Memorandum submitted by UK COAL Mining
EXECUTIVE SUMMARY
1. Greater emphasis should be placed on
indigenous coal as part of a diverse, secure and affordable energy
policy
2. Current planning policy on new fossil
fuel stations, which only requires CCS on coal plant, is influencing
developers build gas to meet the forthcoming energy gap. This
will have a negative effect on both security and affordability
of supply.
3. New gas fired power stations should be
subject to the same requirement to fit CCS.
4. The current winter cold spell has highlighted
our reliance on gas with two national balancing alerts in the
first week of January and many industrial consumers having their
supply cut off. Future planned gas build will exacerbate this
position.
5. Coal fired generation could virtually
disappear from the UK electricity mix in the mid 2020s with only
the four UK Government supported commercial demonstration stations
in operation.
6. The uncertainty over the future size
of the coal market for power generation is hampering current investment
in deep mines which has a long development lead time and payback.
INTRODUCTION
7. UK COAL Mining (UKC) welcomes the opportunity
to submit evidence to the Energy and Climate Change Committee
looking into proposals for National Policy Statements (NPS). UKC
is Britain's biggest producer of coal, supplying around 5% of
the country's energy needs for electricity generation. The Group
has four deep mines located in Central and Northern England with
substantial reserves and employs 3,100 people. Around 95%
of the Group's 8Mt/year production supplies the electricity generation
market and as such we are heavily influenced by policy objectives
affecting the electricity sector.
OVERARCHING NPS (EN-1)
8. UKC supports the high level statements
contained within EN-1 that "it is critical that the
UK continues to have secure and reliable supplies of electricity"
and that the UK needs a "diverse mix of technologies and
fuels". Secure and reliable energy is a vital component of
a developed society. UKC agrees that the forthcoming energy gap
requires that the planning system is streamlined to ensure that
decisions on energy production and infrastructure are made quickly.
9. However we are disappointed that the
document doesn't acknowledge the role that indigenous coal plays
and can play in the UK's energy mix and places significant emphasis
on nuclear, renewables and the continued importation of gas.
10. In 2008, coal provided 31% of the UK
electricity supply of which indigenous coal was responsible for
35% of this figure. Therefore 11% of the UK's electricity supply
was as a direct result of the indigenous coal industry.
11. There is currently 28GW of coal plant
on the UK grid, of which 8GW is due to close before 2016 as
a result of the Large Combustion Plant Directive (LCPD). This
is likely to fall very rapidly post 2016 as a consequence
of the Industrial Emissions Directive (IED). The IED will result
in the total closure of all existing coal plant unless significant
investment in Selective Catalytic Reduction (SCR) is made by 2023.
At present this is not likely to go ahead without greater certainty
about the role of coal in the low carbon economy and what CO2 emissions
are permissible. There is clearly some risk that, by 2023, all
of the coal-fired power stations that are currently running will
be closed.
12. Coal-fired power stations provide security
and diversity of supply. They are also able to respond more quickly
to peaks in demand on the electricity grid than either gas or
nuclear stations. This provides a vital "load following"
capability, which ensures that the National Grid is able to meet
fluctuations in electricity demand. As we become more reliant
on intermittent wind generation this function will become ever
more important. Also coal, unlike gas can be easily stored in
anticipation of future energy demands.
13. UKC believes that Carbon Capture and
Storage (CCS) is vital if coal is to play a significant role in
the UK's long term diverse and secure energy mix. It is therefore
important that CCS development is undertaken in a timely manner
and that National Policy Statements are compatible with this approach.
UKC welcomes the Government's announcement that it will provide
financial support for four commercial demonstration projects of
300MW net, but is concerned that no further build may be forthcoming.
14. To combat the forthcoming energy gap
caused by the impending closure of coal and nuclear stations the
UK market has chosen to build gas generation plant. At present
there is a new "dash for gas" underway, with 7.4GW currently
in construction. The UK is already heavily dependent on imported
gas and was the 5th largest gas consumer in world in 2008 with
3% of the global total after; USA, Russian Federation, Iran and
Canada. The continued build will put further pressure on our need
to import energy from an already highly competitive international
market.
15. The choice to build gas plant has been
caused, in part by Government policy which requires the fitting
of CCS to all new coal stations from day one, but does not impose
the same requirement on new gas build. Government policy on new
gas build only requires that the plant is Carbon Capture Ready
(CCR) before consent may be given. The definition of CCR requires
land to be available and a technical and economic feasibility
to be undertaken, but does not include a mandatory date when CCS
must be retrofitted. This result of this policy is to further
exacerbate the UK's security of supply position and lock in long
term carbon emissions.
16. The UK's reliance on gas has been highlighted
during the current winter cold spell. In the first week of January
the National Grid issued two national balancing alerts and over
200 industrial customers on interruptible contracts had their
gas cut off. During this week it was coal fired power stations
which helped keep the lights on, supplying over 50% of demand.
Also there is no doubt we have been helped in meeting this winter
demand by the current economic downturn which has partially offset
power requirements. In future years as the economy recovers the
demand from industry will be far greater.
17. Investment in coal power stations is
an essential requisite for the long term future of the indigenous
coal industry. The long lead time involved in mining projects,
especially new deep mine schemes means that it may be seven or
eight years before the first production arrives and would require
a further 10-15 years in order to make a return on the substantial
investment required.
18. The uncertainty over the future market
has meant mining companies have found it impossible to raise finance
for viable schemes which would enhance UK energy security and
provide valuable employment. One such example is at UKC's Harworth
Colliery.
19. Harworth Colliery is situated in North
Nottinghamshire and is currently mothballed following the exhaustion
of the reserves in the Deep Soft seam in 2006. Boreholes and seismic
exploration have identified up to 54Mt in the Top Hard seam which
would be suitable for the local power station market. If the project
went ahead the mine would produce in excess of 2 Mt per annum,
which would directly replace imports as well as providing employment
for 550 employees.
20. The overall cost of the scheme would
be around £200 million. In the current economic climate UKC
has failed to attract investment from traditional sources and
has subsequently approached the European Investment Bank (EIB).
The EIB[318]
have targeted energy production and security as a priority area
for lending, but UKC has been told that although the scheme meets
the criteria for funding in terms of creating jobs in an area
of high unemployment, security of supply and return on investment;
it fails in terms of its "low carbon green credentials".
Therefore in order to secure funding from the EIB, they would
require coal to be sold to a power station with CCS installed.
Hence there is a further urgent need from a coal producer's perspective
to see many CCS coal stations up and running within the UK as
soon as possible to provide a continuation of the market.
FOSSIL FUEL
POLICY STATEMENT
(EN-2)
21. Despite its title, this document is
mainly concerned with conditions for new coal fired plant. It
takes its direction from the overarching EN-1 document which
as stated above requires partial CCS to be operational on all
new coal stations from the start of operations and to be completely
retrofitted by 2025.
22. The planning system should not put barriers
in place which would delay or discourage the building of new coal
fired plant. In this respect, UKC is concerned that there should
be a conditional consent requiring CO2 pipeline and storage
consents to be in place before construction commences. In
an emerging technology, these consents will take time and this
condition risks imposing major delays in an area where rapid progress
is essential. The estimated two years quoted by the Government
before consent could be given, may deter operators to simply build
unabated gas stations as a simpler and quicker alternative, with
consequent long-term security of supply, price and high carbon
lock-in risks.
23. Also UKC would wish to see a condition,
at least for the publicly funded CCS demonstration plants, that
new coal-fired power stations can accommodate indigenous coals.
Indigenous coal production is an important constituent of our
energy security and CCS stations should be designed to burn the
quality characteristics associated with UK coals which are not
typical of international traded coal, ie higher sulphur and chlorine
levels.
24. An example where power station operators
have made such investment in the past is in flue gas desulphurisation
(FGD) equipment. Certain FGD coal stations in the UK can only
meet SO2 emission standards by burning low sulphur imported
coals. This is because they have opted to cut capital costs and
not install a full blown system which would remove the higher
sulphur levels associated with indigenous coals.
January 2010
318 The EIB takes its guidance from the European Commission
and its Board of Governors. Each EU Member State appoints one
member to the Board, normally the Finance Minister. The UK representative
is the Chancellor, Alistair Darling. Back
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