Ofgem boss urges debate on IED implementation in UK

26 February 2013 18:07 Source:ICIS

Alistair Buchanan, chief executive of British energy regulator Ofgem, has called for a debate over the implementation of the European Commission's Industrial Emissions Directive (IED) and its effect on the UK's looming power-generation capacity squeeze.

"There is 20GW of coal that is going to have to meet the IED by 2016. Only 6GW have signed up to clean up," he said. "I think that the IED should be up for debate."

Speaking before the parliamentary Energy and Climate Change Committee, Buchanan repeated his concerns that the UK could face a shortage from 2016, which would be augmented by coal plants coming off line if they opted out of the IED. He has previously described the UK's upcoming shortage as a "near crisis" (see EDEM 19 February 2013).

The comments chimed with those he made earlier this month, when he openly deliberated getting rid of the Large Combustion Plant Directive (LCPD) as an option to ease the capacity squeeze.

Buchanan noted, however, that there were several challenges associated with this. They include damage to the UK's reputation, a judicial review, not to mention objections from the utilities that had already invested in cleaning up their plants (see EDEM 20 February 2013).

The coal plants that opted out of the LCPD account for 20GW of installed capacity. As a condition to continue running, they would have to install flue gas desulphurisation equipment.

This now means they are subject to the IED, which stipulates that, by 2016, the plants must either: opt in, and invest in reducing emissions; or opt out.

Under similar rules to those under the LCPD, plants that opt out of the IED will then be allowed to run for 17,500 hours between 2016 and 2023 before closing (see EDEM 8 November 2010).

Legal?

"There would be a number of issues with abandoning the IED. Is it at all legal, and can we do it with regards to the EU?" questioned Lakis Athanasiou, an independent utilities analyst.

One plant that has opted in to the IED is German utility E.ON's 2GW Ratcliffe plant, in Nottinghamshire, England. It is also widely believed that the three of the six units at the 4GW Drax plant, in Yorkshire, will also invest in the IED. The remaining three units at Drax are set to convert to biomass (see EDEM 14 November 2012).

Notably, operator Drax Power said during its 2012 annual results conference that it is postponing its decision on the IED until the end of this year.

"For the remaining 14GW, I don't think they [generators] will commit to investing into cleaning up, especially considering the CO2 tax," Athanasiou continued.

"But by opting out, they could still run off their allocated 17,500 hours in 2016, 2017 and 2018. In this scenario, they would mainly run in the winter, during peak demand.

"If the IED was abolished, I doubt coal generators would continue to run their plants after that because of the CO2 tax. Short-term capacity payments may be required to keep the plants running." Katie McQue

By Katie McQue