$71 billion in Japanese coal assets at risk from cheaper renewables

Japanese utilities turn away from coal plans amid a green energy boom. (Reuters/File)
Updated 06 October 2019

$71 billion in Japanese coal assets at risk from cheaper renewables

  • Offshore wind and large-scale solar PV could be cheaper than the long-run marginal cost of existing coal plants by 2025 and 2027 for onshore wind, the report says

LONDON: As much as $71 billion in Japanese coal assets could be at risk as the economic viability of plants is undermined by cheaper renewable energy, research by the University of Tokyo, Carbon Tracker and the Carbon Disclosure Project showed on Sunday.

The report, called Land of the Rising Sun and Offshore Wind, used project financial models to analyze the economics of new and existing coal plants in Japan.

It found that Japan’s planned and existing coal capacity could be jeopardized by low utilization rates and cheaper renewable energy, namely onshore and offshore wind and large-scale solar photovoltaics (PV). Offshore wind, solar PV and onshore wind could be cheaper than new coal plants by 2022, 2023 and 2025 respectively.

Added to that, offshore wind and large-scale solar PV could be cheaper than the long-run marginal cost of existing coal plants by 2025 and 2027 for onshore wind, the report said.

To meet a globally agreed goal of limiting temperature rise to below 2 degrees Celsius this century, planned and operational coal capacity would need to be shut down and Japanese consumers could face $71 billion in higher power prices as the cost of stranded coal assets is passed on.

Of this amount, $29 billion could be avoided if the Japanese government reconsidered the development of planned and under construction capacity straight away, according to the report.

Coal generation

Coal-fired power generation is a major contributor to carbon dioxide and other pollutants that contribute to global warming, which is causing heat waves, rising sea levels, droughts and other extreme weather events.

The Japanese government has said renewables should be the main source of power and the country should aim to be carbon-neutral as soon as possible after 2050, to meet the Paris global climate agreement.

However, the Fukushima nuclear plant disaster in 2011 and shutdown of Japan’s reactors increased its fossil fuel import dependence to nearly 95 percent in 2016, from 80 percent in 2010, and resulted in carbon emissions from power generation rising by a quarter, according to the International Energy Agency.

According to a Reuters survey, Japan plans to build nearly 12.6 gigawatts (GW) of new coal capacity in the next decade.

Japan’s coal generation capacity totalled around 43 GW at the end of March and is expected to reach 52 GW in 2023, according the country’s grid monitor.

Globally, previous research by Carbon Tracker has calculated that 42 percent of coal plants in operation were likely unprofitable last year and at least 72 percent could be unprofitable by 2040.


S&P 500 inches closer to record high

Updated 12 August 2020

S&P 500 inches closer to record high

  • US stock market index returns to levels last seen before the onset of coronavirus crisis

NEW YORK: The S&P 500 on Tuesday closed in on its February record high, returning to levels last seen before the onset of the coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.

The benchmark index was about half a percent below its peak hit on Feb. 19, when investors started dumping shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression.

Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second quarter earnings season have allowed all three of Wall Street’s main indexes to recover.

The tech-heavy Nasdaq has led the charge, boosted by “stay-at-home winners” Amazon.com Inc., Netflix Inc. and Apple Inc. The index was down about 0.4 percent.

The blue chip Dow surged 1.2 percent, coming within 5 percent of its February peak.

“You’ve got to admit that this is a market that wants to go up, despite tensions between US-China, despite news of the coronavirus not being particularly encouraging,” said Andrea Cicione, a strategist at TS Lombard.

“We’re facing an emergency from the health, economy and employment point of view — the outlook is a lot less rosy. There’s a disconnect between valuation and the actual outlook even though lower rates to some degree justify high valuation.”

Aiding sentiment, President Vladimir Putin claimed Russia had become the first country in the world to grant regulatory approval to a COVID-19 vaccine. But the approval’s speed has concerned some experts as the vaccine still must complete final trials.

Investors are now hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with US cases surpassing 5 million last week.

Also in focus are Sino-US tensions ahead of high-stakes trade talks in the coming weekend.

“Certainly the rhetoric from Washington has been negative with regards to China ... there’s plenty of things to worry about, but markets are really focused more on the very easy fiscal and monetary policies at this point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Financials, energy and industrial sectors, that have lagged the benchmark index this year, provided the biggest boost to the S&P 500 on Tuesday.

The S&P 500 was set to rise for the eighth straight session, its longest streak of gains since April 2019.

The S&P 500 was up 15.39 points, or 0.46 percent, at 3,375.86, about 18 points shy of its high of 3,393.52. The Dow Jones Industrial Average was up 341.41 points, or 1.23 percent, at 28,132.85, and the Nasdaq Composite was down 48.37 points, or 0.44 percent, at 10,919.99.

Royal Caribbean Group jumped 4.6 percent after it hinted at new safety measures aimed at getting sailing going again after months of cancellations. Peers Norwegian Cruise Line Holdings Ltd. and Carnival Corp. also rose.

US mall owner Simon Property Group Inc. gained 4.1 percent despite posting a disappointing second quarter profit, as its CEO expressed some hope over a recovery in retail as lockdown measures in some regions eased.

Advancing issues outnumbered decliners 3.44-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 50 new highs and four new lows.