The prices of gas and coal have increased significantly these last few months, which has impacted businesses and consumers alike. However, findings from an analysis conducted by TransitionZero show that it has become cheaper to switch to clean energy from coal in comparison to switching to gas from coal. This is mainly because of the reducing cost of battery storage and renewables and the increasing volatility of the price of gas.
TransitionZero is a climate analytics company that is focused on generating financial analytics to make zero-carbon a reality. TransitionZero analyst Jacqueline Tao stated in an interview that the price of carbon needed to encourage the switch to renewable energy for storage from power generation via coal had declined to a negative price. This, she said, basically meant that individuals could switch to renewable energy to save on costs.
The company’s report claims that the average cost of switching to renewable energy from coal globally has declined by 99% in the last 10 or so years, in comparison to the price of switching to gas from coal. TransitionZero measured the price level for carbon that it took to motivate 25 nations to switch fuels to renewables such as solar photovoltaics plus battery or onshore wind, from coal.
The company found that the carbon price needed to encourage the coal-to-renewable energy switch had dropped to $61/ton of CO2 emitted on average in 2022. This is compared to $236 per ton of carbon dioxide to incentivize them to switch to gas from coal.
The coal-to-renewable energy carbon price varies in different regions, with Tao noting that this was mainly due to differences in fuel-price mechanisms and market structure. For instance, nations in southeast Asia, including Vietnam, the Philippines and Indonesia, still incur relatively high costs of transitioning from coal to renewable energy.
Tao noted that traditionally these nations had fallen behind in transitioning to renewable energy because of fossil fuel subsidies provided to domestic producers of gas and coal. The analyst also added that renewable energy enhanced energy security concerns, explaining that investing in renewable energy offered a hedge against risks associated with climate change.
This comes as concerns increase from financial institutions that fossil-fuel assets may soon be abandoned as the world transitions to the use of renewable energy. It is expected that in the near term, fossil fuel and gas markets will tighten and become prone to supply and demand shocks, potentially boosting stockholdings in companies such as Peabody Energy Corporation (NYSE: BTU).
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