Around 22% of European and 31% of US gas plants run at loss
ANKARA. KAZINFORM Around 22% of European gas-fired power plants and almost a third of units in the US run at loss and many more are being sent into the red with rising fuel price risks, a new report from the financial think-tank Carbon Tracker revealed on Tuesday.
The report, Put Gas on Standby, analyzed the financials of 835 operational gas power plants in Europe of around 189 gigawatts which account for 85% of total capacity, along with 2,200 plants in the US totaling around 513 gigawatts and accounting for 97% of total capacity, Anadolu Agency reports.
When operational and carbon costs are taken into account, 43 gigawatts in the UK and EU, corresponding to 22% of the analyzed capacity, and 159 gigawatts in the US, or 31% of the capacity, are already making losses.
In Germany, 88% of the country's 23.7-gigawatt gas plant capacity is unprofitable and could lose an average of $20 for each megawatt-hour of generation this year and next.
The report assumes 2021 gas prices at the pre-COVID-19 level in 2018-19, averaging around $24 per megawatt-hour in Europe and $11 per megawatt-hour in the US. However, the average since October 2020 has been nearly 50% higher in Europe at over $35 per megawatt-hour and more than a third higher in the US at $15 per megawatt-hour.
The report warns that gas power economics are increasingly fragile and units are highly exposed to volatile gas prices that are at record levels in Europe. European operators are also exposed to carbon prices, which have risen 10-fold in four years.
It argues that gas, the largest single source of power sector emissions in Europe, and which accounts for 34% and 44% of US power sector emissions, needs to be phased out to meet climate targets.
The report found that most gas plants would need to close before the end of their lifetime unless there is significant progress in abatement technologies to reduce or mitigate emissions if governments are to meet net-zero by 2050.
If gas plants are phased out in line with a target of net-zero by 2050, nearly $16 billion of investment in units that are currently profitable could be stranded. In the US, $5.8 billion is at risk and $10.1 billion in Europe, including $5 billion in Italy and $3.5 billion in the UK.
«The long-term use of unabated gas for power generation is incompatible with climate targets and units are unlikely to run for their full lifetimes,» Carbon Tracker Senior Analyst and report co-author, Jonathan Sims, said. «Investors who continue to back gas ahead of renewables are not only exposing themselves to the risk of stranded assets but are also potentially missing out on higher rates of return from the clean energy sector.»
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