Deutsche Bank to stop financing coal

Strip coal mining
CC BY 3.0 Wikimedia

Remember when Bank of America promised to stop financing coal mining? They weren't the only ones getting cold feet about this formerly dominant energy source. Now The Guardian is reporting that Deutsche Bank is committing to end financing of new coal mining and new coal-fired power plant construction.

This pledge is being made, says the bank, to back up its commitment to supporting the Paris Climate Deal. But it is also, most likely, a very prudent investment decision. With India phasing out new coal plant construction years earlier than recommended, China reducing its pipeline too, and huge utilities and whole countries alike saying they are pretty much done with coal, it's getting increasingly hard to see where the future for this industry lies.

Despite politicians' promises to put coal miners back to work, the energy industries—and the financial giants that enable it—are beginning to realize that coal is pretty much toast. After all, regardless of government policies or the party political pendulum, it's hard to make the case for coal when offshore wind prices are falling, solar is becoming more competitive and large-scale, rapidly deployable energy storage is becoming a real live thing.

The trouble for coal is not just that renewables (and natural gas) are becoming cheaper. It's that renewables are more easily and rapidly deployed, and they have almost zero marginal cost once operational. That means at any given time, a solar farm or wind farm can afford to undercut electricity from a conventional coal-fired power plant—meaning the wind or solar farm gets paid, while the coal plant still has to keep running because it can't fire up at a moments notice. (Mike wrote a great post on "death by capacity factor" a while back.)

So yes, Deutsche Bank undoubtedly made this decision with an eye on their public relations profile. But they are also in the habit of making money, and coal just isn't a sure-fire bet for banks anymore. And once banks stop lending (or demanding higher interest rates), then the economics of coal just keep getting worse.

Deutsche Bank to stop financing coal
This isn't just a PR move. The economics of coal have become decidedly shaky in recent years.

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