The UK government’s projections that coal will be off the system by 2027 are wrong, according to modeling from Imperial College London.
Last week the government released figures predicting coal generation will “fall to zero by 2027”.
This is in direct contrast to recent government promises to phase out existing coal plants in the next 10 to 15 years.
And the government’s advisors on climate policy, the Committee on Climate Change (CCC), said: “there can be no role for conventional coal generation in the UK beyond the early 2020s.”
We currently run 16 coal plants in the UK and last year they provided 36% of our electricity.
Imperial’s researchers ran six different models and found that in all scenarios that they looked at the result was more coal generation capacity in the UK’s energy mix that DECC projected - and certainly not zero by 2027 (see below graph).
This is because, according to the study: “The model indicates that a market opportunity exists for coal.”
The outlook for coal has been improved by three government policy decisions: freezing the carbon price in the 2014 Budget; allowing coal plants to bid in the capacity market, where they could be subsidised by around £2.2bn; and failing to extend the Emissions Performance standard to existing coal plants.
The two worst case scenarios - of no carbon price support mechanism (CPS) or pro-coal policies - would mean around 9-14 GW of coal capacity on the system in 2030 - equivalent to about half of the remaining 16 plants on the system. And in the best cases, there would still be around 2GW online by 2030.
This would mean that instead of zero electricity generated by coal power in 2030, the two worst case scenarios would result in around 55TWh of electricity generated by coal-fired plants per year.
Carbon targets at risk
As a consequence, if the UK’s coal plants continue to operate into the 2030s, there is a risk that the UK won’t meet its decarbonisation goals of 80% on 1990 levels by 2050, set out in the 2008 Climate Change Act.
The CCC has advised that the UK needs to reduce emissions to around 50g CO2 per kWh by 2030 to meet the goals set out in the Act.
But as you can see below, the reduction target recommended by the CCC is missed in all of the scenarios that were modeled.
In the worst scenario, the study predicted 240g CO2 per kWh by 2030, and in the best case 130g CO2 per kWh - both of which way overshoot the 50g CO2/kWh recommended by the CCC.
Carbon price most influential policy on coal in the mix
The Imperial researchers concluded from their modeling that the carbon price was the single current policy that had the biggest impact on whether coal was going to come of the system by 2030.
The ‘high’ CPS scenario is in line with DECC’s projections - but there is a level of uncertainty over whether the price will increase as in DECC’s trajectory because of the price freeze announced in the 2014 Budget.
In that scenario carbon emissions from the UK energy mix (coal and gas) is two and a half times more than the CCC’s recommended target - whereas in a low carbon price scenario CO2 emissions are nearly five times recommended limit.
Lack of investor certainty
The researchers also conclude that the government either needs to increase the carbon price or regulate coal by extending the Emissions Performance Standard (which limits emissions from new plants) to existing plants.
This, they state, would avoid a ‘policy failure’ by 2030 and give investors more certainty about the future role of coal - and make investing in gas and low-carbon plants more attractive.
The better option to give investors confidence would be the EPS, because the government has changed its mind over the carbon price before - and investors may fear this could happen again.
Otherwise, the researchers warn: “Our analysis suggests that the incoming government is likely to be faced with the prospect that a number of coal plant invest and become IED [Industrial Emissions Directive] compliant - how much will depend on the view investors take of likely carbon prices in the 2020s.”
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