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The early retirement challenge for fossil fuel power plants in deep decarbonisation scenarios

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  • Kefford, Benjamin M.
  • Ballinger, Benjamin
  • Schmeda-Lopez, Diego R.
  • Greig, Chris
  • Smart, Simon

Abstract

Rapid decarbonisation of the global energy sector will likely have a multitude of economic consequences, including the premature decommissioning of most fossil fuel power plants. In this analysis, we examine the impact of early retirements for oil, coal, and natural gas-fired generators required to follow a given 2 °C emissions trajectory (the IEA 2DS) and explore the policy implications surrounding this challenge. Modelling the period up to 2060, the drop in retirement age required to meet this scenario potentially creates $541 billion worth of stranded power plant assets across the US, EU, China, and India alone. In some cases, coal plants built within the past 5 years will need to be retired after only half the nominal operating lifetime. Regional analysis exposed disproportionate impacts in China and India, shouldering the vast majority of the costs and amplifying concerns over energy access and affordability. Policies such as burden-sharing for equitable mitigation, investment into CCS technology, and international financial compensation are discussed as potential avenues for mitigating this impact. However, limitations in all avenues highlight the need for further consideration of the inferred requirement to force early retirements, in order to avoid exacerbating regional imbalances and improve the feasibility of imposed targets.

Suggested Citation

  • Kefford, Benjamin M. & Ballinger, Benjamin & Schmeda-Lopez, Diego R. & Greig, Chris & Smart, Simon, 2018. "The early retirement challenge for fossil fuel power plants in deep decarbonisation scenarios," Energy Policy, Elsevier, vol. 119(C), pages 294-306.
    • Handle: RePEc:eee:enepol:v:119:y:2018:i:c:p:294-306
    DOI: 10.1016/j.enpol.2018.04.018
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    Citations

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    Cited by:

    1. Angelika von Dulong, 2023. "Concentration of asset owners exposed to power sector stranded assets may trigger climate policy resistance," Nature Communications, Nature, vol. 14(1), pages 1-9, December.
    2. Ernesto Rivas & María Ángeles Martín-Lara & Gabriel Blázquez & Antonio Pérez & Mónica Calero, 2019. "Column Leaching Tests to Valorize a Solid Waste from the Decommissioning of Coal-Fired Power Plants," Energies, MDPI, vol. 12(9), pages 1-13, May.
    3. Miroslav Variny, 2022. "Comment on Rogalev et al. Structural and Parametric Optimization of S-CO 2 Thermal Power Plants with a Pulverized Coal-Fired Boiler Operating in Russia. Energies 2021, 14 , 7136," Energies, MDPI, vol. 15(5), pages 1-5, February.
    4. Louis Daumas, 2024. "Financial stability, stranded assets and the low‐carbon transition – A critical review of the theoretical and applied literatures," Journal of Economic Surveys, Wiley Blackwell, vol. 38(3), pages 601-716, July.
    5. Pereira , Alfredo Marvão & Pereira, Rui Manuel, 2021. "On the Macroeconomic and Distributional Effects of the Regulated Closure of Coal-Operated Power Plants," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 46(4), pages 1-30, December.
    6. Camille Macaire & Fabio Grieco & Ulrich Volz & Alain Naef, 2024. "High Voltage: Financing the Path to Zero Coal," Working papers 960, Banque de France.
    7. Le Treut, Gaëlle & Lefèvre, Julien & Lallana, Francisco & Bravo, Gonzalo, 2021. "The multi-level economic impacts of deep decarbonization strategies for the energy system," Energy Policy, Elsevier, vol. 156(C).
    8. Kühne, Kjell & Bartsch, Nils & Tate, Ryan Driskell & Higson, Julia & Habet, André, 2022. "“Carbon Bombs” - Mapping key fossil fuel projects," Energy Policy, Elsevier, vol. 166(C).
    9. Shimbar, Ali, 2021. "Environment-related stranded assets: What does the market think about the impact of collective climate action on the value of fossil fuel stocks?," Energy Economics, Elsevier, vol. 103(C).
    10. Wu, Qingyang & Tan, Chang & Wang, Daoping & Wu, Yongtao & Meng, Jing & Zheng, Heran, 2023. "How carbon emission prices accelerate net zero: Evidence from China's coal-fired power plants," Energy Policy, Elsevier, vol. 177(C).
    11. Ansari, Dawud & Holz, Franziska, 2020. "Between stranded assets and green transformation: Fossil-fuel-producing developing countries towards 2055," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 130, pages 1-1.
    12. Zhu, Mingjuan & Liu, Yudong & Wu, Xiao & Shen, Jiong, 2023. "Dynamic modeling and comprehensive analysis of direct air-cooling coal-fired power plant integrated with carbon capture for reliable, economic and flexible operation," Energy, Elsevier, vol. 263(PA).
    13. Fan, Jing-Li & Li, Zezheng & Li, Kai & Zhang, Xian, 2022. "Modelling plant-level abatement costs and effects of incentive policies for coal-fired power generation retrofitted with CCUS," Energy Policy, Elsevier, vol. 165(C).
    14. Jindal, Abhinav & Shrimali, Gireesh, 2022. "Cost–benefit analysis of coal plant repurposing in developing countries: A case study of India," Energy Policy, Elsevier, vol. 164(C).
    15. Pegels, Anna & Altenburg, Tilman, 2020. "Latecomer development in a “greening” world: Introduction to the Special Issue," World Development, Elsevier, vol. 135(C).
    16. Klöckner, Kai & Letmathe, Peter, 2020. "Is the coherence of coal phase-out and electrolytic hydrogen production the golden path to effective decarbonisation?," Applied Energy, Elsevier, vol. 279(C).
    17. Maamoun, Nada & Kennedy, Ryan & Jin, Xiaomeng & Urpelainen, Johannes, 2020. "Identifying coal-fired power plants for early retirement," Renewable and Sustainable Energy Reviews, Elsevier, vol. 126(C).

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