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Slag heap at Ratcliffe coal power station
Slag heap at a coal fueled power station. Credit: Getty Images
COAL
9 November 2016 14:45

UK plans to close last coal plant by 2025

Simon Evans

Simon Evans

11.09.16
Simon Evans

Simon Evans

09.11.2016 | 2:45pm
CoalUK plans to close last coal plant by 2025

Plans to close all coal-fired power stations by the end of 2025 were published today by the UK’s Department for Business, Energy and Industrial Strategy (BEIS).

The plans, which are open for consultation until 1 February 2017, would meet a commitment made in the run up to the Paris climate talks last year.

The options being considered include applying emissions limits to existing coal plants in 2025 and setting a limit on running hours or emissions from 2023. Carbon Brief runs through the details.

Coal decline

UK electricity generation from coal has been declining rapidly since a peak in 2012. Coal use fell by a fifth during 2014 to historic lows not seen since the birth of the industrial revolution.

Demand fell by another fifth during 2015, after the UK’s carbon price floor doubled in April 2015. Electricity from coal is down two-thirds year-on-year in 2016 to date and 80% compared to 2012.

Glossary
Carbon Price Floor: The UK's top-up carbon tax, applied to power stations and designed to supplement inadequate prices on EU markets. When implemented in 2013, the floor was set to rise gradually to £74/tCO2 in… Read More

Despite these declines, the UK’s remaining coal plants emitted 53 million tonnes of CO2 (MtCO2) in 2015, equivalent to 11% of UK greenhouse gas emissions that year.

The central forecast from BEIS is that this decline will continue, with all remaining coal plants closing by 2022 without government intervention. Note that this assumes a rising carbon price floor after 2020; a decision on this is expected in the chancellor’s autumn statement on 23 November.

However, if coal prices fall and remain low, and if the carbon price floor remains frozen at its current level, then BEIS thinks that coal plants could remain open until 2030. See below for more detail on coal’s recent decline and whether it would continue without intervention.

Today’s consultation proposes a backstop, so that unabated coal must close in 2025 regardless of the carbon price floor and market conditions. The impact assessment accompanying the proposals says:

“The policy intends to lead to the retirement of unabated coal-fired power plants by the end of 2025, to be replaced by less emission-intensive forms of generation such as gas without risking security of electricity supply.”

When the plan to phase out coal was first announced, ministers said the intention was to close plants “by 2025”. The consultation repeats this language, but asks for views on the date in 2025 when coal restrictions should kick in.

Phase out

The options for phase out centre around an emissions performance standard (EPS) for old coal plants. There is already an EPS for new power stations, which limits emissions to 450kgCO2 per megawatt hour (MWh) of electricity, as an average across the year.

BEIS suggests this could be directly applied to existing coal stations during 2025. This would include an exemption to the EPS for plants that fit carbon capture and storage (CCS). The current EPS requires at least 300 megawatts (MW) of CCS, but BEIS thinks this might need to be raised to cover a higher proportion of capacity.

As it stands, the annual averaging of the EPS would allow a coal plant to continue to operate unabated for around 40% of the year. BEIS suggests an alternative option of limiting emissions to 450kgCO2/MWh at any point in time, rather than as an annual average.

One way plants could meet this second alternative would be to burn a mixture of biomass and coal, BEIS notes. It will consider whether this route should also be limited, in order to avoid an increase in subsidies under the Levy Control Framework cap on consumer-funded support.

BEIS is also looking at ways to reduce coal output from 2023, through limits on running hours at some or all power stations. However, the department does not set out in detail how it would implement such a limit.

Replacing coal

The government has always been clear that the coal phase out is contingent on security of electricity supplies being maintained. Its consultation asks if it should take powers to suspend coal restrictions in case supplies are threatened, and if so how to trigger such powers.

However, it maintains that a coal phase out would have “no impact” on security of supply. Analysis from Conservative thinktank Bright Blue came to a similar conclusion earlier this year. It found that even under the most difficult circumstances, a phase out would not leave the UK in the dark.

Both BEIS and Bright Blue assume that significant new gas capacity will be built in order to replace coal plants as they retire. It’s worth noting that replacing coal with gas-fired generation would not eliminate the 53MtCO2 emissions from coal plants in 2015: it would only cut them roughly in half.

Power sector emissions should fall below 100kgCO2/MWh in 2030, the Committee on Climate Change says, if the UK is to remain within its legally binding carbon budgets.

BEIS says a combination of new gas, power interconnectors to other countries and new renewables can fill the gap left as coal is phased out. Carbon Brief has previously looked in detail at how much new gas might be needed.

It’s worth noting that forecasts of the costs of different electricity generation technologies, made in 2015 and published by BEIS today, show that onshore wind and solar would be cheaper than new gas. This confirms similar analysis from the CCC and others.

BEIS also notes that renewables have greater potential for unexpectedly fast cost reductions, whereas gas plants will be more expensive than expected if they operate below full capacity.

Market conditions

This year’s spectacular fall in coal use has been caused by a variety of factors, including the continued impact of the carbon price floor. Commodity markets have also shifted in favour of gas, where prices have been falling and, against coal, where prices have surged.

A recent article from consultants Timera Energy says:

“The 2016 coal price rally appears to be the nail in the coffin for most of the UK coal plant fleet, which is penalised by the additional burden of the carbon price floor.”

Gas plants have been a major beneficiary of these changes, with output up nearly 50% in 2016 on a year earlier. However, the combined output of coal and gas plants has fallen over recent years.

Increasing output from renewables, falling demand and rising electricity imports have helped plug the gap. Across the six months from April to September, solar generated more electricity in total than did coal.

Against the impact of rising coal prices, operators have been able to earn very significant revenues on wholesale electricity markets in recent weeks.

For example, several coal plants earned hundreds of thousands of pounds in a single half-hour period on 7 November, according to information in Aurora Energy Research’s EOS data portal.

Tightening electricity supply margins, reforms to electricity trading rules and a rash of outages at nuclear plants in France have increased wholesale power prices this autumn, a situation likely to continue through winter. During the evening peak, prices have spiked as high as £2,500 per MWh.

The interplay of rising coal prices and the government’s capacity market makes it hard to predict how long and at what level coal plants will continue to operate in the UK in the absence of the proposed 2025 coal phase out backstop.

A pending decision on the future of the carbon price floor, which currently only runs until 2021, adds to this uncertainty.

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