The European energy sector has reached a “watershed” where cheaper, clean energy will destroy the economic viability of coal production within a decade, says the head of Europe’s largest power utility.
Francesco Starace, chief executive of Enel, said the increasingly lower costs of wind and solar energy would mean that coal and other types of carbon intensive power production would be driven out of the market, and governments and companies must plan to replace the jobs that will be lost.
“The watershed moment for coal is there in some countries already, and will happen across Europe in all countries,” he told the Financial Times.
Managing the decline of older, more polluting energy production will require the industry and governments to “face the truth without panicking”, he said.
“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 coal industry employs 185,000 people across the EU, according to Euracoal, a trade body. Several countries, such as Germany and Spain, have already closed their pits and attempted to find new jobs for its miners.
He said the use of technology to manage capacity and distribution of power, and the continuing falling cost of building cleaner power generation production, meant that the economics of clean energy would mean more polluting energy sources would cease to be competitive.
The viability of coal power in Europe has also been hit by a surge in the price of carbon credits — used by power plants and industry to offset each tonne of carbon dioxide they produce — since the start of 2018.
“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, outgoing president of Eurelectric, the pan-European industry trade body, said he believed he had managed to convince his peers that it was better to prepare for a future where coal power would become obsolete than “fight defensive, but losing battles”.
“There are 28 countries in the European Union, and the energy policy of Portugal and Poland, or Germany and France, are very different,” he said.
“The European Commission was used to having Eurelectric as an antagonist, they wanted to do things and it said no. All of a sudden the commission found it was getting proposals going in the direction they originally thought they would fight.
“This moment is now, and this is a major awareness moment which we can be proud of, that we faced the truth without panicking — and this means there is a big opportunity in front of us.
“We have tried to say, let’s look at what the world is throwing at us, whether we like it or not, and let’s not fear this future. Demand [for] electricity is going to grow faster than global growth, is that good or bad for us? We are in the electricity business.”