How to make coal plants more profitable by switching to solar?

This should be done through large-scale deals.

A recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) found that more than 800 coal power plants in emerging markets can provide better returns to investors whilst slashing carbon emissions when replaced by renewable energy.

In the “Accelerating the Coal-to-Clean Transition” report, IEEFA found that it is economically viable to use large-scale renewable investment coupled with restructured power purchase agreements (PPAs) to replace these coal assets through transactions that cover all costs associated with the transition to clean energy.

“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,” said Paul Jacobson, an IEEFA guest contributor and author of the report. 

He said this can also "accelerate the shutdown of emerging economies’ dirtiest power generation assets by more than 10 years whilst providing the basis to attract substantial foreign direct investment and create significant new employment opportunities."

IEEFA’s analysis of case studies from Botswana, Colombia, Morocco, Romania and Thailand showed that “if renewables are operational between 2026 and 2028, the projects can completely end carbon dioxide emissions from those assets by 2029.”

This approach also works because significant gains from renewables PPAs are guaranteed for up to 30 years, it said.

Furthermore, these deals pay for all costs associated with the transition, including site decommissioning, recovery of equity losses of shutting down an operational asset, financing PPAs, construction and development of renewables, retraining workers, and upgrading grid infrastructure to support more clean energy, it added.

Whilst this approach is profitable, IEEFA noted there is a problem about limited resources to identify similar opportunities and support local teams that can create bankable business cases.

“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,” said Jacobson. “This is also an excellent opportunity for financial institutions to create their own deal flow of bankable coal-to-clean transactions.”