UK government to phase out coal-firing by 2025

The UK government has announced that it aims to entirely phase out the use of coal-fired power plants within the kingdom by 2025 if enough gas-fired plants have been built by that time. The Energy Secretary, Amber Rudd, told the BBC “We need to give a clear signal to people who are in the market for building new gas stations that they will no longer be crowded out by coal,” and that “We need to build a new energy infrastructure, fit for the 21st century,” echoing recent language by Hillary Clinton. Environmental groups have welcomed the planned phasing out of coal, which is seen as significant in the lead up to the Paris Climate Conference, even though subsidies for onshore wind power and solar power generation have been cut in recent months. Others have pointed out that coal-firing was forecast to account for only 1% of the UK’s energy mix by 2025 anyway, and be ‘naturally’ phased out by 2027, due to prior policy announcements and EU emissions rules. A third opinion has been offered by the Association of UK Coal Importers, which has argued that the UK should not set phasing out coal as an example to developing nations, because those nations cannot afford to stop firing it, and that carbon capture and storage should be the focus of UK government policy instead. With a reemphasis on gas-firing, there have been some questions whether the government’s position on the goal of reducing emissions by 80% by 2050 from 1990 levels will change, but the government has stated that it remains the same.

Meanwhile, subsequent to recent criticism of the stand-by power generation scheme promoting small-scale diesel firing, Ms Rudd has announced that the scheme will be re-examined with a view to changing the rules.

UK CCS competition cancelled

Some days after the announcement about the phasing out of coal-fired power generation, the UK government gave a further announcement that it was cancelling its £1 billion (€1.4 billion/$US 1.5 billion) competition for carbon capture and storage commercialisation. The competition had been running for several years, narrowing the field down to two projects: Shell and SSE’s Peterhead project, and the White Rose CCS Project, run by Capture Power, which Drax recently pulled out of, leaving BOC and GE. Capture Power CEO Leigh Hackett said that the company was s”urprised and very disappointed”, and went on to say that it is difficult to imagine the project’s continuation, though a decision had not yet been made on it. Shell, on the other hand, has already announced that the Peterhead project is “dead,” but said that the company remained committed to developing CCS, though it would do so in other countries. The UK government’s decision to cancel the program is hugely significant given that the Intergovernmental Panel on Climate Change estimates that without CCS, the costs of mitigating climate change would double (including in the UK), and that CCS development worldwide has been sluggish, insufficiently supported by governments. It is, perhaps, amongst all the announcements in the lead-up to the Paris Climate Conference, the most significant.

US federal bill may provide new support for CCS

In better news for carbon capture and storage, The New York Times has carried an article on a federal bill in the US which aims to allow a certain type of financing for CCS projects. ‘Tax-exempt private activity bonds’ were used by the US government in the 1960s and 70s to finance industrial air pollution control installations, and the idea of introducing them again has occurred to federal legislators. The premise for the use of the bonds is that the only CCS projects currently operating have utilised enhanced oil recovery to make the financial picture better; therefore, projects which do not have potential to include EOR should have some means to improve their finances. Effectively, the government could sell bonds and use the funds to finance CCS technology in private industrial plants. The Center for Energy Policy and Finance Stanford University helped draft the bill, which is being sponsored by Democrat and Republican senators. If it passes into law, it may set a new mode of encouraging CCS development.

OECD moves to limit subsidies for export of coal-firing technology

In further news pointing to the decline of coal-firing, this time in the developed world, the 34 members of the OECD have agreed to limit export subsidies for lower-efficiency coal-fired power stations, despite resistance from Australia and South Korea. From 2017, OECD countries will not be allowed to grant domestic companies tax breaks for exporting less efficient coal-firing technology, except if at least 10% of the population of the importing country doesn’t have access to electricity. Highly efficient ultra-supercritical plant technology will still be allowed to be subsidised through tax breaks. While these exceptions may seem to be quite wide-ranging, the Financial Times has quoted some environmental groups as estimating that the new agreement will mean that around 850 coal-fired power stations may no longer proceed, though it is difficult to know just what will happen, given the complexities of economics. Still, a measure of the significance of the agreement is that collectively, the OECD subsidised coal-fired power plants to the tune of $US 34 billion (€32 billion) between 2007 and 2014. The agreement includes a provision of a review of the plan in 2019.

Philippines moving to coal as domestic gas supplies diminish

Bucking the trend of a move away from coal is the Philippines, as the country looks to find cheap fuels to replace local gas supplies which are rapidly dwindling. As with most developing countries, the Philippines has somewhat competing aims of moving to lower-emissions power generation while vastly increasing power output within a budget. In its case, the goal is to double power output by 2030 and have a mix of one-third natural gas firing, one third coal firing, and one third renewables. However, a recent series of approvals for coal-fired power plants (a total of 40 plants are planned, though some have not yet secured financing) suggests that coal may make up more than half the energy mix by 2030. This is partially the result of the expected exhaustion of the Malampaya gas field, the only source of domestic natural gas, by 2024, with no domestic alternatives currently in sight. Importation of LNG is the alternative, with a terminal being constructed in Quezon province, and another planned to service the areas currently supplied by the Malampaya gas field. Coal is proving to be the cheaper alternative for the time being, however, as evidenced by the string of applications to build coal-fired plants. The Philippines government has been considering subsidising LNG import infrastructure in order to make LNG more cost-competitive.

Enel repositions itself to focus on renewables

The Financial Times has looked at the transformation that has been underway at Enel as it repositions itself to focus on renewable energies. The appointment of Francesco Starace as chief executive last year brought a focus on cost cutting and asset disposal, as well as a further emphasis on renewables, in which the company had already led the way amongst large European power utilities. Enel is currently aiming to sell assets to a combined value of €6 billion ($US 6.4 billion), while it is also encouraging up to 9,200 of its workforce to take early retirement, hiring only 4,500 in their place. In mid-November it announced it would buy out minority shareholders of its subsidiary, Enel Green Power, so that it could centre its business model around renewables and increase investment in them, with Mr Starace believing that EGP is now in a phase of maturity and industrial growth. Investors appear somewhat uncertain about Enel’s growth, with the share price dropping slightly on the EGP news.

Statoil to pull out of Alaskan Arctic oil exploration

Norway’s state-owned oil company, Statoil, is to follow in the footsteps of Shell by pulling out of Alaskan Arctic exploration for the foreseeable future. Statoil will withdraw from the 16 exploration leases it holds in the Chukchi Sea, the waters north of the Bering Strait, as well from 50 leases it has a stake in with ConocoPhillips in the same area. The head of exploration for Statoil, Tim Dodson, has indicated that the current oil price and dampened outlook has simply made Alaskan Arctic exploration uneconomic. However, Statoil will continue with exploration in the Norwegian Arctic, in the Barents Sea.

Egypt secures financing for first of three 4.8 GW gas-fired plants

In an update to a story from the middle of the year, financing has been secured by the Egyptian government for the Beni Suef natural gas-fired combined cycle power plant, around 150 km south of Cairo, along the Nile River. Beni Suef, which is to begin operation just next year, is the first of three 4,800 MW plants (a total of 14.4 GW) to be built by Siemens, making the three the largest single order in the company’s history. The lending banks are Deutsche Bank, HSBC Germany and KfW (owned by the German government), according to Reuters, and they are providing €2 billion ($US 2.1 billion) of financing. The three plants will increase Egypt’s total generation capacity by 50%.