Two-fifths of Chinese coal plants losing money

A groundbreaking study has used satellite imagery to estimate that two-fifths of China’s coal power stations are losing money, with owners risking billions of dollars in the process.

The research by financial think tank Carbon Tracker also found that a whopping 95% of China’s coal plants could be loss making by 2040 amid growing air pollution regulations and a rising carbon price.

Owners could save nearly $390bn (£295bn) by closing the power stations in line with the Paris Agreement, or face “painful” consequences similar to those that have seen European utilities write down $150bn in assets.

This comes in the same week that the Intergovernmental Panel on Climate Change (IPCC) warned that coal would need to be completely phased out by 2050 to limit global warming to 1.5˚C above pre-industrial levels.

It is hoped that Carbon Tracker’s innovative methodology of using satellites to measure coal plant activity will help inform governments and investors about the risks associated with the power stations.

“Satellite imagery coupled with data science offers a powerful response to those governments and asset owners who are unwilling or unable to disclose timely and accurate data,” Carbon Tracker head of power and utilities, Matt Gray, said.

“If China fails to phase-out coal power, the world will fail to contain dangerous climate change. Our analysis proves it is in China’s financial interests to retire coal in a manner consistent with the Paris Agreement.”

The research used satellite images and advanced machine learning techniques to assess the activity of each of China’s more than 1,000 coal plants, estimating profitability, when they should be closed, and the cost of failing to shut down.

It was found that the country’s National Energy Investment Group – the world’s largest power company – risks losing $66bn in stranded assets if it carries on as usual, representing half its total capital.

The Guangdong Yudean Group and Zhejiang Energy Group risk losing more than their total capital, with Carbon Tracker’s satellite-based modelling found to be more than 90% accurate when tested in the US and EU.

“With the realities of the energy transition starting to bite, this new searchlight really leaves fossil laggards with nowhere to hide,” Carbon Tracker data scientist, Laurence Watson, warned.

Image credit: iStock