Examination of Witnesses (Question 600-619)
MR GERRY
SPINDLER AND
MR CHRIS
MAWE
20 JUNE 2006
Q600 Chairman: You remind us in your
memorandum that the DTI thinks that coal is going to give us about
17 per cent of total energy needs, 34 per cent electricity generation
over the next ten years or so. Given that there are tougher environment
standards for coal-fired plants and the Large Combustion Plant
Directive and so on, do you think that 34 per cent figure for
electricity generation is likely to be a realistic figure? Will
there be enough coal plants around to meet those higher standards?
Mr Spindler: The 34 per cent is
probably realistic. Coal plants tend to be like the old family
axe. It has had three heads and six handles but it has been in
the same family for 200 years. The capacity for these plants to
have their lives extended through more complete turnarounds and
reinvestment is probably being underestimated.
Q601 Mr Weir: What about the longer
term? Is there a longer term future for coal as a generating fuel?
Does it depend on the practical feasibility of carbon sequestration?
Mr Spindler: It is almost an inevitable
fuel. How carbon sequestration treats it will determine what its
relative cost is but compared with other forms of fuels and the
existing technologies we see on the horizon it will always have
a place.
Q602 Mr Weir: What about its place
in the generation mix? You are talking about 34 per cent over
the next ten years. Do you see that increasing, decreasing or
staying the same in the longer term?
Mr Spindler: Certainly it will
stay the same. The kind of demands that are going to be made on
the grid and the kind of demands that coal-fired plants are particularly
adept at meeting—for example, base load generation—are
going to be more significant requirements of the electrical needs
in future years.
Q603 Chairman: On the question of
carbon sequestration, give me a sense of how important that is
going to be in determining the future of UK Coal.
Mr Spindler: I am not sure that
I understand completely.
Q604 Chairman: A lot of faith has
been pinned on carbon capture and storage.
Mr Spindler: Yes. I am not sure
I understand the costs for a viable mechanism for completely converting
all of the power plants in the UK to a carbon sequestration scheme
in the near future. As a matter of fact, I do not. The US, for
example, has gone to a broad approach of coal gasification which
does not eliminate carbon but cuts it in half by changing the
nature of the fuel the plant burns. Clean coal technologies will
add to that, but what carbon sequestration can contribute is yet
to be determined.
Q605 Chairman: That is quite a worrying
statement from an industry that is seen to be one of the major
sources of carbon dioxide production in the generating sector.
Our sister committee, the Science and Technology Committee, is
very excited about the prospects for carbon capture and storage.
It suggests a series of regulatory changes the British government
should make and international commitments. It should renegotiate
international treaties; it should clarify and permit massive adoption
of carbon capture and storage. Would you encourage going down
that route, to make sure that can be adopted?
Mr Spindler: I would have to understand
the technology first and, bluntly, I do not.
Q606 Mr Hoyle: I wonder if you can
let us know what percentage of coal used by electricity generators
is imported at present?
Mr Spindler: A little over 50
per cent is currently imported.
Q607 Mr Hoyle: As near as damn it
of the other 50 per cent, do you know how much is deep mined and
how much of it is opencast?
Mr Spindler: It is 50/50 approximately
on that remaining half so deep mines account for 25 per cent currently
and surface mines account for the other 25 per cent of the total
coal requirements.
Q608 Mr Hoyle: Do you think UK Coal
has a future?
Mr Spindler: I do. UK Coal can
produce the ten million tonnes it currently does comfortably at
today's market price. It is competitive, it does not need direct
support and possesses the ability to contribute significantly
to the coal mix and to energy security for the country. The tonne
that we do not produce that will be imported will increasingly
be imported from Russia which is the current swing supplier for
all imported coal. The imports from Russia have increased dramatically
over the last year or year and a half.
Q609 Mr Hoyle: A significant volume
of coal does come from Russia and South Africa in reality. Is
the reason for that that at the moment with price levels there
is not much in it? When I was talking to a representative of Powergen,
they said that the advantage of Russian coal is it is very low
in sulphur.
Mr Spindler: It is low in sulphur.
Q610 Mr Hoyle: That gives them an
advantage in something that is better for the environment.
Mr Spindler: If you have an FGD
equipped plant, you should be indifferent to that advantage. The
Russian coals that are imported are significantly different from
the market varieties of coal available through Amsterdam because,
first of all, they are adapted for small ships. They come out
of Murmansk. Neighbouring ports have a slightly higher freight
rate and are suited to land into the ports in the UK which will
only take smaller ships, but they are priced independently of
the ARA.
Q611 Mr Hoyle: The future is good
for Russian and South African coal?
Mr Spindler: It is better for
Russian coal for the UK. South Africa will not be the swing supplier.
Q612 Mr Hoyle: Do you think there
is a future? Do you think you may sink a shaft in the future?
Mr Spindler: No. The price that
is currently available on the ARA, while quite sufficient to generate
the investment to offset new developments in existing mines or
existing shafts, is not enough to start sinking new shafts, particularly
in the regulatory and planning regime in the UK. I would suggest
that, with one possible exception at Daw Mill, the UK has seen
its last shaft for coal under current economics.
Q613 Mr Hoyle: That is interesting
because there are rumours around that CORUS were looking to look
for coal extraction through a shaft.
Mr Spindler: I understand that.
Q614 Mr Hoyle: Therefore, there may be
a future after all.
Mr Spindler: There certainly would
not be for the steam coals of northern Yorkshire and Nottinghamshire.
CORUS is of course looking to exploit the Welsh metallurgical
coalfields, a different market altogether.
Q615 Mr Hoyle: Will the alternative
be to raid the countryside through opencast?
Mr Spindler: The alternative will
be imports.
Q616 Mr Hoyle: I thought you said
there was a future for UK Coal. Maybe there is not.
Mr Spindler: I think there is.
We have existing reserves from the shafts we have now to last
for 10 to 20 years, depending upon what the burn is. If that tonnage
is not there the replacement will come from imports.
Q617 Mr Hoyle: You see the end of
deep mined coal within 20 years?
Mr Spindler: I could not predict
the exact period.
Q618 Mr Hoyle: Thereabouts?
Mr Spindler: We have reserves
to go for 20 years, depending on the market. Our reserves are
pretty much price dependent. You can extend those reserves even
further and at some point perhaps even sink a new shaft. It depends
on the price that the BTU or the gigajoule commands.
Q619 Mr Hoyle: If the price is right
there could be a new shaft in the future but it would have to
be reviewed as and when?
Mr Spindler: It would have to
be reviewed and it would require much higher prices than exist
now. Under current economics, there is not the ability to put
down a new 1,000 metre shaft to access new base reserves.
| 
