Clean Coal

Charles Hendry Excerpts

Tuesday 28th February 2012 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a great pleasure to serve under your chairmanship this afternoon, Ms Osborne. I am grateful to the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) for securing this debate. She has raised some important issues. I am sorry that, to make a political point, she distorted the situation, but I will clarify how we are trying to take forward carbon capture and storage particularly, to ensure that Britain can lead global developments in the sector.

Let me say at the outset that we agree absolutely with the hon. Lady about the important role that coal can continue to make. We want it to have a significant role in our energy infrastructure for many years to come. It is valued partly because of its flexibility, and as we move to inevitably more intermittent generation from all sorts of renewables, the flexibility, or dispatchability, of the coal sector is valuable indeed. We recognise that to secure that long-term future, we must deal with carbon emissions. The clean coal technologies—the hon. Lady outlined two of them—can help to ensure that coal has a chance to play an important role in our energy mix.

We are keen to take CCS forward with all speed. The Department has created a new division called the office of carbon capture and storage. It is not part of the old coal liabilities group, which is dealing with the historic legacies of the mining industry, but a new dynamic team focused purely on developing clean coal technologies. I hope that the hon. Lady recognises that in our message to the outside world we are already doing a great deal to signal a step change.

The hon. Lady referred to coal production and the volume of imports. In 2010, which is the last year for which we have full figures, domestic production was nearly 18 million tonnes from 16 underground and 35 surface mines, employing just over 6,000 people. We have seen a significant drop in imports in recent years, because of a range of factors, from 38 million tonnes in 2009 to 27 million tonnes, a drop of 31%, by 2010. There is a range of reasons for that, including pricing issues—it may sometimes be cheaper to import coal—but often the reason is the sulphurous content and other issues that are important in combustion uses for the different types of coal. Those are commercial decisions, but I want to ensure that we create a long-term viable future for the UK coalmining industry, and we want as much coal as possible to be provided from domestic sources.

On carbon capture and storage, the hon. Lady talked about confusion. At a CCS conference yesterday, Jeff Chapman, who heads the Carbon Capture and Storage Association, used the word “tremendous” to describe the Government’s position. He said that he was encouraged by the speed at which we are trying to move forward and our dynamism and much more comprehensive approach.

Last year, we had to accept reluctantly that the Longannet project would not work and that we could not get the 300 MW CCS output that we wanted for $1 billion. Some aspects of the old competition were part of that process. It ruled out some of the pre-combustion technologies that we believe have a significant role to play and oxy-fuel combustion, which is another technology that could be significant. It did not take account of the £100 million cost involved in putting in place the flue gas desulphurisation technology that an old plant needs to give it a longer-term future.

Since pulling back from that project, we have sought to put in place a new one and a new competition that is much more all-embracing. It will give the industry opportunities to identify more projects, and greater scope for collaboration between different industrial partners in that process. It will also provide the opportunity to find out whether we can use the funding to support infrastructure development. For example, would putting in place large, over-sized pipelines provide the opportunity for an industry to be created, rather than a few pilot projects?

Our ambition has moved on. It is not just about how to put a few projects in place, but about how to create an industry that is viable and competitive in the 2020s. That is why there is a real sense of excitement. There were 200 people at the CCS conference yesterday. Two hundred businesses attended an industry day last week, and 150 attended a previous one before Christmas. People around the world who know about the technology are looking at the United Kingdom as one of the places where they can take it forward.

We still have the £1 billion. The hon. Lady is wrong in saying that it has been raided. The Treasury said that we do not now expect it to be used in the current spending round, but it is still available, and if projects come forward more quickly, they can access it.

[Chi Onwurah]

Is the Minister saying that the £1 billion is available to be spent in this period of the spending review?

[Charles Hendry]

We think it unlikely that anyone could come forward for £1 billion in this spending round, but we have said that it is still available when it is needed. The likely expectation is that it has been knocked back to the next spending round, but the commitment remains.

[Mr Anderson]

I understand that I must be brief. If we are to reduce emissions by 8% from 1990 levels, when would CCS have to have proven itself and to be operational?

[Charles Hendry]

The hon. Gentleman speaks with tremendous authority on these issues. We want a viable industry that is cost competitive with other low-carbon sources of electricity generation in the 2020s. We want the project work to be done now, and we are looking at a range of technologies and their contribution.

We have £1 billion of up-front funding. We want to run the project so that it links in with European funding— the new entrant reserve 300 funding—so that that can also be accessed. We have allocated £125 million for research and development, which is on top of that. Our electricity market reform measures are considering a range of other factors that can be used to incentivise long-term investment in full-scale plant. I hope that I can reassure the hon. Lady that we are moving ahead with tremendous speed. During the next few weeks, we will launch the competition with a view to deciding how to select the best companies and the best projects as soon as possible.

The hon. Lady referred to underground coal gasification, and I was grateful to her and the hon. Member for Wansbeck (Ian Lavery) for bringing representatives from Newcastle university to see me at the end of last year to talk through some of the issues. Underground coal gasification is a fledgling industry so far and has yet to be proven in the United Kingdom, but there is increasing interest in its potential. It has been suggested, as the hon. Lady did today, that it could be linked with carbon capture and storage, although that concept is still at an early stage of development and a lot more work will need to be done on the process. I do not want to go into the technology, but we think it may be a significant opportunity to enable us to access the extensive coal resources that remain in the United Kingdom. They are unlikely to be exploited by conventional mining, as the hon. Member for Blaydon (Mr Anderson) said, and we must use different technologies to access the very deep mines, which cannot be done by men and women working in them.

As with any activity involving underground coal, potential underground coal gasification operators would have to obtain a lease and a licence from the Coal Authority. It is likely that the UCG process would also release native methane, which would require a licence from Department of Energy and Climate Change under petroleum legislation. However, given the incidental nature of any natural gas release, the Department will seek to minimise any administrative burdens in that respect.

To be acceptable in the United Kingdom, operators must be able to demonstrate that they employ processes that are sound from the environmental control perspective. A great deal of evidence has been submitted about this, and we look forward to working closely with the hon. Lady and her colleagues at Newcastle university to try to take the matter forward. She will be aware that the Coal Authority has issued 18 conditional licences, paving the way for potential exploitation of coal through UCG. I will follow the progress of the Newcastle team and other conditional licences with great interest.

I hope that in that brief response I have been able to re-emphasise our commitment to clean coal technologies and their contribution, and I hope that that strong message will go back to the communities that the hon. Lady and her colleagues represent.

Question put and agreed to.