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The coal phase-out announced by energy secretary Amber Rudd in her ‘reset’ speech in November should be brought forward to 2023 – two years ahead of the current schedule – according to a report from conservative think tank Bright Blue.
The study is based on an analysis of three different scenarios for the phase out conducted by Aurora Energy Research – a base case, a low stress scenario and a high stress scenario.
On the basis of these scenarios the report concluded the 2025 target “should be brought forward to at least 2023 to give investors greater certainty, particularly those planning new gas capacity”. It said this could be achieved “without threatening security of supply”.
“Under all scenarios, the lights stay on,” the report said. “Phasing out coal will not undermine the security of the UK’s energy supply. There is plenty of time under each scenario to commission any required new gas capacity.”
The ‘Base Case’
Under the base case renewables, nuclear and interconnector capacity continue to grow “largely according to expectations”. Hinkley Point C comes online in 2029, three years after it’s currently expected to be delivered.
Coal is forced to close at the end of 2025 but there are favourable conditions for thermal plant in the first half of the 2020s due increase procurement under the capacity market. Very little new gas capacity is needed before 2025 but quite a bit is needed after that, with 10GW being built between 2026 and 2028.
Annual household electricity bills average £241 (excluding taxes and the retail top-up on wholesale prices). The UK fails to meet its carbon intensity target for power generation of 100gCO2/kWh by 2030.
The ‘Low Stress’ scenario
In this scenario demand falls; the growth of renewables, nuclear and interconnectors exceed expectations; and demand side response (DSR) and storage play a more significant role in the energy system. Hinkley Point C is delivered ‘on time’ in 2026.
Coal is forced to close at the end of 2025 but market conditions force many to leave the market sooner. Only 8GW of new gas capacity is needed over the next fifteen years.
Household electricity bills are £2.40 lower than in the base case. The UK meets its carbon intensity target “with time to spare”.
The ‘High Stress’ scenario
In this “worst case scenario” demand rises; renewables, nuclear and interconnector grow slower than expected; and Hinkley Point C is cancelled.
“In order to simulate a pessimistic response to forced closures,” all coal plant is assumed to close by the end of 2020. 21GW of new gas is needed between 2020 and 2030 but even in this scenario none is required beyond what has already been committed to between now and 2020.
Household electricity bills are £1.20 higher than in the base case and the UK misses it carbon intensity target for 2030 by 50 per cent.
Source: Aurora Energy Research
The Conclusions
The think tank recommended that the government use an emissions performance standard to regulate coal off the systems, saying this would be “by far the simplest method to guarantee policy outcomes and send clear signals to the market”.
In order to set Britain on the path towards the low stress scenario, the report said the government should encourage the development of renewables and interconnectors as well as energy efficiency, DSR and storage.
It said the government should set targets for DSR and storage of 4-5GW and 5-6GW respectively by 2030 and that a new home improvement mechanism should be created following the failure of the green deal scheme, to ensure there are continued gains in energy efficiency.
Finally, it said renewables could “easily fill the gap” if Hinkley were to be cancelled – “much more quickly than long lead time and significantly delayed new nuclear” – and should therefore be considered as the “plan B”. It said the ability of these technologies to deliver capacity “is already impressive and will be even more so in the mid to late 2020s”.
By contrast it said small modular reactors “are very unlikely to be available at all, let alone before the 2030s, in any scalable, cost-competitive or politically acceptable way”.
Last week the Department of Energy and Climate Change denied reports that coal-fired plants could be allowed to run beyond 2025 if they make at least partial use of carbon capture and storage.
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