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Gas on course to replace coal in UK energy mix

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World Coal,

Gas will replace coal as the largest component of the UK energy mix, according to BMI Research, following the results of the UK’s first power capacity auction, the closure of coal-fired capacity to comply with EU regulation and the continued implementation of the UK carbon price floor.

In late 2014, gas secured a 45% share of the UK’s inaugural power capacity auction, which covers 2018 – 2019 and will see power companies paid to ensure generation capacity is available. Coal and biomass combined only secured 19% of the market.

More damaging, however, has been the introduction of the carbon price floor – a carbon tax in all but name – which artificially inflates the cost of coal-fired power generation in the UK compared to its European neighbours. As Tony Lodge, Research Fellow at the thinktank, Centre for Policy Studies, recently pointed out in a piece for the Yorkshire Post, power producers in the UK face a cost of £23.28/t of carbon emitted; in the EU, it is less than a quarter of that at £5.30.

“Clearly this makes running a power plant like Ferrybridge uneconomic, irrespective of low coal prices,” writes Lodge.

“If the tax is not urgently addressed then the consequences are indeed stark [...],” Lodge continues. “There could now be further early closures of coal plants across Britain; last year these elderly but reliable assets generated around 35% of electricity supply and this can rise to 40% at times of higher winter demand. Another consequence is the reduced likelihood of new coal plants with carbon capture and storage or ‘clean coal’ as they will need the skills and infrastructure transfer from old plants to new ones.”

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