Coal industry will never recover after coronavirus pandemic, say experts
Crisis has proved renewable energy is now a safer investment, and accelerated the shift [image: Climate activists in front of the coal-fired Jaenschwalde power station in the Lausitz region, Germany, protesting against open-cast mining in November 2019. Their banner reads: ‘Love for the Lausitz. Not for the coal.’] Climate activists in front of the coal-fired Jaenschwalde power station in the Lausitz region, Germany, protesting against open-cast mining in November 2019. Their banner reads: ‘Love for the Lausitz. Not for the coal.’ Photograph: Christian Mang/Reuters Jonathan Watts
The global coal industry will “never recover” from the Covid-19 pandemic, industry observers predict, because the crisis has proved renewable energy is cheaper for consumers and a safer bet for investors.
A long-term shift away from dirty fossil fuels has accelerated during the lockdown, bringing forward power plant closures in several countries and providing new evidence that humanity’s coal use may finally have peaked after more than 200 years.
That makes the worst-case climate scenarios less likely, because they are based on a continued expansion of coal for the rest of the century.
Even before the pandemic, the industry was under pressure due to heightened climate activism, divestment campaigns and cheap alternatives. The lockdown has exposed its frailties even further, wiping billions from the market valuations of the world’s biggest coal miners. Covid-19 crisis will wipe out demand for fossil fuels, says IEA Read more
As demand for electricity has fallen, many utilities have cut back on coal first, because it is more expensive than gas, wind and solar. In the EU imports of coal for thermal power plants plunged by almost two-thirds in recent months to reach lows not seen in 30 years. The consequences have been felt around the world as well. Advertisement
This week, a new report by the US Energy Information Administration
Rob Jackson, the chair of Global Carbon Project
Records are falling thick and fast. By Friday, the UK national grid had not burned a single lump of coal for 35 days, the longest uninterrupted period since the start of the industrial revolution more than 230 years ago. In Portugal, the record coal-free run has extended almost two months, the campaign group Europe Beyond Coal
Last month Sweden closed its last coal-fired power plant
More importantly, in India – the world’s second-biggest coal consumer
Elsewhere in Asia, the picture is mixed. A few years ago, Indonesia, Vietnam and the Philippines were expected to be the industry’s biggest growth areas, but the pandemic, falling renewable prices and a growing divestment campaign have put several major coal projects on hold. The party of South Korean president Moon Jae-in has been re-elected on a pledge to phase out domestic coal use, and many in his ruling coalition are pushing to end financing of overseas projects. In Japan, the big three commercial lenders and the governor of the Japan Bank of International Cooperation have recently said they will no longer accept proposals for coal generation
Other money taps are also being turned off, as investors and finance houses respond to scientific advice and campaigns by divestment activists and school strikers such as Greta Thunberg
“The economics of coal were already under structural pressure before the pandemic,” said Mark Lewis, the head of sustainability research at the investment management arm of French bank BNP Paribas. “And coming out of it these pressures will still be there – but now compounded by the impact of the pandemic.”
BNP Paribas is one of a growing list of financial institutions which have chosen to sever ties with coal. The bank said last week that it would accelerate its planned exit from coal financing to 2030 to bring its portfolio in line with the Paris climate goals sooner.
In the same week, the Norwegian sovereign wealth fund – the world’s biggest – ditched a host of coal mining and energy companies
The fossil fuel has fallen from favour in the eyes of many investors due to rising climate concerns, cheaper renewable energy alternatives and a public backlash against air pollution.
“The public health benefits of cleaner air will be front and centre after weeks of lockdown that have prompted blue skies and clean air in Asia’s megalopolises,” Lewis said. “This pressure from the finance sector will only accelerate going forward, pushing the cost of capital for coal projects even higher.” Advertisement
Even before the pandemic, Australian coal companies said they were finding it hard to find financing
The elephant in the room is China, which burns half of the world’s coal and is the biggest financier of mines and power plants in Asia and Africa – largely to provide an export market for its domestic manufacturing and engineering firms. A few years ago, domestic coal consumption fell, prompting hopes that president Xi Jinping was committed to a shift away from dirty, high-emitting power production. But after the lockdown, the political priority is to jumpstart the economy. Provincial governments are now working on a slew of new thermal plants. But they are running at less than half of capacity because demand for coal has not returned
“Covid-19 has made clear that China and India have built more than they need. Even before the crisis, they had overcapacity. Now with lower demand, you can see everything is a mess,” said Carlos Fernández Alvarez, lead coal analyst at the International Energy Agency.
Alvarez said coal had been hit hardest by the pandemic, but he cautioned the decline could be temporary unless governments invest in renewables to pull economies out of the lockdown. “We have to look at this structurally. If there is high energy demand again in the future, it will probably be coal that picks up the slack because it is the marginal supplier,” he said.
While nobody is expecting coal to disappear any time soon, Ted Nace, director of Global Energy Monitor
• This article was amended on 18 May 2020. The quote about “structural pressure” was from Mark Lewis, head of sustainability research at the investment management arm of BNP Paribas, not from Michael Lewis, head of climate change investment research at BNP Paribas, as an earlier version said. And it was the party of the South Korean president that was re-elected this year, rather than Moon Jae-in himself.