Could old coal threaten the UKs carbon budgets?
Keeping old, polluting coal plants open could threaten the country’s ability to reduce its carbon dioxide emissions, argue campaigners. The House of Lords is due to vote on a measure on Monday that aims to stop that happening.
Coal is still the biggest single source of the UK’s electricity. But as the UK shifts to a low-carbon power system, the government assumes our old coal power stations will be phased out. A complex web of different different pieces of legislation will interact to make old coal plants uneconomic, the government predicts.
But the changing economics of coal may mean power companies decide to keep the coal power stations open, threatening the country’s ability to reduce greenhouse gas emissions and hit our carbon budgets. A vote in the House of Lords next week could be about to decide whether old coal keeps going in the UK, or not.
Phasing out coal?
Coal power currently accounts for about 35 per cent of the country’s electricity generation, according to government statistics. But many commentators assume that coal is on the way out in the UK – for three reasons.
First, the government has introduced legislation – known as an emissions performance standard – limiting emissions from new power plant to 450g per kilowatt hour of electricity.
That’s about half what an average coal power stations emits. The measure gives companies that want to build new coal power limited options – install expensive capture and storage technology, combine burning coal with burning biomass, or run the power station for only part of the year. Or abandon coal and – the government hopes – build gas plants instead.
Second, the EU’s Large Combustion Plant Directive (LCPD) requires old coal generators to upgrade their plants, limiting their sulphur dioxide and nitrogen oxide emissions, or close down. Installing the equipment to upgrade to old, polluting power plants is expensive, so commentators have assumed that power operators are more likely to close the power plants down.
Finally, the European-wide carbon price is meant to make it more expensive to run carbon-polluting coal power plants in the future – meaning the power suppliers are more likely to turn to gas or renewables.
The measures could all combine to persuade operators to shut down their old coal power stations and concentrate on other fuels instead.
The changing economics of coal
The economics of coal is changing, however – and the old assumptions may not hold true.
Over recent months there has been something of a European coal revival. One reason is that the US is currently able to exploit cheap shale gas and is therefore exporting cheap coal to Europe. So it’s now cheap to buy coal.
It’s also cheap to burn it. The carbon price, set by the EU-wide Emissions Trading Scheme, has also fallen to a record low in recent months. The EU is working on reforming the scheme, but there’s no guarantee the carbon price will recover.
There is one measure that could still make coal unattractive – but it’s under threat as well. The UK government has unilaterally introduced a top-up tax to the ETS, which sets a ‘floor’ to the carbon price and prevents it falling too low. But the scheme is expensive, and a number of commentators from different parts of the political spectrum are urging the government to get rid of it.
Will old coal power stations be shut down?
So overall, the policy mechanisms that are meant to make it uneconomic to burn coal in old, polluting power stations aren’t looking as strong as they were.
The UK has a number of old coal power stations still running – many of which have been going since the 1960s. Under the LCPD, these power stations need to either fit the expensive filtration equipment to filter out health pollutants, or close down.
Analysis by Carbon Connect suggests power companies are going to choose to adapt their plants, rather than close them down. It asked the generators about their plans – and concluded 15 gigawatts of coal power going could keep going “well into the 2020s”. Keeping these coal power stations open and burning coal would mean a lot more greenhouse gas emissions.
What’s more, the government could be paying for it. Under the new energy bill, coal power stations could receive payments from governments known as capacity payments. Operators could use these payments to pay the filtration equipment to clean up their power stations and comply with the LCPD , according to Labour peer Bryony Worthington.
If the country wants to reduce greenhouse gas emissions, that doesn’t make a lot of sense – as old coal fired power stations are both inefficient and very carbon polluting.
Carbon price means it doesn’t matter?
The energy industry argues that this doesn’t matter what individual power plants do – because EU-wide carbon price and set an overall limit on the greenhouse gas emissions from the whole system.
The carbon price may be in the doldrums at the moment, but when they’re investing in power stations generators have to think long-term.
Jeremy Nicholson of the Energy Intensive Users group tells Carbon Brief:
“It would be a brave investor who proceeded on the basis that there’s always going to be a low carbon price. There’s more likely to be an increasing carbon price in the 2020s on a national and international basis, and investors know that”.
So power companies won’t gamble on a low carbon price in the long-term – and are therefore more likely to turn away from coal.
A House of Lords amendment
Worthington, along with Lib Dem peer Lord Teverson, has introduced an amendment to the Energy Bill that would prevent old coal power stations from emitting greenhouse gas emissions indefinitely.
The amendment, which is due to be voted on on Monday, would extend the emissions performance standard to include old coal plants that stay open, rather than closing down under European legislation. In other words, operators that choose to clean up their old coal power stations and keep them open will also need to reduce their carbon emissions.
The amendment was previously introduced in the House of Commons, but it was voted down. Worthington says she doesn’t know whether the government will support the measure or not. If the government opposes it and it goes to a vote, then it would require a sizeable Lib Dem rebellion, a lot of unaffiliated peers and Labour peers to support the measure, so it’s by no means guaranteed.
Predicting the future is difficult, particularly where energy prices and complex pieces of European legislation are concerned. Over the next decade or so, the price of gas could go down and the carbon price could go up – both changes that would make coal less attractive in comparison to gas.
Or the reverse could happen, creating more financial incentives for operators to keep their coal plants going. If the House of Lords vote doesn’t go through, there’s a chance that old coal could continue to rule in the UK for some time to come.