UK: British Coal minefield for sale. (4 of 4)

UK: British Coal minefield for sale. (4 of 4) - Longer term the most critical issue for the coal industry is the environment. Green flagwaving has led to some red-hot statutes in the EC rule book, and unless the Government takes action now to fund new an

Last Updated: 31 Aug 2010

Longer term the most critical issue for the coal industry is the environment. Green flagwaving has led to some red-hot statutes in the EC rule book, and unless the Government takes action now to fund new anti-pollution technology, coal will cease to be a feasible bulk fuel early next century.

Jim Harrison, director of the Coal Research Establishment of British Coal, rightly fears that he is presiding over the beginning of the end of his 40-year-old group's lead in "clean coal" technology. Since 1977 the Government has devoted only £28 million to a £150 million UK research project (co-funded by the US, Germany and the EC). Now it is stalling on new funds, while other countries are eagerly adopting our ideas.

While £200 million a year of UK government money goes to nuclear research, only £2.5 million is turned to coal programmes. "Even in countries like Japan where nuclear use is high, spending on coal technology is around half that of nuclear, not one hundredth," says Harrison grimly.

Longer term the only real hope for coal is the installation of pressurised, fluidised-bed combined-cycle systems and a further development known as the Topping Cycle. Both reduce carbon dioxide and sulphur dioxide emissions. The latter also increases the efficiency of coal burning stations by 20%, taking them to 45% efficiency, compared with 50% for gas.

"With any luck we'll have proved the Topping Cycle concept by 1997-98 for a reasonable commercial scale, which will be fine for the next generation of (electricity) plant," Harrison says. "And not only is it 20% more efficient but 20% cheaper."

Feasibly, as work on similar plant is going on elsewhere, Britain could buy in the commercialised technology before the energy crunch in the next decade. But as our research lab is one of the best in the world, Harrison argues that it would be pitiable to leave the future in other hands. Independent analyst Patterson comments: "I'm no big fan of burning coal for the sake of burning coal, but I really think a symbiosis of British Coal and coal technology will be a crucial element in meeting the UK's long-term energy needs."

And what happens under privatisation? To what extent would a private company invest in expensive research? British Coal's Edwards has no doubt in his mind that government funding will still be essential. "I think it's got to. R and D in every other country is funded by government."

It is matters like this that make the actual form of privatisation a sticky issue for the Government. Should British Coal be sold as a single entity? Or would it be better to chop it up? Chairman Neil Clarke hints that he backs the former. "It would be very unnatural for the future shape of a privatised coal industry not to reflect in some way the shape of the market it serves - the two very large customers," he states.

The high capital cost and geological risks of modern mining also argue for the sale of the group intact. A National Union of Mineworkers official claims that, lacking capital strength, smaller units would be wiped out any time that they had a bad year, even if they could be profitable the next. "Pits would squeeze each other out," he predicts.

Consultant and UK Coal Review editor Michael Prior is one who argues for a "sink or swim" philosophy. "You could accept bids for any component part of British Coal or the whole lot. If you bid two luncheon vouchers for a mine and you were the only one, you would get it, except", he adds more cautiously, "for a minimum value on the land. And the advisers could put together the best package." Another alternative might be to have a single part-owner of British Coal which negotiates the electricity contract, and then have individual private pits or regions bidding for a share of that contract.

If one sticks strictly to the Conservative ideal of breezy free market competition, a break-up programme would appear to be the way to go. Once capital assets are written down, some observers argue, smaller units could be feasible. But likewise, it must not be forgotten that even a single monster British Coal has competition thrusting in from all sides. Coal imports, gas and even low-cost, local, private producers will keep even a giant dancing. We await the Government's views.

Some time before then, hopefully, the generators will recover from their all-singing, all-dancing show and come off stage to do some serious talking. The parameters of the talks are totally elastic - one man's guess of energy economics 10 years down the road is as good as another's. One guesses that it is no bluff, however, when Edwards states bluntly that he is not so worried about 1993 (when the current contract expires). "I do not believe it is feasible to continue the British Coal industry unless there is a contract for a minimum of five years in front," he says, apparently satisfied that this is what they will get. That will take the industry up to 1998 - when the real uncertainty, and Edwards' worries, start.

Well before then some hard decisions have to be made about gas-fired plant, ports, clean coal research and the future of the British coal industry. Otherwise the Government might find that it has nothing that anyone wants to buy. For even widows and orphans want to know that their investment has a future beyond the next five years.

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