Government kills off coal

Energy secretary Amber Rudd tells coal power stations: convert by 2025 or die. Long live gas?

by Adam Gale
Last Updated: 26 Jan 2016

If for some reason you were planning to build a smoke-spewing coal power station any time over the next 10 years, forget it. Energy secretary Amber Rudd has confirmed today that burning the shiny black rock is ‘perverse’ for a 21st century nation like Britain, and its use will be phased out by 2025.

‘It cannot be satisfactory for an advanced economy like the UK to be relying on polluting, carbon-intensive, 50-year-old coal-fired power stations. Let me be clear: this is not the future,’ she will say in a speech today.

Coal was dying long before this speech. Energy generation from coal fell 36% last year according to Rudd’s Department of Energy and Climate Change. Choked by ever more stringent environmental regulations, it’s just no longer economical and probably would have snuffed it of its own accord by 2025 anyway. But at least this sets a deadline for its demise and makes a positive statement ahead of the Paris climate change conference next month.  

The problem is, coal still provides 29% of Britain’s electricity. So unless we suddenly decide to reconnect with our inner earth children and forgo modern comforts like ironing and computers, we’ll need to find another source of energy somewhere. Rudd’s preferred replacement is the noticeably cleaner natural gas, which is already the largest contributor to the power supply.

‘We need to give a clear signal to people who are in the market for building gas stations that coal will no longer crowd out new gas,’ Rudd will say.

Needless to say, the gas option isn’t all that popular with the greener members of society – ‘switching from coal to gas is like an alcoholic switching from two bottles of whisky a day to two bottles of port’, Friends of the Earth campaigner Simon Bullock told the BBC.

But the problem with the environmentalists’ preferred option, renewables, is that they are only as reliable as the British weather. In the absence of drizzle power, that’s not very much. And creaking, run-down coal plants aren’t much better.

Rudd has already said that energy security is even more important than reducing emissions, and with the National Grid admitting it was running on fumes earlier this month, plenty of consumers and businesses would no doubt agree.  

So is the combination of gas and nuclear (let’s not forget George Osborne’s £2bn jump start for the Hinckley Point reactor last month) just what the doctor ordered? It’s certainly the easiest - and in the case of gas, cheapest - medicine, but investment could prove to be a hiccup.

The government has already offered subsidies for new gas-burning plants, but only one private sector partner has actually taken it up on the offer, the 1.9gW Trafford power station being built by Carlton Power. Even that’s behind schedule (it’s due to begin powering homes by 2018) and struggling to find financial backers.

Rudd says this is because coal has crowded out investment in gas. That’s true, in the sense that declining energy generation from coal would, all other things being equal, hike energy prices and make investment in gas more attractive. But as that would be politically unpopular and would also necessarily involve power shortages in the short term, it’s hard to imagine this is what the government really wants.

Businesses only invest when they anticipate a decent rate of return. If that isn’t going to come from an price rise as a result of the government letting supply drop, then it will have to come from increased subsidies.

As investment in energy is such a risky proposition right now - what if the next government decides gas is too dirty and cancels the subsidies? – those subsidies would need to be sweet indeed. Whether the government can square that with the demands of austerity remains to be seen.  


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