Coal-fired Power Stations

Luciana Berger Excerpts

Wednesday 29th June 2011 Westminster Hall

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship for the first time, Mr Howarth. I congratulate the hon. Member for Sherwood (Mr Spencer) on securing the debate and speaking eloquently on behalf of his local colliery.

Many hon. Members have spoken today of serious concerns about capacity and a future energy gap in the UK. My hon. Friends the Members for Midlothian (Mr Hamilton) and for Blackley and Broughton (Graham Stringer) spoke about the urgent need to deal with the issue, and several hon. Members have spoken about carbon capture and storage, which I shall mention later. I want to focus my remarks on how coal-fired power stations fit into Britain’s transition to a low-carbon future, and the integral role that clean coal has to play as we reconcile the competing demands of reducing the country’s greenhouse gas emissions and ensuring that enough energy is generated. I want also to highlight some of the challenges that we face.

It is clear that a low-carbon future will not be realised without some contribution from fossil fuels. The urgent challenge that we must overcome is how to ensure through the use of technological innovation that the fossil fuels that we use are cleaner. The UK must be a world leader in investment, research and development, infrastructure and planning across our energy portfolio; but the window of opportunity is closing. We have drifted from 2010 to 2011, still awaiting crucial decisions: from the re-banding of ROCs, to grid investment, to the detailed sign-off on the first CCS project.

At the UK coal conference in February the Minister said that detailed sign-off for CCS1 would be confirmed by July, but when the Energy Bill was in Committee he referred instead to the summer. I would be grateful if he clarified when we will have detailed sign-off of that crucial first CCS project.

At the risk of stating the obvious, it is worth explaining why we are where we are. A quarter of the UK’s energy generating capacity will close by 2018, and as much as 30% will need to be replaced by 2020. Without prompt action, we face an electricity generation gap in the next 10 to 15 years as our nuclear and coal-powered stations are retired. World energy demand is rising and highly politicised. As North sea reserves decline, we are increasingly reliant on imported oil and gas, and UK electricity demand is forecast to double over the next 40 years. Adapting to that increase in demand will require a rapid decarbonisation of our electricity supply and a diversification of the energy sector, moving us from a reliance on fossil fuels and unabated combustion, to an increased use of low-carbon and decentralised energy.

We need a new energy mix, combining renewables, new nuclear and clean coal, but to achieve that mix and meet our climate change targets we will be required to urgently develop carbon capture and storage technology alongside renewables. We will need to create sufficient capacity to meet electricity generation needs at all times, and we will need to put the necessary supply chains in place. We will require the development of smart grid and electricity networks to meet the needs of a reconfigured, smart and diverse electricity infrastructure and, of course, investment in coal and gas infrastructure. All that does not come cheap. Depending on what we read, it could cost between £200 billion and £450 billion to achieve. I have only touched upon the future of coal in the UK energy mix, but it has a strong future.

In 2009, coal-fired power stations produced approximately 28% of the UK’s electricity supplies, using 40 million tonnes of coal in total. Last November, the Minister said that the UK

“will rely on gas and coal for years to come”,

and he is right. Coal is the most abundant worldwide energy resource, yet, unabated, it is also the most polluting. Without finding a way to reduce its harmful effects, we will not be able to tackle climate change.

The question we therefore face is: how do we ensure that the lights do not go out while at the same time meeting the need for greenhouse gas reductions of at least 80% by 2050? In government, Labour committed to funding the first commercial-scale CCS demonstration plant, so we welcomed the coalition’s decision to continue it. As I mentioned earlier, however, we are still waiting for the detailed sign-off of that project.

In addition, many questions remain unanswered in relation to how the crucial second, third and fourth projects will be funded. The Government have committed to funding them from general taxation, but can the Minister give us more detail about where the money will come from? When does he expect the Treasury to release the funds to pay for the project?

It is not just the direct funding for CCS that is required. We need to build the right infrastructure, conduct further research and development into CCS projects, and develop innovative financial mechanisms to devise solutions to the financial challenges facing CCS. We are encouraged that the current CCS demonstration already includes support for nascent infrastructure that will be needed to support the deployment of CCS, but more needs to be done to develop the infrastructure of pipelines and encourage clusters of those facilities in certain areas beyond the demonstration phase.

What work has the office of carbon capture and storage at the Department of Energy and Climate Change done to ensure that those coal-fired power stations that may come forward are able to share infrastructure, such as pipelines and capture plants, with industry, to reduce the overall cost of CCS and to make those plants more economically viable? How will the electricity market reform proposals ensure that a viable supply chain can develop to deliver CCS retrofits to a time that is compatible with our decarbonisation trajectory, as set out by the Committee on Climate Change?

If CCS is to be an integral part of our future energy security and carbon reduction—although we have to prove the technology on a commercial scale first—and if we wish to be at the forefront of the technology, so that we capture the benefits for the domestic and export markets in the future, from China, to India, to Brazil, to the US, we must provide the means. In fact, we have a duty to develop this technology, alongside our European neighbours, because with rising global use of electricity generated by coal, the downsides of delay are significant.

Any delay in the roll-out of CCS will mean higher atmospheric concentrations of CO₂, which in turn will mean that subsequent attempts to limit temperature rises to less than 2°C will be harder to achieve. Some calculations suggest that for every year that widespread global deployment of CCS is delayed after 2020, the long-term atmospheric stabilisation level of CO₂ increases by one part per million. Therefore, if we delay by more than a decade, the stabilisation of atmospheric concentrations of CO₂ at lower levels becomes near impossible. According to the International Energy Agency, without CCS and if we were to rely on other technologies alone, the costs of tackling global CO₂ emissions will rise by more than 70% each year. In simple monetary terms, it is a cost of $1.3 trillion annually by 2050.

During the deliberations of the Energy Bill Committee, the Minister referred to emissions performance standards, but I hope that he will provide more detail today. What will the introduction of EPS mean for the future of coal-fired power stations, and what representations has he received on the issue from industry? Will next month’s electricity White Paper identify the level at which the EPS will be set? What effect does he envisage the EPS having on the British coal industry? As the EPS applies only to new-build coal-fired power stations, is it the Minister’s intention that the carbon floor price will be the mechanism to incentivise a reduction in CO₂ emissions from plants?

Despite concerns from those representing coal-fired power stations, particularly about the burden of an extra layer of legislation and the fact that it will apply to new-build stations, the right EPS, for example, could help drive investment in carbon capture and storage, but only if it is set at an intelligent level. In written evidence to the Energy and Climate Change Committee in January, energy solutions company Alstom said:

“An EPS at a technology-neutral level from, say, 2020, could provide support to the deployment of CCS, increasing the diversity and security of supply by enabling continued, but decarbonised, use of coal.”

As such—and while recognising the positive intention of the EPS to ensure that no new coal-fired power station should be built in the UK without CCS, and the danger, highlighted by Alstom, of the wrong EPS level resulting in no new coal builds—this makes it even more critical that the Government drive on with the four CCS projects, pre and post-combustion, with urgency.

Planning is another big and obvious problem for coal and other new generation capacity. Undoubtedly, with the closure of many coal-fired power stations over the next decade, many planning applications will be made for new coal and gas-fired power stations, alongside applications for new nuclear build, onshore and offshore wind, biomass plants, and so on. What will happen, therefore, now that the Infrastructure Planning Commission is being scrapped? Will there be adequate resources and expertise in the Planning Inspectorate to avoid it being overwhelmed by the resulting workload, or will it simply become a rebranded version of the IPC?

Before I finish, I wish to raise a few issues that I hope the Minister will address in his wind-up. What discussions has he had with the coal industry about the carbon floor price mechanism and capacity payments? What impact does he expect those mechanisms to have on the future of coal-fired power stations?

The European Union’s emissions trading scheme is a cap and trade system. If less CO₂ is produced in the UK, is the Minister concerned that, as fewer CO₂ allowances are used, the introduction of a carbon floor price will simply result in the migration of the carbon to elsewhere in Europe? That point was raised by the hon. Member for Nuneaton (Mr Jones) during an earlier intervention.

Will the proposed single tax rate under the carbon price mechanism disadvantage UK-mined coal against imported coal? There is concern that it will have a detrimental impact on UK coal producers, potentially leading to the closure of more pits, particularly deep mines, and resultant job losses.

Co-firing biomass with coal is a recognised renewable technology and receives renewables obligation support. The hon. Member for Thurrock (Jackie Doyle-Price) has made a powerful case in support of her local plant. However, concerns have been expressed about whether the technology receives sufficient funding. Can the Minister update us on the banding review of renewables obligation certificates? What is his intention in relation to co-firing biomass with coal?

In conclusion, coal is important to the UK’s energy future—as clean coal—to provide the bridge over our energy gap and to a low-carbon future. However, we face significant challenges and must move quickly to develop the required technology to overcome them, if we are to tackle the dangerous threat posed by climate change. I would be grateful if the Minister addresses in his closing remarks the issues I have raised.

Thank you, Mr Howarth, for your stewardship this afternoon. I also thank the hon. Member for Sherwood for securing the debate and all the Members whose eloquent contributions have ensured that we have had an informed discussion.