According to a new report by the International Energy Agency (IEA), investors have dramatically withdrawn their investments in coal. In the last three years, investments in new coal-fired power plants have dropped by 75%. Also, for the first time since the industrial revolution, there has been a reduction in coal capacity across the globe. Until recently, humans had been using more and more coal. Now we've finally starting to back away -- another sign that coal's best days are well behind it.
Another nail in the coffin
The IEA report World Energy Investment 2019 shows that a total of 236 gigawatts (GW) of coal-fired plants are currently under construction worldwide. That's still quite a lot -- the equivalent of 740 million solar panels. However, investors' confidence has dwindled. In 2015, the Final Investment Decisions (FIDs) fund for coal plants signed off 88 GW for construction but pledged only 22 GW in 2018.
Most of the new coal capacity is planned for India and China. Meanwhile, the EU and US have dramatically cut back on this fossil fuel, reducing overall use by 25% and 40%, respectively, over the last decade. And more and more plants will have to be closed. For instance, to meets its Paris Agreement carbon emissions target, the EU will have to shut down all of its coal-fired power plants by 2030.
Across the world, coal-fired plants are responsible for around 38% of global electricity demand. But despite the huge number of planned power plants for the future, the rate at which old coal plants are being decommissioned is now higher than the rate of new plants coming online. The IEA says that a staggering 30 GW of coal-based generators were retired in 2018.
In the past couple of years, banks, hedge funds, cities, universities, religious entities and even the heirs to the Rockefeller fortune have withdrawn trillions of dollars from coal investments. If this trend continues, it will only be a matter of time until FIDs tumble to a big, fat zero. And when this happens, coal will officially become history.
The findings suggest that more and more investors want to pivot to more sustainable forms of energy. However, the report also found that although new energy infrastructure is needed to meet the growing and robust energy demands, there doesn't seem to be enough capital flowing towards energy efficiency and cleaner supply sources. In other words, investors are being careful, looking at both sides of the street. But they certainly can't stall forever -- sooner or later, capital investors will have to place their bets, and the odds are stacked against coal and fossil fuels
“Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” said Dr. Fatih Birol, the IEA’s Executive Director. “But the bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course. Whichever way you look, we are storing up risks for the future.”
“Current investment trends show the need for bolder decisions required to make the energy system more sustainable,” Dr. Birol said. “Government leadership is critical to reduce risks for investors in the emerging sectors that urgently need more capital to get the world on the right track.”