Select Committee on Environmental Audit Written Evidence

Memorandum submitted by the World Coal Institute


  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.


  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 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].



  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.


  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

    —  clean coal.

  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.


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.


  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.


  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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