In the
run-up to the UK elections the main political parties are vying with
one another to appear tough on old, polluting coal whilst at the same
time trumpeting their support for clean coal with CCS. But what does
this mean in terms of action, when will the first power station with
CCS be built and will the UK end up leading or lagging the field in
this race?
Although there are differences at the detailed level, there is cross
party consensus on the major policy issues, such as no new coal without
a proportion of CCS capacity from day one. Nevertheless,
regardless of which party occupies No. 10 Downing Street after the
election, the UK will continue to be one of the leaders in emissions
stringency.
Launching the UK’s new industrial strategy for clean coal in March,
Secretary of State for Energy and Climate Change, Ed Miliband, said,
"Coal is the most abundant worldwide energy resource but it is also the
most polluting, so there is no solution to climate change without it."
But despite the enthusiastic words and plethora of reports and
policies, the competition to develop the world’s first full-scale CCS
demonstration project initially announced in 2006, will have to wait
another year for the winner to be announced.
The Conservative Party also launched their energy policy in March
saying, keeping coal in the energy mix will be an enormous challenge,
but went on to say: "We will bring the current CCS competition to a
rapid conclusion….. Avoiding the pointless delays seen so far, we will
expand the demonstration programme to at least four facilities…. and
include both pre-combustion and post-combustion technologies.”
Fine words again, but what does this mean for investors, coal suppliers
and power station operators? At the same time, concerns mount about the
generation mix in 2016, after a number of older plants are forced to
close by the Large Combustion Plants Directive. The outcome of the
Industrial Emissions Directive will largely determine how long the
remaining coal plants will survive beyond 2016. Even with the most
bullish scenarios for new coal plant, the UK will see a major reduction
in the quantities of coal burnt, at least in the medium term. And all
this is before any considerations of relative prices of coal and
competing fuels, mainly gas.
When the UK liberalised its power markets from the early 1990’s it was
seen as a pioneer in Europe, but, under the new system, generators
initially failed to fit clean-up equipment for SOx and NOx, and are now
questioning the investment signals for new plant. A currently
depressed EU Emissions Allowance price, along with uncertainties in
investment and carbon rules going forward, is failing to incentivise
investment in low carbon generation without additional subsidies or
market mechanisms. Many players and commentators are calling for the
market to be reformed, or even for the clock to be turned back and a
‘Central Energy Buyer’ to be set up.
Will the rest of Europe follow the UK with its clean coal policies, as
the UK government would like, and what will be the outcome of EU
policies for both existing and new coal-fired power stations? Energy
Edge has the expertise both to track policy developments and model
potential outcomes for the coal market. If you would like to discuss
further how all this may affect your business, contact Nigel Yaxley at Energy Edge
today. |
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