Myth 1: Coal is Cheap

Coal is only considered cheap because coal plants do not have to pay for the full social and environmental costs of coal burning on people’s health, the natural environment, and our climate. These costs, known as “externalities”, would double or triple the price of electricity from coal according to a Harvard University study, making renewables much cheaper. In China, mortality from air pollution is now valued at 10% of GDP. A 2015 IMF assessment put global fossil fuel subsidies at $5.3 trillion annually, which includes the costs of managing the environmental and health impacts of coal.

Even without factoring in these externalities, the price of renewables is becoming increasingly competitive with coal. Wind power is now cheaper than coal in many markets; in the United States it’s now half the price of existing coal plants. In India, the cost of solar and wind is already cheaper than building coal plants using imported coal. And a modern coal plant using advanced pollution controls produces electricity at around 9-10 cents/kilowatt hour, making it more expensive than many other options.

Even though the coal industry likes to talk about “clean coal”, it works to prevent pollution standards being adopted at the national level precisely because it makes coal more expensive than other options. Building coal plants today locks in a reliance on this dirty fuel for 40 to 50 years. Coal prices are volatile and unpredictable: once constructed, a plant will have limited options over the next 40 to 50 years for sourcing and transporting its coal requirements, reducing flexibility and exposing it to significant coal price risks. Moreover, recent data is showing that coal plants are being less and less utilised as cheaper options come online, with coal plants in China being utilised less than 50% of the time. As a result, researchers estimate that if all the coal plants in the pipeline today were built, this could result in up to $981 billion in stranded assets.