Study provides first tool for investors to identify uneconomic coal plants and align with the Paris Agreement

NEW YORK/LONDON, September 14 – Phasing out unprofitable coal plants could save US consumers $10 billion a year by 2021 and boost the country’s competitiveness, finds a new report by Carbon Tracker launched today.

The financial think tank finds that by the mid-2020s it will be cheaper to build new combined cycle gas turbines (CCGT) than continue running 78% of existing coal power stations. In an increasing number of states onshore wind and utility-scale solar PV are also providing competitive alternatives.

Senior analyst and co-author of the report Matthew Gray said: “Cheap gas and renewables are here to stay and will continue to undermine the economics of coal. President Trump has pledged to revive the industry but the reality is that phasing out coal power in line with the Paris Agreement will save consumers billions and make the US economy more competitive.

No Country for Coal Gen: Below 2°C and Regulatory Risk for US Coal Power Owners is the first study to look at the economics of each US coal power plant and provide investors with a tool to support a rational closure programme and ensure their portfolios are in line with the Paris Agreement to keep global warming below 2°C.

Data scientist and co-author of the report, Laurence Watson, said: “Phasing out coal to meet climate targets makes economic sense. Our asset-level model provides investors with a tool to align with the Paris Agreement in an economically rational way and protect their portfolios from losses.

“Merchant” coal owners operating in competitive wholesale markets have lost nearly half their value in the last two years amid fierce competition from cheap gas and renewables. However, two thirds of coal plants are “regulated” and receive government-approved prices which cover their costs. This means that consumers rather than shareholders pick up the bill for supporting uneconomic coal plants.

By 2021 consumers will be paying $10 billion a year to prop up more expensive existing coal power, the report finds, equivalent to 10% of household energy bills in Kentucky, 9% in Indiana and 7% in Michigan and Wyoming.

No Country for Coal Gen warns that regulated coal plants will face increasing risk of interventions from regulators to protect consumers and keep the US economy competitive. It concludes that investors are exposed to $185 billion of regulatory risk – the difference between the artificially high book value of regulated coal plants and their market value.

The report also warns investors that a phase-out of coal power in line with the Paris Agreement would have a major impact on the value of listed coal plants. Early closure of coal plants to align with this scenario in the most efficient way results in $104 billion of stranded value by 2035.

Five of the 20 largest listed US coal owners would see the value of their existing coal plants fall by at least half if the least profitable ones are shut first to align with the Paris Agreement: Dominion (60%), CMS (59%), NiSource (52%), DTE (51%) and OGE (50%). Duke Energy, the largest listed US coal owner, would see the value of its assets fall by 35%. However, lost revenues could be replaced with income from cleaner alternatives if the transition is planned properly.

US utilities risk making the same mistakes that have seen the value of European utilities plunge. RWE has lost 80% of its market value since 2008 because of a failure to understand the changes in policy, technology and business models that are transforming the energy market.

The US power sector remains entirely unprepared for a coal phase-out consistent with a below 2°C outcome,” the report says. Only 10% of US coal capacity is due to be retired and eight of the 20 largest listed coal owners have announced no plans to close plants. [1]

Accelerating the transition away from coal would be good for investors, consumers and the wider economy according to Carbon Tracker’s economic analysis of US power options. It makes the case for:

  • Investors to ask listed coal owners for their plans to manage energy transition risk;
  • Utilities to act in the interest of shareholders and customers and make plans to phase out uneconomic coal;
  • Regulators to work with the industry to develop coal phase-out schedules consistent with a below 2°C outcome and focus on employee retraining and compensation.


Carbon Tracker assessed the value of every US coal plant – around 700 units – based on their operating cost and system value, comparing them with the levelized cost of a new CCGT.

The conservative analysis takes into account anticipated future costs of coal and gas but does not factor in the Clean Power Plan proposed by the Obama administration or any carbon pricing, and the only environmental regulation included is the Clean Air Act, originally drafted in 1970.

Carbon Tracker compared coal owners’ business as usual plans with the International Energy Agency’s “Beyond 2°C Scenario” (B2DS), which phases out all unabated coal power by 2035 and gives a 50% chance of limiting global warming to 1.75°C.  By assessing the operating cost of each plant and assuming the least economic will close first it is able to establish a rational closure programme and identify which companies are most exposed in a B2DS scenario.

It valued regulated units based on the revenue requirement approved by regulators and compared this with their market value to establish the level of regulatory risk. The market valuation assumes the unit generates no further value once the operating cost is greater than the cost of a new CCGT.

It established the stranded asset risk from the US power sector aligning with the Paris agreement by comparing the difference in discounted cash-flows between B2DS and business as usual, based on company reporting.

[1] However, the industry is starting to respond to changes in the energy market. When Xcel Energy recently announced plans to retire two coal plants it stated: “It is really about the economics.” See: Denver Post, (2017). Xcel Energy plans to retire two coal-fired plants in Pueblo, increase renewables. Available: