Coal has almost been confined to the history books in terms of electricity generation. Recent statistics show that coal’s share of electricity generation dropped to a record low of just 5.8 per cent in the three months to the end of June 2016, with a number of days over the summer having no coal-generated power on the system for the first time in more than a century.
The volume of coal-fired power on the system fell by 71 per cent when compared with the previous year, down to 4.6TWh.
However, as coal drops off the system, and cleaner renewables come online, what is the short-term future for coal as temperatures begin to tumble?
The decline in coal-fired generation is largely due the closure of the Ferrybridge C and Longannet plants and the conversion of one of Drax’s units to run on biomass, according to the Department for Business, Energy and Industrial Strategy.
Gas generation took up much of the slack, rising by more than a half to 35.4TWh. Its share of the generation mix grew by around 15 percentage points to more than 45 per cent. Overall demand for gas jumped by 16.4 per cent as a result.
This all fits with the ambitions of the European Union and the UK to cut carbon emissions. Coal-fired generation typically emits more than 800gCO2/MWh, more than double the average emmissions for gas plant.
Sandbag’s carbon and power analyst Dave Jones says the major factor in coal dropping off the system is cost driven by environmental policies and market forces. In particular, the carbon price floor has had an impact in making coal less economical than other generation sources. “Coal is being pushed to the margins and, as long as the carbon price floor stays as it is, it will continue to be.”
Phil Hewitt, director of EnAppSys, agrees. He says: “The rapid decline in the levels of coal-fired generation are unprecedented for a market that has traditionally been dominated by coal power stations since its inception.
“This drop in coal generation reflects how plants have struggled to justify adequate run hours and economic utilisation rates in the face of the disadvantages of the carbon price support and continuing low gas prices.
“With legislation continuing to act against coal-fired power stations, those that remain do so mainly to provide reserve to the system or for ‘black start’ contracts where they are used to restart the grid in case of a loss of supply.”
Since the introduction of the carbon price floor coal has largely been run as peaking plant, augmenting other forms of generation at periods of high demand. This is the role it is expected to play this winter, as National Grid sets out in its winter outlook for 2016/17.
However, chancellor Phillip Hammond is said to have a space in his autumn statement of 23 November set aside for the carbon price floor. The details of what will be said are unclear, but they will be significant for the short-term future and profitability of coal – and the UK’s carbon emissions.
The current carbon price cap, introduced under George Osborne’s chancellorship in 2014, set a cap on the carbon price floor of £18 per tonne above the EU ETS price between 2016 and 2020.
If this changed, Jones says coal would “quickly step back into becoming baseload rather than peaking plant” and this would result in a “terrible step back for the UK’s carbon emissions” because it would displace lower carbon generation. “This would undo all the good work the UK has done by pushing out coal.”
The government is, however, unlikely to cut or remove the carbon price floor, even though it adds costs to UK industry over and above those of the EU Emissions Trading System – which remain relatively low. To do so would be to damage the UK’s high-held environmental credibility.
Coupled with this, a number of coal plants have closed this year (see table), while others are mothballed.
While these could be brought back online, the economics would need to stack up for their owners. This would either require wholesale price spikes – potentially as a result of another station or stations tripping and dropping offline – or as highlighted above, a fundamental change to their economics.
Unless Hammond does roll back the carbon price floor, winter 2016/17 could prove to be coal’s last hurrah as it slips off the system and we move into the post-coal era of electricity.