21 april 2013

Close coal power stations to meet carbon targets, says report

By Michael Kavanagh, the Financial Times, April 21, 2013

Closing Britain’s coal-fired power stations should continue if the government is to meet carbon cutting targets, according to a cross-party report.

It argued that gas power generation could providing enough capacity to avoid an energy crunch in the next decade,

The report, by Carbon Connect, an independent cross-party forum co-chaired by Charles Hendry, a former energy minister, and Lady Worthington, Labour’s energy and climate change spokeswoman in the Lords, calls for more incentives to ensure that gas power generation capacity is maintained during the 2020s while coal-fuelled generation is minimised. This is the most environmentally friendly way of bolstering nuclear and sustainable electricity supplies, it said.

But the authors of the study, to be published on Monday, are concerned that higher gas prices relative to coal are eroding the economics of gas-fired power stations and forcing some to be mothballed or considered for closure.

They accept that consumers have benefited in the short term from cheaper coal imports, which have limited energy bill rises as wholesale gas prices have increased. They also conclude that the potential for UK shale gas is “highly uncertain and unlikely to give the UK cheap gas”.

But the paper, Power from Fossil Fuels, argues that the continued retirement of coal-fired power stations in favour of bolstering gas in the energy mix is essential to fulfil hopes of reducing carbon emissions.

Speaking before the launch of the report, Mr Hendry called for more agreement between parties on energy policy and clarity on long-term allowable incentives for different energy sources to let investment decisions proceed.

“Uncertainty has far-reaching consequences in a sector where power stations are built and operated by companies, often with international portfolios and investment opportunities,” he said. “Consensus among politicians and parties is therefore particularly important in keeping investment flowing and the costs of finance down.”

Lady Worthington warned against a scenario where Britain’s remaining coal power capacity could continue to generate significant carbon emissions until 2030.

This could happen unless there is investment in nuclear and renewable power capacity, a drive to reduce power consumption and sufficient encouragement of gas and biomass-fuelled generation. Without this, she said, “there are risks of prolonged high carbon emissions from both coal and gas power stations”.

Alistair Buchanan, chief executive of the energy regulator Ofgem, warned in February that Britain could be heading for a “horrendous” gas supply crunch which would lead to higher energy bills as coal-fired power plants were retired and nuclear reactors and offshore wind farms were delayed.

A fifth of the UK’s power generating capacity is due to close within the next decade.

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