Coal in the firing line
13 Nov 2009
London – Investments totalling up to £200 billion will be needed to secure energy supplies and meet environmental targets, Ofgem said in a recent review of the UK energy market. Consumers, it warned, are likely to face steep price rises for gas and electricity as many power stations near their end of life and the global gas market becomes more volatile.
The energy watchdog presented four potential scenarios to assess the energy risk to the UK in the next 10 to 15 years. It forecasts that if global businesses experience a strong recovery whilst missing carbon-reduction targets, energy prices could increase by more than 60% by 2016. The scenario with the smallest price increase sees energy bills rise 14% by 2020, following the execution of green initiatives and a slow economic recovery.
Recent decisions by E.ON and DONG Energy regarding their commitment to investing in coal-fired plants incorporating carbon capture & storage (CCS) technology have put a question mark over the future of coal in the UK energy mix - and, in turn, its ability to ensure a reliable and affordable energy supply over the coming years.
E.ON is delaying its plans to build a coal-fired power station at Kingsnorth in Kent for up three years. The company linked its surprise decision to a decline in demand for electricity since the economic downturn. This, said the company, has put back to around 2016 the need to build the 1,600MW coal-fired facility.
E.ON remains committed to the development of cleaner coal and CCS, insisted a company statement: “We believe these have a key role to play, alongside renewables, gas and nuclear, in tackling the global threat of climate change while ensuring affordability and security of energy supplies.”
Danish group DONG Energy has, meanwhile, decided not to go ahead with its planned investment in a coal- and biomass-fired power station in Scotland. The company will, instead, limit its role within Ayrshire Power, the JV behind the project.
Last year Peel Energy and DONG Energy established Ayrshire Power to examine the feasibility of building a 1,600MW power station at Hunterston, West Kilbride, North Ayrshire. The state-of-the-art facility, , which would use CCS technology, would be fuelled by coal and up to 15% biomass, such as wood, and would deliver a high level of thermal efficiency.
Status change
Over the last year Peel Energy has been providing direction on the planning application, while DONG Energy has contributed technical input on design. However, DONG has now decided to change its status within Ayrshire Power from investor to a design partner.
Owen Michaelson, chairman of Peel Energy, insisted that Ayrshire Power’s overall strategy for the project is unaffected by this decision, noting that the company had just completed the latest stage of public consultations with the local community and key stakeholders.
Coal currently accounts for 37% (29GW) of the UK’s electricity capacity and generated 20-30% of its supply in 2008. That level is set to decline to 21GW as stations close in accordance with EU controls on sulphur and nitrogen emissions.
The Large Combustion Plants Directive could shut many power plants across Europe by 2015, including at least 10 in the UK that generate 35 thermal gigawatts (GWth) of electricity, some 25% of capacity.
Under plans announced by Ed Miliband, secretary of state for Energy and Climate Change, in April, up to four CCS demonstration facilities are to be built as part of UK plans to require coal-fired power operators to capture all carbon emissions from their plants by around 2025. All new coal-fired power stations, including demonstration plants, will have to capture at least 25% of their carbon emissions on startup.
“In order to ensure that we maintain a diverse energy mix, we need new coal-fired power stations, but only if they can be part of a low carbon future,” said Miliband.
Demonstration CCS projects would start coming on stream by 2014 under the plan, which envisages CCS clusters in regions such as the Thames, Humberside, Teesside, Firth of Forth and Merseyside.
The recent moves by E.ON and DONG Energy, however, suggest that power generators now need clarity on the level of government funding they will receive for adding CCS to their plants - at an estimated cost of £1 billion a time - and a more level playing field between new ‘clean’ coal and existing unabated coal in the UK.
