Utility Week

14 | 19TH - 25TH JANUARY 2018 | UTILITY WEEK Policy & Regulation Analysis O nly five years ago, coal plants accounted for around half the UK's electricity generation. Last April saw the first day when coal made no contribution to the energy mix across a 24-hour period. To underline that this figure was no one-off, coal supplied just 2 per cent of the country's total electricity requirement last summer. The coup de grace for coal came last week with an announcement from the Department for Business, Energy and Industrial Strategy (BEIS), which spelled out how unabated coal will be phased out of the UK's energy mix aer 2025. The paper, published on the department's website, outlines how prime minister The- resa May's pledge to phase out unabated coal from the middle of next decade will be implemented. The mechanism is to bar una- bated coal plants – those that have not been fitted with measures to cut CO2 emissions – from the capacity market aer 2025. Unabated coal units will be unable to bid as soon as late 2021 when the four-year ahead auction for 2025/26 and beyond is scheduled to take place. By October 2025 – which the government has set as the cut-off date for unabated coal – the paper forecasts there will be just 1.5GW of capacity le, com- pared with 13GW now. Around 5.5GW of new capacity will be needed by 2026 to compensate for the coal plants that have been shut down, according to the government's impact assessment of the phase-out, also published this month. It calculates the policy will boost generation costs by £450 million and predicts a "small increase" in the cost of balancing the net- work due to the more frequent use of costly peaking plants. Set against this, though, it forecasts that getting rid of unabated coal will prevent around 15 million tonnes of carbon from being emitted. In addition, the policy should boost confidence about investing in gas plants. Overall, Alastair Martin, chief strategy officer at demand response aggregator Flex- itricity, believes the phase-out plan is a good deal because the government does not have to pay to shut coal plants down. "We're going to get it for free and we won't be burning coal, which is where we should be going," he says. The existence of established grid con- nections is a powerful argument for not abandoning the site of existing coal plants, though. Richard Howard, head of research at Aurora Energy, says: "The grid connec- tion itself is quite valuable so people will be thinking how they can best use different parts of the asset." It will be possible for coal to remain open aer 2025 but only if emissions are abated. The government has set a cap on the emis- sions, which solid fuel burning plants will be required to comply with in order to remain open aer 2025. This is set at an intensity limit of 450g of CO2/kWh of electricity gen- erated, which is in line with unabated gas generators and the existing emissions per- formance standard for new-build fossil fuel plants. This emissions intensity limit will be applied from October 2025 to all 300MW-plus plants that burn solid fuel, such as coal and lignite. Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit, says the emissions intensity limit is a good mech- anism for implementing the phase-out. "A coal plant is not going to get anywhere near that, so it's a good way of retrofitting it off the system." Carbon capture and storage In order to abate emissions, the government rules out forcing surviving coal plants to fit carbon capture and storage (CCS) technology. Frank Gordon, policy manager at the Renewable Energy Association, says the decision not to pursue CCS recognises the state of play on the technology. "It's quite expensive and the technology is not there," he says. Instead coal will have to be combined with another, lower emitting fuel, such as biomass. Gordon calculates that up to 70 per cent of the fuel burnt in converted units would have to be biomass in order to comply with the emissions limit. Converting coal plants to biomass makes sense and can cut emissions by 90 per cent, says Gordon: "We've got all this big plant coming off-stream. This infrastructure has already been built, which can be cost effec- tively transferred to biomass." It's not a cheap option, though, says Mar- shall, pointing out that the electricity gener- ated by converted plants has cost more than £100/MWH. And there is little subsidy sup- port available through the contracts for dif- ference regime. Cost hurdles The only support currently available is for biomass-fired combined heat and power plants in the "pot 2" auctions. But there is a 150MW cap on the size of plants eligible for support through this mechanism. Given these cost hurdles and the fact that many coal plants are ageing, it might make more sense to exploit grid connections by building a new power station rather than refurbishing existing assets, suggests Auro- ra's Howard. The government expresses confidence that security of supply will not be an issue. Its impact assessment says any shortfall in generation capacity will be covered by a mix of new and existing gas plants remaining online, which would otherwise have been retired on economic grounds. Flexitricity's Martin agrees that the rapid evolution of the energy system over the past five years means the UK can survive without coal plants. While the government's energy security standard assumes there will be three hours of "brown-outs" a year, the UK has not experienced such an event for six years, he says. "If you pushed coal off the network, you would be miles off breaching the govern- ment's security standard." There are plenty of companies willing to provide capacity, says Howard. "There is no shortage of people interested in provid- ing capacity. It doesn't look like it will be a problem. We can be pretty confident and just have to make sure there is a plan," he says. "If there is sufficient lead you can build a mix of things that will mean security of sup- ply is not compromised." Coal is king no more Coal-powered generation has already shrunk dramatically in recent years, but now the government has outlined how all unabated coal will be taken off the system by 2025. David Blackman reports.

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