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Dirty dozen

Energy Coal

Coal, which fuels a third of UK electricity, may have as little as 12 years left to burn.Andrew Mylius investigates.

Coal fired power generation is caught in a three-pronged pincer movement of environmental legislation. As a result, economists specialising in the energy sector, climate change campaigners, business lobbyists and generators themselves reckon coal-fuelled stations, contributing some 35% of UK electricity, could have the life squeezed out of them by 2016.

A new European Union (EU)-wide carbon trading market launched a fortnight ago and set to go live next year will clamp down on CO 2emissions.

The government is to set in train another piece of EU legislation, the large combustion plants directive, this spring. The directive comes into force in 2007 and will impose stringent cuts in sulphur dioxide (SO 2), nitrogen oxide (NOx) and particulate emissions. And integrated pollution Prevention and control (IPPC) legislation, coming into force in 2006, demands that power stations employ 'best available technology', or BAT, to curb negative environmental impact.

The power sector is holding its breath to find out just how grave the economic impact on coal will be (News last week).

'Coal's under pressure. The way things are going I can't see it being in business for too long, ' confesses CBI senior environment policy advisor Alice Castell.

'Coal has a future but it's limited, ' confirms Mike Kegan, corporate environmental manager at generator International Power. 'The trick for us is how best to manage coal's decline. It'll be progressive.'

Carbon trading sets each member country of the EU a limit for CO 2emissions. On a national scale this allocation is broken down, with carbon 'permits' handed out to industrial sectors by governments. The UK government has published a draft 'national allocation plan' setting out which industries will be required to make what cuts in their CO 2output.

'Figures show coal will be expected to take a big cut in the first trading period (2005-8), and things will get tougher in the second period to meet the government's target of reducing CO 220% on 1990 levels by 2010, ' sums up Friends of the Earth climate change campaigner Bryony Worthington. Compared to other major greenhouse gas producers, cuts demanded of power generators will be disproportionately large, she says.

What this means for polluters is cost. Initially industry will not be able to meet the government's targets: firms will be able to buy unused portions of other companies' CO 2allocations.

Failing this, they will be hit with a crippling financial penalty.

'Coal starts feeling the pinch immediately because coal generators are given a proportionally smaller CO 2allocation than gas, ' Worthington points out.

Compared to gas, coal production of electricity produces a third more CO 2 per kWh.

'Generators will be forced to pass on the cost of carbon to their customers and it won't take long for coal to lose market share to lower carbon generating technologies, ' concludes Brian Ricketts, chairman of lobby group the Coal Research Forum.

The looming abyss of carbon trading is causing some operators of coal fired power stations to think hard about the economic case for modernising their operations. IPPC regulations demand that generators equip their stations with 'best available technology' to curb emissions and improve efficiency. Around half of UK coal fired stations have been fitted with flue gas desulphurisation plant (FGD), which chemically scrubs SO 2from the exhaust stream. They are also under pressure to scrub out NOx and particulate pollution.

'Once IPPC's in place, generators will need to install BAT to continue operating. The technology will need to be in place by the end of 2007, ' says Castell. With a 28-30 month design and construction period for FGD, firms need to set projects in train this year to meet the deadline, says Duncan Thew, International Power's project manager for development of a £50M+ FGD at Rugely, Staffordshire.

But without any certainty over the future of coal fired generation it is impossible to justify the outlay right now, he adds.

Coal's final stumbling block will be the large combustion plants directive. Sulphur can be limited either by installing FGD or by burning low sulphur coal, imported from abroad;

British coal has a high sulphur content and cannot be burned without FGD.

The industry was hoping that under the directive SO 2allocations would be national, enabling trade of credits between high and low SO 2emitters. If a plant closed down this would result, it was assumed, in its allocation being redistributed to other coal fired plants.

But this does not appear to be the case, says the CBI's Castell.

The national SO 2'bubble' will decrease as fewer coal fired stations continue to operate.

Under the directive there is a 'do nothing' option, she adds.

But as this involves progressively cutting back operating hours, leading to closure of the power station in 2015, it is a choice of last resort.

'I hope we can find a way of avoiding this situation, ' she says grimly. For many operators, however, 2016 may be the year the power is turned off.

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