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UK coal-plant closure move gains CCGT investors’ support

05 Nov 2013 14:42:14 | csd

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An amendment has been added to the UK energy bill that could put pressure on up to 15GW of coal-fired power plants to close earlier than initially thought.

Amendment 74 is backed by potential investors in gas-fired power plants, according to Bryony Worthington, the House of Lords member behind its introduction, on grounds it would create more certainty over the make-up of the country’s fossil-fuelled electricity generation mix in coming years.

Across the UK at least 12 coal-fired power plants totalling around 15GW of generation capacity fall outside of the EU’s large combustion plant directive (LCPD), which has forced the closure of around 8GW of capacity.

This contributed to an “imminent electricity capacity crisis”, the outgoing chief executive of energy regulator Ofgem warned earlier this year (see EDEM and ESGM 19 February 2013 ).

But the energy bill does little to clarify what will happen to the 12 remaining plants in coming years, Worthington said during a House of Lords debate on Monday evening, because uncertainty is created by the emissions performance standard (EPS) – a measure intended to cap levels of pollution from coal-fired plants, but one that does not apply to plants seeking life extensions.

This is an apparent loop-hole that amendment 74 is intended to close.

“The government’s policy is not to support the application of an EPS to coal seeking life extensions... as long as this question over 15GW of coal is allowed to remain unanswered, how can any investor in replacement capacity move forward?” Worthington said.

The House of Lords voted to include the amendment by 237 to 193.

But it must be approved by the House of Commons before it can become law, meaning the relevant section of the bill is now in a state known as “ping-pong” where it can be batted back and forth between houses until agreement is reached.


Base-loading

Coal-fired power plants in the UK have been running as baseload over the past two years on the back of generous profit margins, or dark spreads.

This has lifted the carbon intensity of the country’s power generation mix, compared to a supply infrastructure in which coal is the marginal plant, which historically had been the case.

The 12 plants outside of the LCPD in the UK have tightening air quality regulations in front of them under the EU industrial emission directive (IED), in effect an extension to the LCPD. The IED encompasses all remaining coal plants, which will affect their operation from 2016.

The IED offers plants a number of options, including opting out and closing by 2023, converting to burn biomass or refurbishing to meet emissions standards.

“In that situation, they would certainly wish to continue base-loading, since they would have made new capital investment on which they would want to seek a return,” Worthington said.

But amendment 74 would make closure dates for older coal plants more certain, a move that supporters of the measure hope would encourage investment in new combined-cycle gas turbine (CCGT) power plants.

Opposition

However, those opposed to the amendment said there could be negative implications for both supply security and cost:

“While we do not expect large numbers of coal plants to invest in clean-up equipment, a very small number of our more efficient plants may wish to do so. This amendment is very likely to deter that investment,” House of Lords member Sandip Verma said during the debate.

“In this scenario, more coal stations would have their operation constrained, and there could be more stations closing around the end of the decade than might otherwise be the case. This could require more gas plants to be built earlier to fill the gap at greater cost.”

The UK is facing a capacity crunch, with the pinch point expected in winter 2015 and 2016 ( see EDEM 27 June 2013 ) Jamie Stewart

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