SINGAPORE - Soaring fossil fuel costs, in part because of the war in Ukraine, mean it is now cheaper for many countries to switch directly from coal and invest in renewable energy, a study published on Tuesday (May 10) says.
It no longer makes financial sense to switch from coal to natural gas, says the analysis by TransitionZero, a London-based climate analytics non-profit.
The report said the cost of going from coal to renewable energy has plunged by 99 per cent since 2010 based on present fossil fuel and carbon price costs.
"Due to the declining cost of renewable energy and battery storage, coupled with the increasing price volatility of gas, we found it is now cheaper to switch from coal to clean than coal to gas," said the report, referring to the cost of new-build onshore wind or solar investments plus battery storage.
Burning coal to produce electricity and make steel is the single-largest source of carbon dioxide (CO2) from human activities.
CO2 is the main greenhouse gas heating up the planet and changing the weather, and the United Nation's top climate science panel says greenhouse gas emissions, mainly from burning fossil fuels, need to fall immediately and dramatically to avoid dangerous climate impacts.
This makes renewable energy more attractive since it has lower running costs and does not face the carbon pollution costs in a growing number of countries.
But while wind, solar and storage investments are growing quickly, so is the global appetite for energy, spurring huge investments in gas, which has long been promoted as a bridging fuel to help nations transition from more polluting coal.
However, volatile gas prices in recent months, post-Covid-19 economic growth and Russia's invasion of Ukraine, are undermining the case for gas, the report said.
Globally, about two-thirds of electricity is generated from coal and gas. Asia is the top consumer of liquefied natural gas, and China and India account for nearly two-thirds of the global demand for coal.
"Despite some regional variation, our analysis shows a clear deflationary trend in the cost of switching from coal to clean electricity and calls into question the 615 gigawatts of gas and 442 gigawatts of coal proposed and under construction globally," said Mr Matt Gray, co-founder and analyst at TransitionZero.
He said this trend will accelerate regardless of Russia's invasion of Ukraine, "presenting governments with an economic opportunity to protect electricity consumers from continued fossil fuel volatility".
Europe, which is heavily dependent on Russian energy exports, is trying to accelerate the transition to greener energy.
As part of this, the European Commission (EC) wants to allow some renewable energy projects to receive permits within a year, Reuters reported on Monday, citing a draft document.
Among a package of measures due to be unveiled next week by the EC are boosting renewable energy, saving energy and increasing gas imports from elsewhere.
The commission will also propose rules requiring countries to designate "go-to areas" of land or sea suitable for renewable energy, where such projects would have a low environmental impact, Reuters reported.
TransitionZero also noted variation across regions in the data, particularly in Asia where the renewable energy market is in its infancy in some nations and fossil fuel subsidies have undermined the case for renewables.
"The cost of replacing coal with solar, wind and storage varies greatly amongst different regions," said Ms Jacqueline Tao, analyst at TransitionZero.
In Europe, she said the price of switching to green power is negative due to rising carbon prices from policy reforms to the EU's emissions trading scheme, decades of policy support for renewable energy, and Russia's invasion of Ukraine, which has also triggered surging coal prices.
"Japan, on the other hand, has one of the highest switch prices due to discriminatory regulations and land-use constraints, while in China and the US, despite being world leaders in renewable energy, lower domestic coal prices partially offset advantages," she said.
In South-east Asia, costs were influenced by subsidies for coal and gas, as well as renewable energy being a nascent industry compared with other countries, she added.