Update 21/7/16 – We updated all of the entries in our tracker table. A consultation on how to achieve a 2025 coal phaseout is expected soon.
The UK plans to phase out unabated coal-fired power stations by 2025, as long as security of electricity supplies is maintained.
The proposal, launched to great fanfare in the run up to the Paris climate summit, remains subject to consultation this spring. However, events could take the decision out of ministers’ hands.
The UK’s coal use fell by a fifth during 2014, to historic lows not seen since the birth of the industrial revolution. Demand fell by another 22% during 2015 and was was down 50% year on year in the first quarter of 2016. During May, solar generated more than coal for the first time ever over an entire month, a feat likely to be repeated in July.
The economics for coal have deteriorated significantly. Falling gas prices and higher carbon taxes have combined to leave coal generators facing increasing losses. Coal supplied zero power to the UK for the first time ever in early May. Coal generation across 2015 was the lowest since the early 1950s.
Three large coal plants have so far closed during 2016: Longannet, Ferrybridge C and Rugeley (see map and tables). A fourth, Eggborough, is not currently connected to the grid. Carbon Brief will update this article as the situation develops.
Around 4 gigawatts (GW) of capacity has closed this year, leaving 15GW able to operate today. Together, the fully- and partially-closing plants emitted 40m tonnes of CO2 in 2014, around 8% of total UK CO2 emissions. As well as reducing greenhouse gas emissions, the closures will reduce air pollution.
It’s worth noting that 8.4GW of coal capacity has already closed since 2010. Coal is usually thought of as baseload generation that operates constantly day and night, but most coal plants were generating power less than 10% of the time in May and June, according to Aurora Energy Research. Drax and Aberthaw B just topped 50% in June while Rugeley, now closed, touched 50% in May.
The plants that have shutdown or will operate reduced hours are slightly older than those still expecting to stay open. However, all but two of the remaining stations are more than 40 years old.
The cost of maintaining ageing equipment was cited by SSE in explaining its (now reversed) decision to consider closing Fiddlers Ferry. From this year, plants face tightening air pollution rules under the EU Industrial Emissions Directive (IED), though various exemptions and transitional arrangements are in play.
Given unfavourable market conditions, the decision over whether to keep coal plants running at a loss is complicated by two separate policies designed to keep the lights on.
The capacity market, due to kick in from winter 2017/18, will pay power stations a retainer to be available during winter evenings. It pays a fixed price for each kilowatt of capacity, up to the level of expected peak demand.
The auction for 2019/20 will pay £18/kW for a total of 46GW, meaning the capacity market will cost nearly £1bn in 2019 alone. Several coal plants have secured capacity market contracts worth £139m in 2019, meaning they should keep running until at least the end of this decade (see table).
However, Fiddlers Ferry considered closing despite having secured a contract for 2018/19. It failed to win a 2019/20 contract. It seemed to have decided that paying a £33m penalty for breaching its 2018/19 agreement would be cheaper than the losses it faces before then.
That decision looked to have dealt a blow to the credibility of the capacity market. It added to pressure for reforms and a sense that the scheme is actively undermining security of supply. The government now plans to strengthen the capacity market and bring it in a year early, from winter 2017/18.
SSE’s latest announcement, at the end of March, means the plant will remain open for winter 2016/17, but still leaves a question mark over whether it will fulfil its 2018/19 capacity contract.
A second scheme known as the National Grid Supplemental Balancing Reserve (SBR) is designed to secure supplies in the years before the capacity market kicks in. It is paying a small amount of reserve capacity to remain on standby, operating only when supplies are tight.
For winter 2016/17, National Grid is paying £34/kW for 3.6GW under the SBR, at a total cost of £122m. While the per-kW cost is nearly double the capacity market’s, the overall cost is lower.
Two of the coal plants that planned to close — Eggborough and one unit at Fiddlers Ferry — have secured SBR contracts for winter 2016/17, offering stays of execution on their eventual closure. It’s worth repeating, however, that these units will only operate on request from National Grid.
There was an expectation that the 2016/17 SBR might need to be enlarged now that additional coal plants are due to close. However, current rules limit the size of the SBR to 3.7GW, against 3.6GW contracted to date. Some analysts believe there is no need to expand the SBR.
It’s possible that even more coal plants will opt to retire this year. Aberthaw, Cottam and West Burton were all seen as at risk of closure due to unfavourable market conditions, according to a February Reuters article. Indeed, Cottam and West Burton, both owned by French utility EDF, have defaulted on three-year capacity market contracts they held, having decided not to carry out upgrades. The plants could still bid for further one-year contracts.
Fears that the UK will be unable to maintain secure electricity supplies could spell trouble for the government’s coal phase out plans. The government wants new gas capacity to fill the gap, though there is disagreement over the scale of the requirement and the impact on UK climate goals. Investors are also not currently attracted to building new gas plants in part because the capacity market price is not high enough.
Note – Market data on plant operating hours is sourced from the Aurora Energy Research EOS data portal.
Update 9/6/16 – Rugeley power station in Staffordshire has closed earlier than expected. It had been due to run until the end of June.
Update 27/4/16 – Aberthaw B power station in Wales is to run reduced hours from April 2017. We have updated the map and tables. Note also that Drax, once the UK’s largest coal plant, has said it could stop burning coal within three years if it received extra subsidies from the government to burn biomass instead.
Update 31/3/16 – Fiddlers Ferry has decided not to close. One of its four units already had a contract to be available in winter 2016/17. Owner SSE says a second unit has won a contract to provide ancillary services to National Grid for the next year. The third and fourth units will remain connected to the grid and may be entered into the capacity market in for winter 2017/18. We’ve updated the text below to reflect this and other recent developments.