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Don't mourn the death of old king coal

The omission of coal from our annual review of the costs of different forms of electricity generation was no oversight. While it will continue to play a role in many parts of the world for years to come, the case for creating new coal-fired capacity has fallen apart, on economic and environment grounds.

The US retired more than 13GW of coal-fired capacity in 2015 alone. It has only four new plants set to go online between now and 2020, with a total capacity of 1GW. China's National Energy Administration recently announced the cancellation of more than a hundred new coal-fired projects, amounting to 120GW.

Coal cannot compete with natural gas on emissions and costs, and, where the natural resources for renewables are good, it is undercut by wind and solar.

So-called "clean coal", much trumpeted by some policymakers in the US and Australia in particular, depends on (largely unproven) technology that will make the fuel too expensive to consider. It really would be best left in the ground.

Wind power has strengthened its position as an energy source to replace coal's retiring capacity on the grid, though as our economics consultant David Milborrow points out, the costs of solar PV are falling faster than onshore wind's.

The major advance in wind's economic position over the past year has been the plummeting of offshore wind's costs. This time last year the data pointed to around $190/MWh as representative of average generation costs. The equivalent figure this year is less than half, around $90/MWh.

This, remember, is a forecast rather than a firm benchmark. The projects that have been initiated at record low prices after competitive auctions have yet to be built, let alone operated as financially viable concerns.

What is it that the Dutch and Danish know that other offshore-developing countries don't? The lowest strike price yet set for a project in British waters is £114.39/MWh (over $140/MWh), and this is the country that leads the world in offshore wind deployment.

Even taking into account the preparatory and grid connection costs that were assumed by the Dutch and Danish administrations at Borssele and Kriegers Flak, the UK strike price is considerably higher.

As Bruce Valpy of BVG Associates points out, it would be reassuring to find out a bit more about how the low-bidding developers have managed to slash their costs so radically.

While appreciating their right to commercial confidentiality, we need to have confidence they can make this work, and take a judgment on the prices fixed on other projects in development.

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