Select Committee on Environmental Audit Written Evidence

Memorandum submitted by the Confederation of UK Coal Producers

  The Confederation of UK Coal Producers (CoalPro) represents member companies who produce over 90% of UK coal output. CoalPro is not opposed to the development of any form of energy. CoalPro is pro-coal.

  CoalPro welcomes the opportunity of providing views on this inquiry. We do not pretend to be experts on the costs of nuclear and renewable electricity generation but would like to make some comments on the inquiry issues set out in the press release. Before doing so, we would like to preface these specific responses with some general remarks.

  The recent public debate appears to have focussed on whether new and/or replacement electricity generating capacity should be nuclear or renewables. This debate has created a great deal more heat than light. It is thoroughly misplaced and completely fails to address the most basic issues.

  Most, if not all, of the UK's nuclear generating capacity will close over the next 20 years. A programme of nuclear new-build will be very expensive and will have to overcome severe difficulties associated with planning and the treatment/disposal of waste. It will do no more than replace this capacity and there will be no reduction in carbon emissions from the electricity generating sector.

  Electricity consumption is increasing by 1 to 1.5% each year. The Government has an aspiration to achieve a contribution from renewables of 20% by 2020. This, too, will be very expensive (a cumulative cost to the electricity consumer of £6 billion by 2010 has been estimated) and will also require a major effort in terms of planning and technology development. A contribution of 20% by 2020, even if it can be achieved , will do no more than offset the increase in electricity consumption and again there will be no reduction in carbon emissions from the electricity generating sector.

  It is clear from the above that the entire nuclear/renewables debate is merely playing around the edges of the problem. A programme of nuclear new-build and a 20% contribution from renewables will both require enormous expense and Herculean efforts in other respects. Even if both are achieved, it will do absolutely nothing to address the problem. The net effect on overall carbon emissions will be zero. Fossil fuel consumption will remain at its present level.

  CoalPro does not oppose either strategy but is convinced that much more need to be done if any significant reduction in carbon emissions is to be achieved let alone the deep cuts called for by the White Paper. Carbon emissions from fossil fuels will have to be addressed.

  The nuclear and/or renewables strategies therefore need to be supplemented by a programme of new-build higher efficiency coal plant and by carbon capture and storage from both coal and gas plant. This is the only way that significant net reductions in carbon emissions can be achieved. Not only that, in cost terms, such an approach may well be significantly cheaper per tonne of carbon reduced/avoided than either the nuclear or renewables strategies.

  I now turn to the individual issues referred to in the press release.


  50% of the UK's present generating capacity is either coal or nuclear. Some 10GW of nuclear capacity is likely to close over the next 20 years (all except Sizewell B). The extent of coal plant closure will depend upon final decisions on whether plant will be opted-in or opted-out of the LCPD, but a range of 10-15GW of coal plant is likely to close by 2015. Some of it may close earlier.

  If this is not replaced, the lights will go out under any conceivable demand forecast. Even the most monumental effort on renewables will have a minimal, if any, impact on closing the gap. A hugely expensive and extremely difficult programme of nuclear new-build will do nothing to address the gap caused by the closure of coal plant.

  Energy efficiency policies may have an impact but show no signs of doing so at present. They cannot close the gap on their own and to rely on them doing so would be thoroughly irresponsible.

  The danger is that the gap will be plugged by new gas plant because of its low initial capital costs which, in an uncertain world, exacerbated by regulatory uncertainty, minimise risk. This will occur by default, will have enormous security of supply implications and will lead to very high prices for both gas and electricity.


  CoalPro is not competent to comment in detail on the cost and timescales of different technologies but welcomes the Committee's intention to examine both capital and ongoing operating costs of all technologies, including low-carbon coal. CoalPro would suggest that these costs are measured in terms not only of the costs of generation but also of the cost of carbon emissions reduced/avoided.

  With respect to ongoing fossil fuel costs, the Committee will be aware that there is now a significant price differential between coal and gas which has lead to increasing coal burn. Indeed, coal burn has increased by nearly 2 million tonnes in the first half of 2005 compared with 2004, despite the introduction of the Emissions Trading Scheme and carbon prices of over 20 per tonne.

  Some will argue that the gas price will fall as new infrastructure for importing gas is commissioned over the next few years. However, this runs the real risk of exchanging a UK/European gas price for a world gas price. With the United States now short of indigenous gas, gas imports to that country are rising steeply and US gas prices are higher even than UK average gas prices.

B3.   What is the attitude of financial institutuions to investment in different forms of generation?

  Financial institutions require certainty in order to invest. The renewables obligation and other measures provide certainty for renewables. Some form of Government guarantee would be required for investment in nuclear as has been given for the new nuclear plant in Finland.

  CoalPro is convinced that neither closure of the generation gap, nor deep cuts in carbon emissions can be achieved without investment in replacement low-carbon coal technology if unacceptable price and security of supply risks are to be avoided. A pre-requisite is regulatory certainty in the form of long-term carbon allowances under the Emissions Trading Scheme going well beyond Phase II for a total period of at least 15 years. This will then need to be supplemented by a policy framework and economic instruments, perhaps including a competitive bidding element.

  It may be that a major nuclear investment programme will impact on investment in renewables and energy efficiency, and may also impact on investment in other low-carbon technologies. But the question is misplaced. It is clear that neither on their own, nor both together will come anywhere near getting the job done. It is not a question of either/or. Large scale investment across the board in multiple technologies will be required. The issue cannot be avoided.


  Nuclear new-build will not reduce carbon emissions. It will merely avoid an increase that would otherwise occur. Nuclear new-build would contribute to security of base load supply but it should be noted that electricity demand varies significantly both diurnally and seasonally. Nuclear generation is inflexible and cannot contribute to security of supply for higher loads.

  C5.  Comparability is not the issue. Investment in all options (not only nuclear and renewables) will be required. All options are compatible with each other and with the White Paper strategy. Indeed, without investment in all options, the multiple objectives of the White Paper cannot be achieved.


  6.  No form of electricity generating technology is carbon-free. Many of the considerations related to carbon emissions associated with the construction and operation of nuclear power stations, and the mining and processing of uranium, also apply to the various forms of renewables.

  7.  CoalPro believes that the nuclear waste issue should be resolved before committing to new-build. This is not an anti-nuclear point. It is a statement requiring political will.

22 September 2005

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