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.
A1. THE EXTENT
OF THE
"GENERATION GAP"
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.
B2. FINANCIAL
COSTS AND
INVESTMENT CONSIDERATIONS
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.
C4. STRATEGIC
BENEFITS
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.
D. OTHER ISSUES
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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