‘Coal to Renewable Energy’ is Cheaper than ‘Coal to Gas’: TransitionZero Study

A new study from TransitionZero says that a shift from coal to clean energy is cheaper than switching to gas. Production and use of energy is the reason behind climate change. Electricity and heat produced during the employment of energy in various uses causes 35% of GHGs across the world. Coal alone is the highest contributor to the emission of GHGs. About 46 per cent of the atmosphere’s carbon dioxide comes from the burning of coal. It also makes about 72 per cent of the all GHGs produced in the electricity sector.

The findings are relevant in the context of the plans many countries, including India, have to use Gas as a ‘bridge fuel’ before shifting to Renewable energy by 2050 in a big way. Not only are investments into gas infrastructure being made in a big way, but also more into exploration and drilling. On the other hand, the long term prices of gas, elevated as they are currently, are anybody’s guess.

TransitionZero analyst Jacqueline Tao, says, “The carbon price needed to incentivize the switch from coal generation to renewable energy for storage has dipped to a negative price. So essentially that means that you can actually switch to renewables at a cost-saving.”

The TransitionZero report holds that the cost of switching from coal to RE declined by a massive 99% since 2010 when compared with the cost of switching from coal to gas. The study also finds out that the carbon price of the coal-to-clean energy transition also declined to $62 per ton of carbon dioxide being emitted on average compared to $235 per ton of CO2 when the transition is to gas.

Coal to Clean Carbon Price Index

In its study, TransitionZero employed the ‘Coal to Clean Carbon Price Index’ for measuring the carbon price level of 25 countries based on presumption in case they make a transition from coal to wind or solar energy sources.  TransitionZero holds that natural gas – which has lower carbon emission than coal – can be used as a ‘bridge fuel’ in the larger transition from coal to renewables.

TransitionZero also says that financial incentives are also available for the switch from coal to renewables.

Jacqueline Tao further states, “Banks are increasingly finding it risky to lend to these fossil fuel assets in the concern that they will become stranded assets in the near term down the road due to the global energy transition.”

She added, “That’s going to mean that there’s going to be limited upstream supply that’s going to come online, and we are going to see increasingly tight gas markets and fossil fuel markets in general that will be prone to demand and supply shocks.”