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The cost of generating electricity from coal will this winter be almost half that of using gas, prompting renewed calls from the coal lobby to allow continued coal burn as part of the UK’s drive towards decarbonisation.
A report from CoalImp has called on government to remove policies which exclude the use of cleaner, efficient coal plants, saying the move will decrease affordability while increasing political and market risk through a lack of diversity of fuel source.
The report shows that for this winter the cost of generating power from gas will cost over £40/MWh while the cost of generating power from coal will be just £20/MWh. The price for power on the wholesale market is currently at around £46.50/MWh for delivery this winter, a trader confirmed.
Although gas prices have declined to historic, multi-year lows over recent months coal continues to offer a dampening effect on the overall cost of wholesale electricity, the report argues, adding that in the long-term “over-dependence on any one commodity increases both financial and geopolitical risk”.
In Germany, new efficient coal plants are built in compliance with the European Union’s industrial emissions directive (IED) to operate alongside the country’s strong renewable capacity to provide flexible back-up generation.
But in the UK, the report claims that current energy policies will result in most, if not all, coal plants facing potential closure by the early 2020’s, which is expected to bring a strong move upwards for electricity prices.
“The UK’s unilateral carbon price floor, combined with the need to invest in coal plants to meet obligations under the IED, means that many existing stations are likely to close prematurely and potentially before 2020, exacerbating security of electricity supply issues – which are foreseen by Ofgem as early as 2015/16 – and driving prices even higher,” the report said.
“UK consumers have been protected from the full impact of high prices of gas-fired electricity by the diversity of our power generation system, which can still benefit from the reliability, flexibility and relatively low cost of coal,” the report added.
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