Countries that plan to build coal-fired power plants need to reassess their energy strategy because such facilities may not be a viable investment, the head of the International Renewable Energy Agency (IRENA) said on Monday.
Many industry analysts see natural gas and renewables as the biggest growth sectors in energy, yet most Asian countries including Japan are still expanding coal faster than gas.
A decision by Japan’s environment ministry to abandon its opposition to building coal-fired power stations casts doubt on the industry’s ability to cut greenhouse gas emissions, experts and environmental activists said.
“I think (those) countries will have to seriously reassess their energy strategy,” IRENA’s Director-General Adnan Z. Amin told Reuters on the sidelines of a Group of Seven energy ministers’ meeting in Kitakyushu, southwestern Japan.
“There is a real risk that investment in coal or fossil fuel power generation within five to 10 years will become a stranded asset, which means that they’re no longer a viable investment, and you’re seeing in more and more countries around the world a determination to move out of coal.”
Tumbling coal prices have pushed a number of U.S. coal producers including Peabody Energy Corp into Chapter 11 bankruptcy in the last year, according to a Reuters review of regulatory filings.
“Countries that are intensive users like China are beginning to phase coal out of their mix also,” Amin said.
“So I think looking at a longer-term perspective, there needs to be a real assessment of the use of coal, which I think is nearing its end.”
Amin added that Japan’s feed-in tariff scheme, put in place after the Fukushima nuclear disaster in 2011, was welcome but it was time for a policy reform to reduce the cost to consumers.
Under Japan’s feed-in tariff program, regional power utilities are required to buy power from renewable energy suppliers at pre-set premiums for up to 20 years.
The move, aimed at helping the world’s third-biggest economy shift away from its reliance on nuclear power, has been spurring billions of dollars in clean-energy investment.
For Japan, Germany may serve as a model as it has had feed-in tariff schemes for more than a decade.
“In Germany, renewables need to learn to be competitive and that is why we are currently moving away from feed-in tariffs to a more competitive system, that is, auctions,” Rainer Baake, state secretary at the German Ministry for Economic Affairs and Energy, also told Reuters on the sidelines of the G7 meeting.
“Renewables plants still receive a payment per kilowatt-hour for 20 years – but the level of the payment is now determined through competitive bidding.”