Memorandum submitted by the World Coal
Institute
SUMMARY
1. The need of the UK, for safe, affordable,
environmentally friendly and reliable energy will require a mix
of fuels and a revolution in the development and deployment of
new technologies.
2. The current UK over reliance on gas and
oil should serve as a lesson against future over reliance on any
one fuel source or the geographic/political region that produces
it. Nuclear and renewables can certainly be part a responsible
energy mix, but they are not alone the solution.
3. The Government should ensure that investment
in Britain's energy future is broadly based, and does not hold
UK energy security hostage to either short term popular sympathies
or the myths and illusions pushed by any segment of industry or
society. While much needs to be done to ensure adequate investment
in both safe nuclear and cheap and reliable renewables, investment
in these areas cannot detract from investment in the development
and deployment of clean fossil fuel technologies. These technologies
have the potential to maintain the value of strategic hydrocarbon
assets while ensuring near zero emissions to the environment from
their use.
WORLD COAL
INSTITUTE
4. The World Coal Institute (WCI) is a non-profit,
non-governmental association and the only international body working
on a worldwide basis on behalf of the coal industry. Membership
of the WCI is open to coal enterprises and stakeholders from anywhere
in the world, with members represented at Chief Executive level.
More details on the WCI and its membership and can be found at
www.worldcoal.org. Members include: Anglo Coal, the Confederation
of UK Coal Producers (COALPRO), BHP Billiton, Consol, Rio Tinto,
Total, and Xstrata.
5. WCI's key objective is to provide a voice
for coal in international energy and environment policy and research
discussions. Members of the WCI are undeniably and transparently
pro-coal, but have explicitly committed to:
— co-operate in supporting sustainable
development, including economic growth, social development and
improved environmental outcomes;
— promote cleaner coal technologies
and the responsible use of coal;
— encourage improving mine health and
safety; and
— practice corporate social responsibility.
6. Many of the members of the WCI are multi-commodity
miners; some of these are involved in both the coal and nuclear
industries.
7. In large part, this memorandum builds
upon recent work of the Confederation of UK Coal Producers (COALPRO)[382].
ISSUES
EXTENT OF
THE "GENERATION
GAP"
8. The UK has a large demand for energy
(equivalent to almost 235 million tonnes of oil) of which coal
supplies 17%[383].
Contrary to popular opinion, in the case of electricity coal accounts
for 37% of total generation and more than half of this comes from
domestic coal. This brings a high degree of security and price
stability to an energy market increasingly reliant on imported
natural gas.
Chart
9. In 2004, the UK ceased to be an exporter
and became a net importer of energy, clearly undermining its energy
security profile. The extent of the generation gap facing the
UK can be indicated by the fact that over the next 25 years, EU
demand for electricity is expected to rise by almost 60%[384].
Bridging this gap will require investment in new nuclear and renewables.
However, given the infrastructure lead times and technical uncertainties
involved in those sources, the UK would be unwise to place all
its eggs in one basket and ignore both its substantial domestic
reserves of coal (220 million tonnes[385])
and the international trade in affordable coal from many politically
stable and friendly nations[386].
The UK has the opportunity and expertise to use its existing coal
reserves in an environmentally sound manner, through the clean
coal technologies[387]
being developed and deployed under the just-announced UK Carbon
Abatement Technologies Strategy and by programmes in other nations.
This vital strategic reserve could underpin UK energy security
for many years to come. This would help limit import dependency
on foreign sources of uranium and other fuels, and delay the growing
British dependency on Russian gas in particular.
10. Commonsense and national interest dictates
that investment decisions on new energy sources (eg nuclear and
renewables) should not ignore the long-term strategic demands
of British energy security. For electricity generation, this means
the development of the most efficient, cost-effective and environmentally
responsible mix of energy sources; this means—
— safe and cheap nuclear; and
— cheap and reliable renewables; and
11. None of these is cheap or easy; all
require substantial investment and government leadership. None
alone will bridge the generation gap facing the UK and none alone
will produce the energy security that the UK needs. However, a
sensible investment programme in all three will meet the UK's
strategic energy and environmental objectives.
FINANCIAL COSTS
AND INVESTMENT
CONSIDERATIONS
No fuel is without cost or challenge
12. All types of generating plant face increasingly
stringent regulatory and environmental controls and it is clear
that no fuel source is without challenges:
— "New" renewables such as
wind and solar are politically fashionable but need to overcome
cost and technological barriers. At this point such technologies
only supply electricity when the wind blows at a particular speed
or if the sun shines. Given this limitation wind turbines, for
example, may only generate 25% of their capacity, indicating it
would require 2,000 wind towers, each with a generating capacity
of 2 megawatts of electricity to produce as much as one conventional
1,000 megawatt power station. They could not alone provide the
capacity, reliability or predictability needed to supply base
load electricity to the UK. The sheer number of wind turbines
that need to be erected to replace traditional power stations
may prove too high for local communities opposed to them on ascetic
grounds, or with concerns for ambient low frequency noise, or
the safety of wildlife.
— Gas needs to overcome problems with
supply and accommodate prices rising faster and higher than governments
and consumers had previously anticipated. While it seems that
gas will grow in importance, it also needs to address energy security
issues associated with its concentration in limited areas of the
world. With the loss of British North Sea oil and gas this decade,
it needs to address the question, If energy security is undermined
by national dependence on a limited number of foreign oil suppliers
in politically unstable regions, what is the point of the continuation
of that dependency that would arise from simply switching to gas?
— Oil needs to overcome similar problems
to gas but with a much greater concern for energy insecurity associated
with foreign oil dependency, and a much greater concern with environmental
impacts, including global warming. Questions related to the limits
to oil supply are as much a product of political stability as
geologic concern.
— Nuclear seems to be economic in some
countries, though not in others and needs to overcome major problems
of public acceptance to do with issues of safety, decommissioning
and the waste cycle.
— Coal must address environmental concerns
related to its use, including its contribution to global warming.
— Large scale hydro (more applicable
to other countries) needs to overcome problems associated with
environmental degradation and displacement of people. A decline
in available sites for new hydro projects presents a particular
challenge.
13. The bottom line is that it is irresponsible
to base national energy and environmental policies on the misguided
assumption that any one fuel source is without cost or challenge.
Decisions on national electricity generation are too important
to be held hostage to myths and ideologies.
Fuel comparisons
14. The task of comparing fuel types is
daunting. The most recent IEA work attempting such a comparison
concluded "none of the traditional electricity generating
technologies can be expected to be the cheapest in all situations.
The preferred generating technology will depend on the specific
circumstances of each project. The study indeed supports that
on a global scale there is room and opportunity for all efficient
generating technologies." [388]
15. Nevertheless, there are known general
construction and operating parameters with all energy sources,
some of which are relevant to this inquiry. In general terms:
— Nuclear electricity costs are dominated
by capital costs and are very sensitive to the time taken for
plant construction, interest rates on borrowed funds, explicit
or implicit return on equity, changes to the regulatory regime,
and price changes for equipment, material and labour during the
construction period. They run on a fuel (uranium) that is expensive
and limited and carries with it high costs of monitoring and security.
The high up-front capital costs result in greater investment risk
if there are construction delays or cost overruns.
— Once built, nuclear plants are in
principle relatively immune to inflationary pressures, but their
cost efficiency over a 30 or 40 year lifetime will depend on their
capacity utilisation factor. Any lengthy shutdown, with attendant
high-cost repairs, particularly if it occurs early in a plant's
life, exposes reactor owners to financial exposure not faced by
owners of low capital cost stations. In this regard, it is important
to note that plant closures—for safety or security or other
technical reasons—are an established and distinctive characteristic
of nuclear power plants.
— Oil and gas-fired plants are less
expensive to build, carry a higher risk on variable operating
costs, such as fuel prices and availability of fuel.
— Coal-fired plants are less expensive
to build, and are fuelled by a resource (coal) that is abundant,
inexpensive, portable and reliably supplied through an extensive
supply distribution network. Reinforcing the security of supply,
coal production occurs in more than 50 countries around the world
and is not specific to any particular geological or political
region.
— In order to cope with the unpredictability
and variability of wind generation, it is necessary to have reserve
or stand-by conventional capacity to match and maintain balance
in the electricity system. This could involve running the additional
reserve plant at reduced output; that is, at lower efficiency.
In essence, operating a wind generation capacity could involve
the cost of the wind capacity, plus the cost of the reserve capacity,
plus the cost of the reduced efficiency.
CLEAN COAL
TECHNOLOGIES OFFER
SOLUTIONS
16. Clean coal technologies are available
that can deliver substantial, large-scale reductions in CO2
emissions in electricity generation. These include carbon capture
and storage (CCS) technologies that allow fossil fuels to be used
with minimal emissions—the CO2 being put back
underground from where it came. The UK Department of Trade and
Industry is to be commended for the release (June 2005) of its
Carbon Abatement Technologies Strategy. The £25 million funding
announced is an important investment in realising the potential
of CCS and can complement work being undertaken in a range of
countries in this area from which the UK can benefit.
17. Researchers at Princeton University
have made an assessment of CO2 emissions might be stabilised
over the next 50 years to skirt the worst consequences of global
warming. Emissions would need to be trimmed by 7 billion tonnes
per year (a total saving of 175 billion tonnes). From their assessment,
they have identified 15 strategies, each of which could deliver
carbon savings of at least one billion tonnes by scaling up technologies
available today. Three relate directly to CCS:
— Capture and store emissions from
800 coal power stations worldwide.
— Produce hydrogen from coal at six
times today's rate and store the captured CO2.
— Capture carbon from 180 coal-to-synfuels
plants and store the CO2.
18. These three strategies alone could account
for almost half the carbon savings needed by the world.
19. The implication for UK energy policy
is that investment decisions should not divert necessary funds
from this most important area of practical response to climate
change.
RECOMMENDATIONS
20. All forms of low-carbon energy will
cost money, whether coal or gas with carbon capture, renewables
or nuclear. The Renewables Obligation has encouraged investment,
particularly in wind farms. However, wind farms and other renewables—even
with enormous investment—will never deliver the "heavy
lifting" required during periods of peak demand required
in modern economies like the UK. Their introduction can be greatly
assisted through the base load capacity that can be provided through
coal or nuclear and that alone indicates that energy investment
must be sophisticated enough to encourage a mix of energy technologies
and fuels.
21. As the relevant national coal association,
the Confederation of UK Coal Producers (COALPRO) has in the past
made recommendations to government in the UK. The World Coal Institute
commends these to the Committee:
— Encourage investment in the existing
fleet of coal-fired power stations to further reduce sulphur dioxide
and carbon dioxide emissions:
— By actively encouraging the use of
flue gas desulphurisation.
— By supporting a supercritical boiler
retrofit project.
— By reviewing the rules that limit
biomass co-firing.
— Introduce a "Sustainables Incentive"
to promote the construction of a fleet of new integrated gasification
combined cycle (IGCC[389])
power stations where coal can be used cleanly and efficiently
and, ultimately with near-zero emissions.
— Fund further research, development
and commercial demonstration of clean coal technologies, including
those that are needed to capture and store carbon dioxide.
— The benefits for such investment
can go beyond electricity generation eg hydrogen produced from
coal at IGCC power stations can play an integral part in reducing
emissions from the transport sector.
— Keep options for EC-allowable coal
industry aid (investment, operating and closure) open and use
them if necessary to maintain a secure base of indigenous coal
production.
22 September 2005
382 See in particular, Coal in a balanced energy
policy, Confederation of UK Coal Producers, 2005. Back
383
Statistical data on UK energy supply and demand comes from the
Digest of United Kingdom Energy Statistics 2005, Department
of Trade and Industry, London, and from monthly DTI website updates. Back
384
European Energy and Transport Trends to 2030, Directorate-General
for Energy and transport, European Commission, 2003. Back
385
UK proved reserves at end 2004 as reported in BP Statistical
Review of World Energy, June 2005. Back
386
In contrast to oil and gas and uranium, coal is produced in
about 50 countries around the world and remains the most affordable
and reliable of base load fuels, supported by an existing international
trading architecture and technical expertise. Back
387
Including carbon capture and storage. Back
388
p 14, OECD/IEA, Projected Costs of Generating Electricity,
2005 Update. Back
389
IN IGCC systems, coal is not combusted directly, but reacted
with oxygen and steam to produce a syngas composed mainly of hydrogen
and carbon monoxide. The syngas is cleaned of impurities and then
burned in a gas turbine to generate electricity and to produce
steam for a convention steam power cycle. IGCC lends itself to
carbon capture and storage technologies to ensure that carbon
does not enter the atmosphere. Back
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