to seize the opportunity

Matt Gray, co-founder and analyst at TransitionZero, said that despite the regional variation the analysis shows a clear deflationary trend in the cost of switching from coal to clean electricity, adding that this trend is likely to accelerate independent of Russia’s invasion of Ukraine. This, he says, presents governments with an opportunity to protect electricity consumers from continued fossil fuel volatility, but requires a number of reforms such as accelerating permitting.

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