Analysis
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License: All rights reserved. Credit: greenpeace

Comment: How the capacity market could help UK coal plants stay open for longer

Lawrence Carter
Cooling towers at Ferrybridge coal power station
License: by-nc. Credit: Steve Morgan

The UK’s polluting coal power stations were thrown a lifeline on Friday when it was announced that they will be eligible for millions of pounds in public subsidies. Eight coal power stations will now be able to compete in an auction for cash payments as part of changes to the electricity market that were originally designed to be part of the UK’s efforts to reduce carbon pollution and clean up its energy system.

The announcement comes just days after David Cameron argued at a climate summit in New York that: “we need to give business the certainty it needs to invest in low carbon. That means fighting against the economically and environmentally perverse fossil-fuel subsidies which distort free markets and rip off taxpayers.”

The subsidies were supposed to ensure that gas power stations remain open to meet peaks in energy demand or times when wind farms are producing less power. But they have since been made available to some of the most polluting power stations in Britain.

The auction in December will now see the Big Six energy companies line up to pocket as much as £150m per coal plant, directly funded by the same consumers they already stand accused of ripping off.

Not only does this mean that consumers will subsidise the massive carbon pollution caused by coal, but we will also be paying energy companies to continue damaging our health. A recent study by health experts found that air pollution from the UK’s coal power stations causes an estimated 1,600 premature deaths every year and staggering health costs of up to £3.1bn.

We will also be subsidising dependence on Russia for our energy. Despite all the strong talk of sanctions on Russian energy companies, a recent investigation by Greenpeace found that around 50% of the UK’s coal imports come from a small clique of oligarchs with close ties to the Kremlin.  

If this wasn’t enough, the proposed subsidies could help fund refurbishments that would keep the UK’s outdated coal power stations open for years to come. Our coal fleet was previously expected to be retired by 2023 due to the costs of complying with European air pollution laws, but a drop in the global price of coal combined with government interventions have improved the economics to such an extent that they could remain open for the foreseeable future.

In addition to the proposed subsidies, these interventions include the freezing of a tax on carbon designed to drive coal of the system that the government had only just introduced; attempts to water down air pollution regulations aiming to protect public health; and voting against proposals to cap the carbon emissions of old coal plants in a similar way to those proposed by the Obama administration

This is dangerous – if we’re going to tackle climate change the UK’s coal plants need to be phased out fairly rapidly. The government’s climate advisors have warned that if we’re to meet our legally binding climate commitments: “there can be no role for conventional coal generation in the UK beyond the early 2020s”. Last month’s heavyweight report by the Global Commission on the Economy and the Climate, which was jointly commissioned by the UK government, similarly argued that affluent countries should: “accelerate early retirement of existing unabated [coal] capacity”.

In fact, the Prime Minister has himself made this point, arguing that “all existing coal-fired power stations should be retro-fitted with CCS… if we don’t do this, we will not meet our carbon emissions targets.” A view that was recently repeated according to his climate envoy, Greg Barker MP, who tweeted on their trip to the UN Climate Summit in New York that the “PM pledges to phase out existing coal”.

Number 10 has since denied there is a new policy to phase out coal, arguing that power stations will simply come off the system due to the costs of complying with European air pollution regulations. At best this is complacent, at worst wilfully misleading.

Whether by accident or design, the government has drastically improved the economics of keeping our outdated coal fleet open, while at the same time failing to put in place any regulatory backstop to ensure they do not compromise our carbon reduction targets or continue to damage our health.  

The Liberal Democrats appear to have recognised the threat posed by coal, making a manifesto commitment “banning electricity generated from unabated coal” by 2025. If we’re to establish a clean, secure energy system, the Conservatives and Labour need to rapidly follow suit.

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