Companies building new UK gas power plants risk losing 3.5 billion dollars (£2.6 billion) because they will be forced to abandon them before clawing back their investment, a new report has warned.

Financial think tank Carbon Tracker said that most of the gas plants that are planned or under construction in Europe and the US will never break even.

This will happen even sooner if recent high prices remain, they said.

In the US around 24 billion dollars (£17.5 billion) risks being stranded in these new plants.

Over the last decade many countries have managed to slash carbon emissions from their power sectors by closing very dirty coal power plants and replacing them with gas, which burns cleaner.

However, in the UK practically all the emissions that can be cut this way have already been slashed.

Half a decade ago around a quarter of Britain’s electricity came from coal. In 2020 it was only 1.6% of the electricity mix.

Now eyes are turning to how gas can be eliminated from the power mix. Prime Minister Boris Johnson has vowed that Britain’s electricity will be entirely green by 2035.

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.

“Investors who continue to back gas ahead of renewables are not only exposing themselves to the risk of stranded assets but are also potentially missing out on higher rates of return from the clean energy sector.”

Carbon Tracker found that 22% of the 835 operational gas plants it surveyed in Europe were already making losses. In Germany 88% 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 said: “Over the last 12 months average European gas prices have been nearly 50% higher than the pre-Covid levels we used in our model so utilities will be feeling the pinch.

“If high fuel prices are sustained in the long term it will accelerate the point at which gas plants go into the red.”