Utility Week

UTILITY Week 2nd December 2016

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14 | 2ND - 8TH DECEMBER 2016 | UTILITY WEEK Policy & Regulation Analysis A long with the coal mining industry, coal-fired generation has been an integral part of UK history. Indeed, the former once employed more than one million people. But both sectors now seem on the edge of extinction, mainly due to the pollution that the burning of coal generates. In the 1950s, pea-souper fogs were endemic in certain parts of London, with the famous Battersea power station – now under redevelopment – a particular culprit. However, since the 1990s climate change politics have come to the fore, both in the US and throughout much of Western Europe. A far higher priority than previously is now being accorded to the reduction of carbon emissions . Despite this, coal still fuels 40 per cent of global electricity consumption. In China, burgeoning demand for power has seen con- siderable levels of new capacity, some of it coal-fired. In some Chinese cities, air pollu- tion is at levels that would not be tolerated in the West. In India, too, there is a drive for new capacity, including coal-fired plant, which can use either cheap imported coal or indig- enous resources. Perhaps the formidable power require- ments of these two countries (together with the US they account for 70 per cent of global coal consumption) explain why General Electric remains committed to upgrading coal-fired plant. By contrast, the EU view, aer many dec- ades of green politicking, is very different. The UK and France both plan to phase out coal generation, while Germany has been in the vanguard of renewable genera- tion. In Germany's case, the plight of RWE is illustrative. At its peak, RWE depended on the vast coal resources of the Ruhr industrial region to fuel its boilers and supply its extensive industrial and consumer base. With its share price in the doldrums, it is now a shadow of the behemoth it once was. The UK government has recently con- firmed its plans to phase out all coal-fired plants by 2025. This target is movable, with major capacity shortages or cheap imported coal being factors that could push out the date for a further few years. Importantly, despite substantial coal reserves, the UK no longer produces hun- dreds of millions of tonnes of deep-mined coal, which it had done for much of the last century. Against this background, it is hardly sur- prising that the quest to commercialise car- bon capture and storage (CCS) technology has been an agonising one. To this end, in 2012, the government launched a £1 billion scheme to develop a scalable and commer- cially viable CCS plant. While there were several interested par- ties initially, enthusiasm waned so that only two projects were le standing. First, the Shell/SSE project at Peterhead – whereby surplus carbon dioxide would be pumped out about 60 miles to sea for storage at a depth of around 1.5 miles – was the obvi- ous front-runner. Second, the White Rose consortium – centred on the massive coal- fired plant at Drax – had several distinctive characteristics. However, the sudden exit of Drax Power from this consortium effectively buried it. In any event, the government controver- sially called a halt to its CCS competition in November 2015, announced in then-chancel- lor George Osborne's autumn statement. This was a mortal blow for the Peterhead project, which Shell described as "dead". Also killed off, a year previously, was Vat- tenfall's innovative – and, at one time very promising – 30MW oxy-fuel combustion demonstration plant at Schwarze Pumpe in the former East Germany. Elsewhere the news on CCS development has been less depressing, though hardly encouraging. While some progress has been made in Norway, it is at Boundary Dam in Saskatchewan, Canada, that the first CCS plant has become operational. The 110MW plant is conveniently sited near coal mines: the captured carbon dioxide is transported by pipeline to nearby oil companies to assist in enhanced oil recovery. While many will argue that the failure to develop a commercially viable CCS scheme is a missed opportunity, the reality remains that coal-fired generation in Western Europe is very much a 20th century industry. Despite a low carbon price, new coal- build in the UK is unlikely, unless coal prices themselves remain weak for some years. In any event, things have moved on with recent confirmation that the long-delayed 3,200MW Hinkley Point C nuclear plant will proceed. Furthermore, the government has been actively promoting the benefits of offshore wind generation, whose costs have fallen markedly over the past two years. For post- 2021 offshore wind projects, the government is offering a strike price of c£100/MWh. Nonetheless, given both low plant mar- gins and the dearth of baseload plant investment, it seems certain that one way or another new combined cycle gas turbine (CCGT) plants will be built. With dim prospects for the construction of new UK coal plant, the wheel will have turned full circle. Pre-1920, the UK had more than 1,000 pits in production; nowadays, with the recent closure of the Kellingley mine, no underground pits are operational. Coal's generation role in Western Europe is drawing slowly to its close. Nigel Hawkins, director, Nigel Hawkins Associates Coal burns ever dimmer While India, China and the US are still expanding their coal-fired generation capacity, in Europe it is dead or dying and CCS will come to late to save it – if it comes at all. Nigel Hawkins reports. UK COAL SUPPLY 18 16 14 12 10 8 6 4 2 0 Million tonnes 2013 2014 2015 2016 Deep mined Surface mined Imports Source: BEIS Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

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