Select Committee on Trade and Industry Written Evidence


APPENDIX 48

First supplementary memorandum by RWE npower

1.  BACKGROUND

  1.1  In our original evidence to the Committee's present inquiry, we noted that an energy policy which promotes a diverse energy mix for electricity generation represents the best way of achieving carbon reductions and security of supply. Although environmental legislation is set to erode the role that current coal-fired stations play, we believe that diversity, and an adequate overall capacity margin, could be achieved by keeping existing plant that is technically fit open to contribute to meeting the growing electricity demand and maintain a diverse generation portfolio until such point where new, low carbon technologies (including clean coal) are commercially and technically available.

  1.2  RWE npower currently operates three coal-fired power stations in the UK (see table below). Coal for the stations is procured by our sister company, RWE Trading. Our total coal burn in 2005 was 7,089 kilo tonnes and of this 85% was supplied through imports.

Table 1

RWE NPOWER'S COAL-FIRED POWER STATIONS
Power StationCapacity (MW) Location
Aberthaw1,500South Wales
Didcot A2,000Oxfordshire, England
Tilbury1,400Essex, England


  1.3  All three of our coal-fired stations are located in the southern part of the UK and well placed to receive imported, low sulphur coal. Both Aberthaw and Didcot A are directly linked by rail to the Bristol Port terminal. Tilbury, on the River Thames, has its own dedicated coal import facility and does not have a rail link.

  1.4  Aberthaw is designed to burn the low volatile coal indigenous to South Wales but also available internationally. Presently, the station burns between 30-50% Welsh coal with the balance being sourced internationally. This is driven by two factors: firstly, the availability of power station coal in Wales; and. secondly, environmental limits on emissions of sulphur dioxide (SO2) which are applied on an annual and instantaneous basis. To meet these emission limits and maintain current levels of generation, sulphur levels in coal must be on average of less than 0.6%. As Welsh coal is typically 1% sulphur, we are obliged to import low sulphur international coal to comply with our limits.

  1.5  On the completion of the flue gas desulphurisation (FGD) plant currently under construction at Aberthaw we will be able to burn coal with a higher average sulphur content. We are presently in discussions with suppliers about the future availability of Welsh coal and are willing to purchase further supplies provided prices are competitive with international prices. However, as the majority of existing Welsh sources are coming to an end, extensions to existing mines or new mines would be required. We note that, presently, delays in securing consents and planning guidance issues are hindering the development of new sources of Welsh coal.

2.  THE IMPLICATIONS OF COAL IMPORTS

  2.1  By comparison with gas, there is a diverse range of global sources, minimising supply risks in the event of interruption from politically unstable regions. The size of the world steam coal market is around 520 million tonnes and the coal burn of UK generators is currently about 9% of the world market. As a dry bulk commodity, which can be sourced and easily transported internationally (for example, from America, Australia, South Africa or Russia) coal is easy to handle and can be delivered in multi-purpose ships of a variety of sizes.

  2.2  Although this huge market with its wide range of sources and ease of transport and delivery offers a high degree of supply diversity, it is unlikely that the UK would become over-reliant on coal imports. This is because, as the EU emissions trading scheme develops, the requirement to reduce carbon emissions and the associated price of carbon allowances will constrain the amount of coal that can be burnt in UK power stations. In the future this barrier may be lifted by the introduction of clean coal technologies. We have recently announced our plans to undertake a feasibility study into the construction of a "clean coal" power plant at our Tilbury power station on the Thames Estuary. The new carbon capture and storage technology could be ready by 2016 and could reduce the station's CO2 emissions levels by as much as 90% per year.

  2.3  As indicated above, we are interested in sourcing further supplies of coal from UK suppliers provided it is available at competitive prices. However, although UK coal enjoys a significant transport cost advantage, it has high production costs and is generally of poorer environmental quality than imported coal.

5 June 2006





 
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