EXPRESS #3 - October 23, 2018
It’s an intriguing question: we hear a lot about CO2 emissions from power generation, but how do we know what is really going on? Especially in a country like China?
Well, we probably don’t, but NGO Carbon Tracker has been working hard on technology that will allow for independent verification of emissions.
“Using advanced machine learning techniques to process both commercial and public satellite images of coal plants, we explore the potential to estimate the capacity factors of coal plants in regions where data is inadequate for investors, policymakers and campaigners to make informed decisions”, Carbon Tracker notes in a recent report. “This analysis brings asset-level data to life by making it possible to develop actionable climate scenario analysis for coal power. It can also help investors gain trading insights in emerging Asian economies, which are significant contributors to global GDP and have considerable fossil fuel exposure.”
Carbon Tracker notes that “There is a revolution happening in space. As of August 2017, there were nearly 1,800 operational satellites in orbit. Of these, 596 are used for earth observation. Planet, a commercial satellite provider, has over 175 satellites in orbit, enabling them to produce an image anywhere on the globe with up to 30 cm resolution.”
Drawing on these data, Carbon Tracker claims “our modelling techniques showed that satellite imagery can independently derive coal power plant capacity factors when aggregated at local levels. For instance, the average precision of our model for predicting capacity factors of US and EU plants was 91% and 92%, respectively.”
These results suggest that “a quantitative methodology to estimate the capacity factor using satellite imagery is potentially feasible”, says Carbon Tracker. “As the quality of satellite imagery improves, we expect our methodology to be a powerful tool for investors, policymakers and campaigners to navigate the transition away from fossil fuel power generation.”
In its new report, Carbon Tracker did not merely outline the new technique, it applied their satellite imagery methodology to other data which provide insight into when coal plants are at risk of becoming stranded assets.
- Owing to high fuel costs (capacity-weighted average of $85/t), 40% of the coal fleet may be cash-flow negative in 2018 and due to carbon pricing ($40/t by 2040) and air pollution regulation 95% of the fleet could be cash-flow negative by 2040
- It will be cheaper to build new onshore wind than operate coal by 2021 and solar PV by 2025
- As the majority of units are loss-making from 2018 to 2040, Chinese coal power owners can avoid losing $390 bn by retiring the operating fleet in a manner consistent with the Paris Agreement. Cost-optimised retirement schedules show Guangdong Yudean Group, Zhejiang Energy Group and National Energy Investment Group could benefit the most from premature closures consistent with Paris, with asset stranding as a percentage of total capital of 117%, 101% and 52%, respectively.
Let’s hope these conclusions aren’t an exercise in wishful thinking.