More than a fifth of European gas units and nearly a third in US run at a loss

LONDON/NEW YORK, October 19 – More than a fifth of European gas-fired power plants and nearly a third of US units are lossmaking, and surging fuel prices risk sending many more into the red, finds a report from the financial think tank Carbon Tracker released today.

It also finds that developers of most gas plants planned or under construction will never recover their initial investment. More than $24 billion is at risk in the US and nearly $3.5 billion in the UK, even if plants run for their full planned lifetime.

However, many governments have pledged to meet net zero by 2050, and this will require most gas plants to be closed before the end of their lifetime, unless there is significant progress in abatement technologies to reduce or mitigate emissions. US President Joe Biden and UK Prime Minister Boris Johnson have both committed to deliver a carbon-free power sector by 2035. The EU has also made clear that gas has no long-term future.

The report calculates that 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.

Put Gas on Standby warns that gas must be phased out to meet climate targets. Gas is the largest single source of power sector emissions in Europe, accounting for 34%, and it is responsible for 44% of US power sector emissions.  Gas has a limited role in supporting the power system as coal plants close and renewables expand, but in both Europe and the US it is already cheaper to generate energy by building new solar and onshore wind capacity than to continue running existing gas plants.

“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. 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.”

Jonathan Sims, Carbon Tracker Senior Analyst and report co-author.

Carbon Tracker analysed the financials of 835 operational gas power plants in Europe (189GW, 85% of total capacity) and 2,200 plants in the US (513GW, 97% of capacity).

It finds that 43GW in the UK and EU (22%) and 159GW in the US (31%) is already lossmaking when operating and carbon costs are taken into account. In Germany, 88% of the country’s 23.7GW fleet is unprofitable and it could lose an average $20 for each megawatt hour of generation this year and next.

Rapid deployment of wind and solar power has reduced utilisation of gas plants. Growing numbers are expected to become unprofitable over the next decade as usage continues to fall, carbon prices rise and governments speed up measures to meet climate commitments.

The report warns that the economics of gas power are increasingly fragile, and units are highly exposed to volatile gas prices, which are at record levels in Europe. European operators are also exposed to carbon prices, which have risen 10-fold in four years.

In fact the report may understate the predicament of utilities. Its model assumes 2021 gas prices at the pre-Covid level in 2018-19, averaging around $24/MWh in Europe and $11/MWh in the US. In reality the average since October 2020 has been nearly 50% higher in Europe at over $35/MWh and more than a third higher in the US at $15/MWh.

US utilities currently plan to build 89 new gas plants with a combined capacity of 28.1 GW in areas of the country where they do not benefit from regulated prices, but the report finds none will be viable, putting more than $24 billion at risk. In Europe more than two thirds of planned new gas capacity – a total of 23.7GW – will not recoup its initial investment. Nearly $3.5 billion is at risk in the UK, where there are plans for 20 new units with a combined capacity of 11.4GW.

Costs of renewables and battery storage are expected to continue their rapid fall. In the US it is already more expensive to run existing gas generation than to build new onshore wind backed up by a four-hour lithium-ion battery, and by 2025 solar with storage will be cheaper than gas. By 2023, virtually half of Europe’s operating gas capacity will be more expensive to run than to build new onshore wind or solar with battery storage, rising to more than 85% by 2030.

Even with no new government policies to phase out gas plants, only seven countries are expected to have profitable gas fleets by 2035, the top five of which – Italy, UK, France, Ireland and Poland – support gas through capacity markets. These are designed to ensure a reliable power supply by offering financial incentives to generators that can make capacity available at periods when it is most needed.

But the report warns utilities not to rely on capacity markets for future profits. Clean technology is increasingly able to compete with gas to provide energy at peak times, and governments are already starting to restructure capacity payments to align with their climate targets.

“Policy makers must consider whether supporting potentially unprofitable gas projects which may undermine efforts to achieve long-term climate targets is the best use for taxpayer funds. Renewables, backed by storage, are increasingly able to provide reliable grid services that are not affected by volatile fuel and carbon prices. This offers greater price stability for consumers and business.”

Jonathan Sims, Carbon Tracker Senior Analyst and report co-author.

The report calls on governments to restructure capacity markets to reduce support for gas and direct funds to low-carbon technology, and to set end dates for the use of unabated gas in power generation.

It says utilities should recognise the fact that gas plants will have to close early to meet climate targets and consider an orderly wind down of assets to maximise shareholder value. It warns them against pinning their hopes on carbon capture and storage, noting that the technology is costly and pilot schemes have failed to stimulate large-scale deployment.


  • The report analysed gas plants of 20MW capacity and greater, assessing their profitability by comparing the long-run marginal cost, including fuel, carbon, operations and maintenance, with total revenues, including wholesale power market income and out-of-market income such as capacity payments. It used the Global Energy Monitor plant database, and data from Bloomberg, Entso-E and Catalyst Cooperative.
  • It sourced capital expenditure figures for wind and solar from the International Renewable Energy Agency.
  • It modelled a phase out of coal and gas using the International Energy Agency’s Net Zero 2050 scenario. This does not include regional projections of gas demand so Carbon Tracker interpolated these from the IEA’s Beyond 2 Degrees Scenario.
  • It assessed stranded asset risk and cost savings from early closures on a net zero pathway by comparing it with “business as usual” demand, represented by the IEA’s Stated Policies Scenario, consistent with policies announced by global governments.


Once embargo lifts the report can be downloaded here:

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About Carbon Tracker

The Carbon Tracker Initiative is a not-for-profit financial think tank that seeks to promote a climate-secure global energy market by aligning capital markets with climate reality. Our research to date on the carbon bubble, unburnable carbon and stranded assets has begun a new debate on how to align the financial system with the energy transition to a low carbon future.