Plant Conversions and Abatement Technologies Cannot Prevent Stranding of Power Plant Assets in 2°C Scenarios

While continued fossil fuel development puts existing assets at risk of exceeding the capacity compatible with limiting global warming below 2°C, plant conversions and new abatement technologies may allow for a smoother transition.

In a new journal article published in Nature Communications, Yangsiyu Lu, Francois Cohen, Stephen M. Smith and Alexander Pfeiffer quantify the impact of future technology availability on the need for fossil fuel power plants to be stranded, i.e. decommissioned or underused. Even with carbon capture and storage (CCS) and bioenergy widely deployed in the future, the study found a total of 267 PWh electricity generation (ten times global electricity production in 2018) may still be stranded. Coal-to-gas conversions could prevent 10–30 PWh of stranded generation. CCS retrofits, combined with biomass co-firing, could prevent 33–68 PWh. In contrast, lack of deployment of CCS or bioenergy could increase stranding by 69 or 45 percent respectively. Stranding risks remain under optimistic technology assumptions and even more so if CCS and bioenergy are not deployed at scale.

The paper is the first to estimate the effect of the roll-out of carbon-abatement technologies on the risk of ‘stranded assets,’ which are defined as power sources that must be decommissioned or underused in order to keep global heating below 2 °C. It was co-authored by academics at the University of Oxford, University of Barcelona and Boston University.

Main findings:

• Overall, the results underline a clear stranding risk for investors, plant operators and policymakers. Even if CCS and bioenergy are deployed quickly and extensively in the 21^st century, an average 267 PWh of electricity generation could be at risk of stranding under a 2 °C target.
• If some operating and in-the-pipeline coal power plants were converted to gas, stranding could be reduced by up to 30 PWh. The adoption of CCS and the co-firing of biomass may reduce stranding by 33–68 PWh, depending on the share of CCS-suitable plants finally converted, and the assumed co-firing ratio.
• The amount of electricity generation at risk of stranding would rise by 69 percent and 45 percent, respectively if either CCS or bioenergy are not deployed to their full potential.
• The technologies with the greatest potential to reduce stranding are the ones that face the strongest challenges to their large-scale deployment.
• Despite some pilot and demonstration project, the deployment of CCS is still hampered by the high cost of early demonstration projects and the availability of storage sites.
  • Similarly, the deployment of bioenergy is experiencing challenges in feedstock availability and economical cost, and facing disputes over sustainability, due to risks of deforestation, concerns over food security and potential biodiversity loss.
• Asset exposure to stranding is likely to be much higher than estimated in all technologies deployed scenarios.
• The findings provide a stark warning to energy companies, that have argued such technologies could substantially reduce the carbon footprint of energy production from fossil fuels.

The most immediate option to reduce the risk of stranded assets and lost investments is to fully account for stranding risks now. Decisions have to be made today, and it may be unwise to rely on optimistic forecasts of technology deployment in the future. Most of the risk of stranding assessed in the study relates to plants that are currently in the pipeline. If companies continue to invest in fossil fuel-based infrastructure, some of these assets risk stranding even before they are built. This puts stakeholders and policymakers in a situation in which precaution would suggest that very little or no new fossil fuel power plants can be commissioned, and existing plants may have to retire early or reduce their utilization rates substantially.