Companies building new UK gas power plants risk losing £2.6 billion because they will be forced to abandon them before they can regain their investment, warns a new report.
Financial think tank Carbon Tracker argues that most gas plants that are planned or under construction in Europe and the US will never break even.
The plants will most likely be phased out by government plans to reach net-zero carbon emissions by 2050.
Carbon Tracker senior analyst Jonathan Sims said, “The long-term use of unabated gas for power generation is incompatible with climate targets, and units are unlikely to run for their full lifetimes.”
The report also questioned the profitability of gas plants.
It revealed that 22 per cent of 835 operational gas plants it surveyed in Europe were already making losses.
In Germany 88 per cent of the country’s nearly 24 gigawatts of gas power was unprofitable
The calculations are based on prices in the financial year ending 2019, so do not take into account the huge rise in gas prices in recent months.
Since the start of the year gas prices have more than quadrupled in the UK.
Mr Sims added, “If high fuel prices are sustained in the long term it will accelerate the point at which gas plants go into the red.”
Over the last decade the UK has slashed carbon emissions from its power sector by closing dirty coal power plants and replacing them with gas, which burns cleaner.
Half a decade ago around a quarter of Britain’s electricity came from coal.
In 2020 it was only 1.6 per cent of the electricity mix.
Prime Minister Boris Johnson has since pledged that all UK electricity will come from renewable sources by 2035.
Now questions are being raised over how gas can be eliminated from the power mix as well.
Carbon Tracker’s findings follow calls from 70 climate scientists for the UK to take “bold political action” on fossil fuels and rule out new oil and gas investment.
They said the COP26 global climate summit in Glasgow risked becoming little more than a “bullsh*t session” without firm commitments.