Didcot coal power station
Conventional wisdom amongst those who follow the debate over UK energy policy says that many of the country’s ageing and often very dirty coal-fired power stations are soon to close – and that the race is on to replace those power stations. The debate then centres on what these new power stations should be, where they should be, and how much they should cost – and crucially, who should pay.
Dash for gas vs. low-carbon energy
The Chancellor wants dozens of new gas-fired power stations, which is why he is undermining renewables investment at every twist and turn and why he is driving forward a “gas generation strategy” as well as ‘drill, baby, drill’ policies on fracking.
In contrast, the Energy Secretary Ed Davey is pushing through an Energy Bill, the whole premise of which is to reduce over-dependence on burning imported, polluting and increasingly expensive gas by driving investment into a range of low-carbon power sources like wind farms and a nuclear plant instead.
However, this apparent contradiction - and the lack of support for Davey’s plan from his Cabinet colleagues - together with the lack of any legal commitment in the Bill to cutting carbon emissions from power generation, means there is now a wild amount of uncertainty about the whole direction of the coalition’s energy policy. This political paralysis is being blamed for deterring investment in any new power stations at all.
“Coal” back into “coalition”?
It is with this context – as well as the intense profitability of burning coal right now for the reasons outlined here – that we should be questioning whether Ed Davey’s department is secretly working on an under-the-radar plan to oversee a coal burning revival in the UK.
In January, John Hayes announced he wanted to be the Minister to put “coal” back into “coalition.”
Then last week Hayes told Parliament he was considering a new government “coal strategy.”
Now a senior official in John Hayes’ department has been quoted by an energy industry news outlet saying that the government is looking at coal plant life extension. "We are looking at keeping existing (coal) plants alive," Jonathan Brearley, director of energy strategy and futures at DECC, said at a World Energy Council (WEC) workshop.
Any move to allow more coal-burning without technology to capture the emissions (CCS) would remove the possibility of the UK hitting the legal carbon targets set out in the Climate Change Act. As the government’s advisers - the Committee on Climate Change - have warnedMinisters: there must be no role for unabated coal beyond the early 2020s if we are to get on course with cutting emissions.
David Cameron already took the option of new unabated coal stations off the table with the introduction of the Emissions Performance Standard (EPS) in this year’s Energy Bill. But might they now try a sneaky u-turn by simply encouraging more coal burning in the existing coal stations as this DECC official has suggested?
As we’ve detailed before, to stay legal under binding EU air pollution rules, existing coal stations in the UK must fit new equipment if they want to have their lifetimes extended. It’s an open question as to how many of these stations would “opt in” to these rules in order to keep coal burning for years to come but the prevailing assumption has been that it wouldn’t be an economically attractive option – but that depends on the gas price and on a rising cost of carbon.
So are Ministers looking at ways to make coal burning more attractive?
If Ministers were to choose to throw a life-line to the coal burners, what would any new “coal strategy” likely look like?
One option – not yet ruled out by Ed Davey – is to throw consumers money as hand-outs to the coal industry via “capacity payments.” This could see consumer energy bills go up further to essentially pay fossil fuel subsidies to the big energy companies to encourage them to keep their old power stations open.
Another option would be to weaken or even abolish the carbon tax George Osborne only just introduced in last week’s budget. This would remove a major revenue stream from the Treasury, and would amount to a major u-turn by the Chancellor. Some analysts have speculated this carbon floor price isn’t a major barrier to coal burning anyway because the level of the tax is so low. It seems very unlikely indeed.
So perhaps the most likely option being considered would be to delay the timetable under which utilities need to make decisions on whether to opt in or opt out of the EU rules - the “Industrial Emissions Directive” (IED) by relaxing what the government requires of the energy companies. This would send a signal to the coal industry that all options are on the table and encourage them to take part in the transitional arrangements for the IED, thereby keeping the door open to these mega polluters.
Instead, as I’ve elaborated here, Ministers could ensure we stick to our legally binding targets by extending their new power plant emission standards to cover all coal – not just new coal. That would drive investment into lower carbon alternatives to keep the lights on, and keep us on track with cutting emissions.
By removing political uncertainty, it could also reduce costs to the consumer.
Update: The Energy Secretary Ed Davey this morning ruled out life extensions for the UK’s old coal-fired power plant, telling Business Green, “That's simply not true. Absolutely not true. That isn't going to happen.”
