The chief executive of Europe’s biggest energy company has forecast that the production of energy from coal and other carbon-based fuels will, within a decade, no longer be commercially viable in Europe. Enel’s Francesco Starace warned over the weekend that the increasing efficiency of the latest technology in the world of renewable energy, and further advancements expected over coming years, means that electricity produced by coal-burning power plants will cost more than renewable sources such as solar, wind and tidal. He expects most other carbon-based energy sources of electricity production to suffer the same fate.
Speaking to the Financial Times, Starace stated that the ‘watershed moment’ of renewable sources reaching and surpassing grid parity with fossil fuels has already happened in some countries. For now, renewables are generally cheaper than fossil fuels under optimal conditions. Which means producing energy from coal and other fossil fuels is still, on average, cheaper and/or more reliable than renewable alternatives. But the balance is quickly approaching tipping point.
The crux of Starace’s point was that European governments need to start planning for the loss of most jobs from the current 185,000-strong European workforce employed by coal-burning power plants. He commented:
“What should be done with the asset base that becomes obsolete? Can you defend it past its own time? Can you tell people lies saying it is all going to be fine continuing doing what you have been doing”?
“Or should you rather tell the truth, and say ‘guys, in the next five years, 10 years, 20 years, this is going to happen, so let’s plan ahead’.”
The technologies that are making renewable energy more efficient are not only those involved in the direct production of electricity but also in its capacity management and distribution. That is combining with the additional expense polluting power plants now incur by having to pay for carbon credits to offset emissions that exceed annual limits. Their cost has spiralled over the last couple of years and they are forecast to become even more expensive.
“The question has always been: can the cost of wind or solar generation beat the cost of a fully amortised old coal plant? When that happens the old technology is dead.”
Mr Starace’s comments come as he completes his term as president of Euroelectric, Europe’s trade body for energy producers. He stated that the continent’s major power producers have now accepted that a future where coal technology is obsolete is fast approaching and are ready to adapt to that rather than “fight defensive, but losing battles”.
Instead of panicking, Starace believes Europe’s energy producers are ready to embrace the changing environment with awareness and planning. He concluded by expressing his belief that with energy demand growing faster than global growth, any short term pain resulting from changing technology is offset by that opportunity for those in the electricity business.