More than 800 coal-fired power stations in emerging economies could be economically replaced with solar energy by 2030, according to new research by the Institute for Energy Economics and Financial Analysis (IEEFA).
The analysis from IEEFA focuses on the potential of large-scale renewable investments and restructured PPAs to shut down these coal plants. Although only 10% of the world’s coal capacity is currently set for decommissioning by 2030, advancing these closure dates could significantly reduce emissions and attract foreign investment.
It found that the transition to solar, which covers all associated costs, would not require subsidies and promises substantial returns through long-term power purchase agreements (PPAs).
“There is a solid business case for ageing coal power plants to be replaced with large-scale solar and storage systems, transforming the energy landscape and economic potential of emerging markets,” stated Paul Jacobson, an IEEFA guest contributor and the report’s author.
“Such programmes can accelerate the shutdown of emerging economies’ dirtiest power generation assets by more than 10 years while providing the basis to attract substantial foreign direct investment and create significant new employment opportunities.”
The proposed model involves building renewable facilities that align with the gradual closure of coal plants. The financial viability of these transitions is bolstered by guaranteed earnings from renewables PPAs spanning 20 to 30 years. The funds would cover all transition costs, including decommissioning, compensating for equity losses, financing PPAs, constructing renewable infrastructure, retraining staff, and upgrading grid systems.
The study includes examples from Botswana, Colombia, Morocco, Romania, and Thailand, showing that projects could become operational between 2026 and 2028, and eliminate carbon emissions by 2029. While these transitions are financially feasible without subsidies, the study points to a scarcity of resources for identifying and developing such opportunities.
“As many emerging markets lack the resources to develop coal-to-clean transactions, philanthropic funding can be transformative by bringing together global support and getting deals over the line,” Jacobson explained. He also noted the potential for financial institutions to generate profitable deal flows from coal-to-clean transitions.
The findings suggest that large-scale renewable projects are more likely to succeed than smaller ones because they can achieve national priority status, leading to cost efficiencies and local job creation.