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LONDON (Reuters) - Stricter European Union pollutant limits could lead to costly upgrades or the closure of one third of Europe's large-scale coal power plant capacity, a report by the Institute for Energy Economics and Financial Analysis (IEEFA) showed on Monday.
On April 28, EU member states approved stricter limits on pollutants such as sulphur oxides (SOx) and nitrogen oxides (NOx) from large combustion plants in Europe which can cause air pollution and respiratory diseases.
To comply with the new rules by 2021, utilities will either have to invest in new technology to retrofit coal plants, restrict operating hours to under 1,500 a year or close the facilities, the IEEFA said.
"The cost of compliance will be prohibitive for many of these installations, given the market outlook and other headwinds," said Gerard Wynn, consultant to IEEFA and co-author of the report.
Europe's coal power fleet is already struggling to remain profitable due to low wholesale power prices, weak energy demand and growth of renewables. A record 10 gigawatts (GW) of capacity closed in Europe last year and several EU governments have promised to phase out coal next decade.
To meet EU emissions targets under a global climate pact, the Paris Agreement, a quarter of current EU coal capacity needs to shut by 2020 and all of it by 2030, the Climate Analytics think-tank said this year.
Energy and environment economic research organisation IEEFA analysed around 600 installations in Europe which burn coal, lignite and biomass.
It found that 108 of those, totalling 56 GW of electrical capacity and a third of EU coal-fired generation capacity, are responsible for the most SOx and NOx emissions and are at least 40 percent above the EU limits.
Polish power companies PGE and Tauron, Italy's Enel, Spain's Endesa, France's EDF, Czech Republic's CEZ, Britain's Drax and Greece's PPC operate more than half of those plants.
These operators will have to use NOx abatement technology which would add 2-4 euros per megawatt hour to the cost of power generation and/or SOx abatement which would add 6-7 euros/MWh.
When plants exceed both NOx and SOx limits, retrofitting could add 8-11 euros/MWh to generation costs.
"These costs range from 5 to 30 percent of expected European wholesale power prices in 2021 (40 euros), a highly significant burden," the report said.
"We conclude that in the case of older power plants particularly, these costs are prohibitive, and that it would be more rational to close the installations," it added.
Editing by Edmund Blair