Investment in Coal is on the Decline
It’s often said that if you want to catch a criminal, identify an overarching trend or even impeach a sitting president, you’ve got to follow the money. If Deepthroat’s infamous phrase rings true in a different context, we may well be sitting on the precipice of change that would see coal-fired power plants become an antiquated means of energy production.
Why the sudden optimism, then?
The International Energy Agency just released their ‘World Investment Report’, which provides clear-cut evidence there’s a diversification in energy portfolios, divesting from fossil fuels to renewables. To identify this trend, the IEA put the eye-wateringly wealthy funds that lend large companies money for investments in projects like coal-fired power plants under the microscope – and the results are something to get excited about.
Those filthy-rich funds are the ones responsible for arranging what is known as Final Investment Decisions or FIDs for coal plants, which a company will need to get finalised before getting loans secured worth hundreds of millions.
Now, this is where it gets interesting. The latest IEA report shows that the total number of these FIDs have dropped by a staggering 75 per cent in the past three years. This means, for the first time since we kicked off our pollution-bender back in the 18th century, more coal power stations went offline than were approved for construction.
The IEA estimates that for the first time in human history, there has been a measurable reduction in coal-fired power plants, and we’re actually running net figure in the negatives. As it stands, there are 236 gigawatts of coal plants under construction around the globe, and in 2015, FIDs – those massive loans we talked about – accounted for 88 gigawatts of projects under construction. In 2018, this number fell to 22 gigawatts.
This was buoyed by Europe dropping their use of coal-fired energy by 25 per cent, and the US wiping their coal usage by a whopping 40 per cent over the last 10 years. While the number of coal-fired plants is rising in parts of the developing world – most evident in Asia – the net benefit of Europe and the US kicking their coal habit has had some flow-on benefits. Under the current US administration, this number could indeed change, considering the newfound interest in whatever the fuck clean coal is.
The smart money is moving away from coal.
The IEA has released an accompanying statement outlining that according to their research, “it appears that banks, insurance companies, hedge funds, utilities and other operators in advanced economies are exiting the coal business,” which, at the very least, represent baby steps in the right direction.
Rather than follow the lead of government, investors – as is often the case – are leading the charge and are now letting their noses follow a different scent. As these figures would prove, coal isn’t providing a safe enough investment for these mammoth financial funds, so they’re diversifying their energy portfolio, which includes renewables like wind, solar and hydroelectric projects, as well as nuclear.
IEA executive director Dr Fatih Birol said that “energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies. 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 technologies to change course.”
“Whichever way you look,” he said, “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. 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.”
While Australia does have a shocking environmental record – and an undeniable romance for the black lumps when it comes to coal mines – even our fossil fuel-backed economy is beginning to move away from coal as a means of energy production.
Before we get to those numbers, we’ll address the dirty A-word: Adani. The controversial Adani project isn’t a coal-fired power plant – it’s a mine and a rail line project… and a fucked up one, at that. Here’s a link to the official Stop Adani website.
Despite our steps away from coal burning as a means of energy production, there’s no escaping the fact that our coal exports to China for energy production and steel manufacturing translates to a horrific global emissions rating and catastrophic environmental impact.
Now to the better news: no new coal-fired power plants have opened in Australia since 2009, and there are no plans for any more in the future. South Australia, Tasmania and NT are coal-free in terms of energy production, while Victoria recently closed its Hazelwood plant and has three plants left. There is some evidence that despite the fact Australia is lagging well behind most of the developed world in terms of its environmental footprint, even here, the smart money is moving away from coal.
Moving to the overarching theme of divestment from fossil fuels, Archbishop and anti-apartheid campaigner Desmond Tutu drew a comparison to the current divestment movement with that of companies dealing with South Africa decades ago. “People of conscience need to break their ties with corporations financing the injustice of climate change,” Tutu wrote in a 2014 opinion piece in The Guardian.
“We cannot necessarily bankrupt the fossil fuel industry,” he conceded, “but we can take steps to reduce its political clout, and hold those who rake in the profits accountable for cleaning up the mess.”
In summing all this up, we’re still absolutely trashing our planet. What’s even more depressing in its own right is the fact that it’s taken the risk of investors losing money for these large scale investment funds to diversify their portfolios. It’s fundamentally fucked up that this is the rationale behind more investment toward renewables, but at the very least, if we follow the money, we can see that we’re taking baby steps in the right direction.
It’s now time to apply some pressure on the power brokers, and let them know that we don’t have the luxury of time. For more information on the divestment movement, check out 350.org and GoFossilFree, join the People’s Climate Movement and attend rallies, research ethical superannuation, and perhaps most importantly – vote with your dollars; it’s a weird world that we’re living in, but sometimes that’s the only way you’ll be heard.
*You can also access the IEA’s full report here, but keep in mind that the IEA requires a paid subscription to access its reports in full; and we just served you up the juiciest bits.
Cover by Michael Olsen