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World installed fossil-fuel power generation capacity in the 450 Scenario relative to the New Policies Scenario
---- Inplications for assets -----An important effect of the decarbonisation of the power sector in the 450 Scenario is to cause many older, inefficient, fossil-fuel plants to be either idled or... retired before the end of their anticipated technical lifetime, and some power generation capacity additions under construction to become uneconomic and be retired early, despite originally appearing to be economically sound investments. An additional 2 300 GW of fossil-fuel plants are either retired before the end of their technical lifetime (37%), idled (47%) or retrofitted with CCS (16%) in the 450 Scenario, compared with the New Policies Scenario (Figure 3.10). Most of the retired or idled plants do recover their investment cost, but they are in operation for fewer years than in the New Policies Scenario. Older, inefficient plants are retired early as CO2 costs render their operations uneconomic, but their investment costs have been recovered. Idled power plants remain available and may occasionally run in periods of strong demand, when the economics allow. Some existing, but relatively new, plants require additional investment to retrofit them with CCS, so that they can remain in operation. Almost 50% of the plants retired or idled are inefficient subcritical coal-fired power plants, as rising CO2 prices make them uneconomic, squeetting them out of the market in many countries. This share is significantly higher (75%) in non-OECD Asia, where a large number of subcritical coal plants have been installed in recent years. These plants alone account for more than one-third of the 1 940 GW of global capacity that is retired early or idled.In the 450 Scenario, around 2 000 GW of new fossil-fuel plants are built globally to meet rising demand and, in some cases, to replace old inefficient plants that become uneconomic. Almost 30% of these new plants are fitted with CCS, two-thirds of these as a retrofittng operation, as the technology becomes more competitive at scale. Just under one-quarter of the anticipated new fossil-fuel plants are currently under construction and they may face difficulties recovering their investment costs if they have not taken the costs of decarbonisation fully into account. A smaller, but still significant, number of new plants are idled: of this 260 GW of capacity, 165 Gw are idled before repaying their investment costs, resulting in an unrecovered sunk cost of around $120 billion, or about 40% of the initial investment. The remaining 90 Gw of new power plants that are idled recover their investment costs. Idled plants can still be given new economic life, reducing economic losses, if, at some point, they are retroffited with CCS. Such retrofits would be expected to apply to the most efficient plants where the investment case is strongest (CCS reduces power plant efficiency in the order of 8-10%). The availability of CCS technology, not only for the construction of new power plants but also for the retrofiting of existing power plants, is a key assumption in our assessment of sunk costs, as the deployment of CCS technology has yet to be fully commercialised, making this a key challenge for the realisation of the 450 Scenario (see Chapter 2 section on the relevance of CCS).
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