The First Mile Problem: Bridging the Coal-to-Clean Transition Gap

The International Energy Agency has been clear: accelerating the retirement of coal power plants is among the most consequential interventions to limit global warming to 1.5°C, yet progress has been insufficient. Our analysis shows that transitioning existing coal capacity to clean energy in emerging markets – excluding China – will require US$3.7 trillion.

Capital is theoretically available through institutional investors, development finance institutions, and blended finance structures explicitly designed to bridge the risk-return gap deterring private capital from early coal retirement. However, the pipeline of intentions far outpaces transaction closures. In fact, the Asian Development Bank’s Energy Transition Mechanism, launched in 2021, has yet to close any binding coal retirement transactions.

The transition is a structural failure in early-stage development work that must be addressed before financing. It’s the first-mile problem of the coal transition, where most attempts falter. Coal-to-clean (C2C) transactions lack the mature ecosystem of developers, financiers, and advisers in conventional renewable energy, with established risk pricing and bankability standards. C2C transactions require an entirely different originator – this is the exact gap we aim to close.

As a C2C developer, we’ve spent two years doing the groundwork that prepares projects for financing. From this experience, we’ve codified five lessons for the financial and investment sectors.

Five Lessons from the First Mile

Lesson One: Deep Partnership Development Cannot Be Shortcut

A five-phase process, with the early phases — scoping, stakeholder engagement, and prefeasibility — foundational to everything that follows. It demands a depth, breadth, and duration of institutional relationship-building unmatched in conventional renewable energy development. Early-stage development capital must be structured for patient, multi-year deployment.

Lesson Two: Flexibility in Technical Solutions Matters

We’ve found flexibility is required beyond wholesale replacement of coal with renewables because of concerns such as land availability to add renewables, grid stability requirements, and owners seeking to leverage existing assets through coal-flex (i.e., plants providing dispatchable backup capacity as markets transition to higher renewable penetration). Investment mandates need to allow for a diversity of technical solutions and provide opportunities for partial transition, repurposing, or fuel substitution to find solutions that win buy-in.

Lesson Three: Stress Test Market Assumptions Thoroughly

Our prefeasibility work reveals issues materially impacting transaction viability:

·       Demand growth acceleration. Increased data centre expansion, electric vehicle penetration, and air-conditioning demand create uncertain trajectories. System operators can be reluctant to modify existing contracted capacity, even where it is demonstrably more expensive.

·       Commodity volatility. Coal price swings over the past six years have created simultaneous urgency: coal-fired generation is increasingly expensive and uncertain, making operators and lenders reluctant to lock in transition commitments. Coal prices dropped during the initial months of the COVID pandemic, reaching a low of USD 49 per ton on August 31, 2020. Prices rose through 2021 and 2022 as businesses and economies recouped and demand surged, with a rapid spike in the days after Russia invaded Ukraine in February 2022, topping out at USD 439 per ton on September 12. Prices remained high through 2022, before lowering through 2025, only to rise again in late February 2026 following the closure of the Strait of Hormuz. As of this writing, the most recent high has been USD 151.75 on June 11, 2026

·       Grid backlogs. Interconnection queues for renewables require C2C developers to consider grid connection timing and potentially finance and execute this infrastructure themselves.

Despite these challenges, C2C economics remain compelling across varied market assumptions. Developers require a broad market intelligence base and strong stakeholder relationships to monitor, anticipate, and adapt on a case-by-case basis.

Lesson Four: Broaden Asset Ownership Approaches

While we engage independent power producers (IPPs) operating under PPAs, their decision-making timelines can be impacted by the necessary engagement with their PPA off-taker. Captive power plants, industrial facilities generating power primarily for their own operations, offer advantages: the owner and operator are the same, simplifying stakeholder alignment and focusing the economic analysis on direct cost and carbon implications within the owner’s value chain.

Investors should consider diversified pipelines across IPP and captive assets, appropriately weighted by market maturity and regulatory environment. Captive plants remain an underserved niche with few transactions in development.

Lesson Five: Revise Risk Perception and Due Diligence Frameworks

C2C projects are often perceived as presenting compound risk at origination, but many risks are overstated. Existing PPAs provide structure and price signals enabling revised revenue models. Technology risks are low; we use proven and economically viable technologies.

The Moment Requires Continued Commitment

Our two years of development work confirm the economic case for C2C: lower-cost renewables and declining storage costs produce competitive risk-adjusted returns to investors while reducing system costs.

Long-term equity capital is required for multi-year development timelines. Development finance institutions and philanthropic providers can direct concessional instruments at early-stage C2C development, recognising returns as bankable transaction pipelines rather than direct yields. Investors can establish pooled early-stage platforms aggregating diversified sources of prefeasibility and feasibility funding across large C2C pipelines to further reduce risk.

Clean Energy Bridge was founded on the conviction that structural failure in early-stage C2C development work could be addressed. Two years of patient, early-stage work have only strengthened that confidence. The coal transition does not need more analysis. It needs deals that close. That is the work we are here to do.

Paul Jacobson is the founder and chief executive of Clean Energy Bridge. Drawing on more than 20 years of experience in engineering, developing, and financing major capital programs in energy, infrastructure, and other industrial projects, he develops bankable solutions for coal power phaseout.

Clean Energy Bridge combines deep industry knowledge with structured finance expertise to facilitate carbon reduction projects that are practical enough for operators, credible enough for investors, and scalable across the market.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Energy Tracker Asia.