Coal Consultation: The Government’s final final final response

The Government has just produced its final final final response to the consultation it set in process over two years ago about ending the presence of unabated coal by 2025.

The response sets out in passing how the government is going to do this, and what measures it is going to put in place to ensure that coal really is off the system by 2025. This is quite welcome because judging from what is in the press, and from government inclusion of the target elsewhere in its documents – it’s a done deal.

Coal is coming off. That’s it. Yippee.

In the Clean Growth Plan, there is just one mention of the plan – ‘we confirm the Government’s intention to phase out unabated coal generation by 2025’.

Now don’t get me wrong. That is a really good thing. I would have liked to see that ambition achieved a little earlier, and in a way that does not encourage coal plants, through what they are getting from the capacity market to run for as long as they can up to 2025.

But the knowledge that finally, all coal is off the system and will not come back except if a plant, at its inception, is fully abated through Carbon Capture and Storage is important to achieve step changes in emissions.

Just as there will be no or very limited space for unabated gas on the system in the 2040s, there can be no space for unabated coal now, with its emission level some seven times what we will have to achieve by the early 2030s.

But does the detail in the response to the coal consultation actually achieve that in practice?

I have my doubts.

The mechanisms for making the commitment real, hinge on first what the government proposes to do about introducing an emissions performance standard (EPS) that impacts so fundamentally that coal cannot operate, and secondly on a reasonable conviction that coals banishment does not create a capacity crisis in 2025 – i.e. that there will be sufficient alternative capacity on the system to make up for what is coming off.

Both contingencies are dealt with in the Government’s paper, and both deserve some examination, because neither are quite what they seem.

It’s not a ban on coal power

The 450gm/CO2 per kWh proposal is a modification of what was in the 2013 Energy Act, as a ‘deterrent’ against the building of new coal fired power stations. That Act set out an EPS of 450g for any plant in any year, and might have deterred some plant from build – but the level set was so broad that future builders of coal plant may not have been deterred, because the formula set out in the bill meant that, provided they kept their running hours down, they could easily keep under the annual limit. Since then, a coal power plant not opting in for various modifications under the Large Plant Directive has been limited to 1500 hrs running a year, or about 17% of installed capacity.

The proposals set out in the 2018 document take that rather flawed proscription a little further with an ‘instantaneous’ 450g limit. This is essentially the retrospective EPS proposed by Labour during the passage of the 2013 Act, and means that a plant cannot escape the effect of the EPS by planned running hours over a year. Rather than being an actual ban on coal in power stations, it instead erects a higher hurdle against coal use.

In order to keep below the generous 450gm per kWh limit it is possible to co-fire, mixing coal with biomass, either within burners, or even by firing each burner with different fuel. A typical power station will have a number of burners (4-6) which operate separately but together constitute the ‘unit’. This means a power station co-firing would have to use only a small majority of non-coal to stay below the limit.

Some commentators on this have downplayed such suggestions, citing the non-qualification of coal for carbon tax exemption and the probable reduction in support for co-firing from government in the future as reasons for discounting scenarios in which coal survives as a fuel through co-firing. Those assessments look fairly sound under present circumstances but…

The emergency provision caveat

Here we come to the second evasion within the new strategy, and it is important that the two are considered together.

The report says the Secretary of State should have ‘the power to suspend or amend the arrangements in case there were significant and imminent concerns about security of supply’.

As is pointed out, there is an emergency provision for raising the EPS in place in the 2013 legislation, using similar concerns as the trigger. The document states that the new emissions intensity limit proposals should follow the model set out in the 2013 legislation, which allows for the emission limit to be either modified or suspended under ‘emergency ‘conditions. These are broadly that capacity to ‘keep the lights on’ appears to be lacking.

What might that mean in practice?

We know that the capacity margin debate is less than precise these days, because of the reality of the various ways in which supply and demand can now be balanced.

However, it is the old measure of ‘capacity’ that the Department seem to have gone for in their appraisal of what an ‘emergency’ might look like in the Impact Assessment handily provided alongside the new report.

This among other things appraises what is a ‘likely’ scenario for old style capacity measures up to about 2025, and in so doing, makes the quite astonishing calculation that capacity margins will probably be OK, because the capacity market will ensure some 7.5 gigawatts worth of new mostly combined cycle gas turbine (CCGT), built out to 2025, something it hasn’t been able to do so far.

Will coal plug the gas gap to 2025?

We already know from the pre-qualification for the next rounds of capacity auctions (i.e auctions for capacity in 2018/9 and 2022-23, the so-called T-1 and T-4 auctions) that there is some but not huge amounts of CCGT plants in for the auction.

There is also a preponderance of existing plants bidding for one year contracts, with ironically a large representation from coal eager to gain capacity contracts to keep them in business over the next few years.

It is ironic, by the way, because it is likely that these continuing coal fired plants that have been allowed into the auction, being old and amortised, will bid very low into the auction, driving the overall ‘clearing price’ down, freezing out new plants seeking longer term contracts, which need a higher clearing price to be viable. Allowing coal to do this drives away the very CCGT plants that might avoid the need for the ‘emergency provision’. Ho-hum.

We will know whether some or any of these gas plants does in fact get a contract when the auction is held in February – but the prospects do not look good. Just one small CCGT plant has been supported over four auctions.

Coal could make a comeback

So the likelihood is, on present policies, that there WILL be a scenario which predicates the ‘emergency’ set out in the escape regulations, at which point coal would, presumably be allowed back on the system in some form.

And what you might then ask would this form take?

Well it wouldn’t of course be simply firing up present coal burning plants – with one exception – and for various reasons it is almost certain that all but one plant will be off the system anyway before 2025. Indeed some are already considering whether to convert to gas firing before that point.

And anyway, the provisions of the ‘emergency relaxation’ appear to specify that relaxation would be for specific periods (although 2013 legislation looks to, in principle a longer term cancelling or widening of the EPS under particular circumstances).

What might then be the candidate for such relaxation…?

Well, co-firing looks to be the one: it is relatively easy to change the mix: plants that are in operation can relatively easily be repurposed: which is why scepticism about the role that co-firing might play in the survival of coal on the system might be, in the longer term a little misplaced.

A real coal phase out

The takeaway is, I think, that coal is by no means destined for certain retirement in 2025 according to the formulations set out by the Government.

Wouldn’t it perhaps be easier and more certain simply to produce a one (or maybe two) clause Bill that simply says something like ‘from the 31st March 2025 no unabated coal may be burned in any power station or similar plant in the UK’?

After all the government tells us that the ponderous EPS system they have suggested needs primary legislation in the not too distant future: it might save a lot of people a lot of time and effort to phrase that necessary legislation in these terms – and we would know for certain something that we know has to be certain – that for the future unabated coal would have no place on the power system, and that we shouldn’t have to worry about its high emissions and heavy pollution coming back to haunt us in years to come.

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