In green energy news from abroad, a report warning about stranded asset risks associated with Japanese investment in coal and Norway’s sovereign wealth fund on track to divest heavily from coal-related holdings.
In Japan, utilities and other companies are pushing ahead with new investments in coal-power plants in spite of the risk of creating $57 billion of stranded assets amid shifts in energy policy and the economics of power generation, according to a study by Oxford University’s Smith School of Enterprise and the Environment.
The study claims that the amount of coal-fired generating capacity planned or under construction in Japan exceeds the capacity required to replace the nation’s retiring fleet by 191%.
“This may result in overcapacity and, combined with competition from other forms of generation capacity with lower marginal costs, lead to significant asset stranding of coal generation assets,” the authors said in the report titled Stranded Assets and Thermal Coal in Japan.
To put into context how odd Japan’s reliance on coal is, we can look at planned capacity additions for the United States.
For the U.S., no significant coal capacity is planned for 2016. Instead, solar, natural gas, and wind are scheduled to make up the bulk of new generating capacity additions.
Unlike most developed nations, Japan has continued to rely on coal power in the wake of the 2011 Fukushima nuclear disaster while pushing the development of “clean coal” and carbon capture technologies.
“Stranded coal assets would affect utility returns for investors; impair the ability of utilities to service outstanding debt obligations; and create stranded assets that have to be absorbed by taxpayers and ratepayers,” the authors said in the report.
A majority of parties in Norway’s parliament are pushing for new guidelines that would prevent the fund from owning companies deriving than 30% revenues from thermal coal, according to a group lawmakers including opposition Labor, Norway’s biggest party.
The world’s biggest wealth fund, worth over $800 billion, has excluded more than 50 companies since February thanks to a ban agreed upon in 2015. It plans to announce more divestments later this year.
The fund is one of the biggest investors to restrict coal-related holdings amid escalating international efforts to limit global warming.
Torstein Tvedt Solberg, who represents Labor on the Finance Committee, said they’re satisfied also with the financial implications of the ban on coal.
“We’ve made money by not being so heavily invested in coal,” he said. “As opposed to tobacco, our divestment from coal is a success when you look at the bottom line. The companies we’ve exited have plunged in stock value.”