Coal news and updates

The most under observed recent trend in European energy is the return of coal and the dire state many gas plants are now in, a stark contrast to what is occuring in the United States. To illustrate this consider a few simple statistics. Last year electricity from coal fired power stations decreased by 11%, while electricity from gas increased by 22%. However in the UK electricity generation from coal increased by about 30%, while electricity generation from gas decreased by about the same percentage. This is not the result of new coal plants being built in the UK - none are being built, and any new plants will require carbon capture and storage - or gas plants being decommissioned. It is simply a result of the changes in the relative costs of coal and gas. 

 

The essence of an electricity mix is as follows. You build enough capacity to be able to supply peak demand, some coal, some gas, some nuclear, etc. However what is being fed into the grid at any given moment is based on what plants have the cheapest running costs. Wind farms have no fuel costs, so if it's windy the grid will take the electricity. Uranium is much cheaper than coal and gas, so nuclear runs 24/7 mostly. However the amount of electricity generated by gas and coal plants is very dependent on the relative costs of each fuel.

 

A good example of this is what happened in the United Kingdom last year. Coal was cheap and gas was expensive. The result: coal use went up around 30%, while gas went down by roughly the same amount. An obvious consequence was that the UK's carbon emissions increased.

 

What however would happen if the market ignored price, and only cared about the carbon intensity of the electricity generated? I will refer to this as an "emissions first electricity market." Quite obviously carbon dioxide emissions would go down, but by how much? Fortunately the Committee on Climate Change has estimated the achievable emissions intensity in each year from 2007 to 2012, which is in essence my "emissions first scenario."

 

Predicting future prices of fossil fuels always has an element of shamanism to it, so I am not going to speculate about the prospects of gas becoming cheaper than coal. What about the carbon price? Clearly the carbon price from the emissions trading scheme is having no effect, it's currently the price of a cappuccino from Starbucks (and you can probably hold off on that extra shot of espresso). However we can use the figures above to get a rough idea of how high a carbon price would need to be to make the running costs of gas plants and coal plants very similar.

 

So, here is the current situation. One kWh of gas costs about 5.34 p/kWh and produces about 400 grams of CO2, while one kWh of coal costs about 2.9 p/kWh and produces about 1000 grams of CO2. To make the costs of gas and coal equal we would need a carbon price of around £40/tonne of CO2. This is about ten times higher than the current price on the European Emissions Trading Scheme, and is also much higher than the current carbon floor price of £16 set up by the UK government earlier this year, and even higher than the targeted price of £30 by 2020.

 

 

Source: theenergycollective