Consultations are underway at Whitehall as to whether coal-fired power plants, that are partially retrofitted with carbon capture and storage (CCS), would be allowed to run beyond 2025 – the cut-off date given by the UK's Department for Energy and Climate Change (DECC) last autumn.
In her ‘energy policy reset’ speech, energy secretary Amber Rudd committed to the total phase-out of coal by 2025, suggesting all this capacity should be “switched over to gas and nuclear”.
Realism has set in by now, particularly as Britain’s new nuclear capacity faces delays and not enough investment in new gas-fired generating capacity is forthcoming. The consultation on how to implement the planned coal cut-off now looks at how much operators would have to spend on a CCS retrofit to get a permit to continue burning coal.
"The consultation will very clearly set out if you have got a coal power station basically what happens after 2025... If you are fitting it with CCS, it will set a level of sorts at which this will not be allowed,” an unnamed Whitehall source was quoted by the Independent.
A new CO2 storage appraisal study, carried out for the Energy Technologies Institute (ETI) by Pale Blue Dot and partners, shows an average levelised cost for transport and storage of around £15 per tonne of CO2. Calculated in the same way as for electricity generation by DECC, this would add £7.50/MWh to the levelised cost of power from gas (current cost around £50-70/MWhr).
Silver lining for coal?
While there may be some silver lining on the horizon for utilities to keep burning coal amid fierce lobbying throughout the consultation process, DECC remains adamant that the government would be “absolutely committed” to phasing out power production from unabated coal by 2025 and “it is nonsense to suggest otherwise. We made this clear last year and nothing has changed.”
Outcomes of the consultation on coal’s share in the UK energy mix will be published by DECC in the coming months.
‘Unabated coal’ has been brand marked as the “dirtiest, most polluting way of generating electricity,” but policy makers may have to soften their stance the face of ever tighter capacity reserve margins. Or offer greater incentives to new gas-fired capacity, beyond the current capacity payments.
Fuel prices favour burning gas
Dispatch of existing combined-cycle gas plants has already been helped by a shift in fuel prices. A rebound in global coal prices amid continued low gas prices has seen the share coal in the UK energy mix collapse in recent months, contributing about half the electricity than in spring last year.
“Coal prices have risen $3 in the past week to around $52/t, driven by strengths in oil markets and higher usage rates in Europe for power generation due to colder temperatures,” the consultancy Utilyx said in a note on Friday.
More costly coal significantly increases the attractiveness of using gas to produce electricity, particularly as the UK Carbon Floor Price helps shift the pendulum towards gas generation. On the Continent, coal still keeps the upper hand for baseload power.