Monday, 12 October 2009

Kingsnorth, Coal and a New Dash For Gas

The deferral of Eon’s plans for a new coal- fired power plant at Kingsnorth can be read in several ways. The permits that developers get for new plants are effectively 5-year options in any case, and the history of such projects is littered with tactical delays of all kinds. It could easily be a low-risk shot across the present government’s bows; or simply waiting to see what a Tory regime will do.

Whatever, it’s hard to see it as anything other than a blow for little Ed Miliband’s Carbon Capture & Storage scheme. This, you may recall, floats the idea of compulsory retro-fitting of costly CCS facilities to any new coal plant (at the owners’ expense, since you ask) if in 2020 a government panel decides it is ‘economic’ to do so. Obviously, the chances are – since it’s not their money - that the panel will decide exactly that.

The putative CCS industry (it doesn’t exist yet but it has a lobbying group anyway) thinks this is wonderful, of course, but sober entities like the Energy Institute have warned Ed that this will put the kybosh on new coal. Eon's decision only reinforces that view.

Meanwhile, in another part of the real world, the recession has meant a huge surplus of CO2 emissions credits is building up, so that the ‘price of carbon’ under the EU’s emissions trading scheme is – and will remain, for the foreseeable future – much lower than is ‘needed’ to stimulate the next wave on investment in renewables. So they’ll need even bigger subsidies …which all count as government expenditure

Finally, of course, the wholesale price of gas has collapsed, as predicted. All of Ofgem’s recently-published 4 scenarios show gas imports rising strongly in the coming years. If we don’t like the security-of-supply aspects of this, we’d better get used to it. Dash-for-gas(3), here we come.

ND

6 comments:

Blue Eyes said...

Surely the simplest thing to do would be to delay the decommissioning of the "dirty" coal stations until the technology for cleaner coal is ready or the new nukes are ready?

The last time I saw Ed Miliband on TV he was berating his Tory counterpart for "believing in markets". Scary.

Anonymous said...

"Shotgun Eddie" for his habit of blowing holes in existing schemes.

Nick Drew said...

delaying the decommissioning might be a low-cost option in some instances, BE, but it's not necessarily so, beyond a couple of years extra lifespan

- the plants-to-be-decommissioned were nominated (by their owners) quite a few years ago, on the grounds that there was no economic way to clean them up. As such they really are probably rubbish, and will mostly have had only basic safety-type maintenance done on them since that decision. But capital plant needs constant upgrading-type maintenance to give it a decent lifespan, so their demise is now almost inevitable

- the owners generally see more value in these plants as brown-field sites for new plants in due course. This is because (a) permitting for new large power-plants on greenfield sites is really, really difficult across all of Europe and (b) choice sites (with good access to cooling water, transport links etc) are at a premium even without permitting problem

I don't personally see the LCPD as the big bogey that some people do

Anonymous said...

What was dash for gas(2)?

James Higham said...

Rationing?

Nick Drew said...

James - that would indeed be interesting & maybe sooner than we think: boroughs in E.London are being told to draw up elec supply priorities to ensure the Olympic sites don't suffer from brownouts

anon - the 1st d-f-g was late '80s / early '90s, when the power plants were being fully hedged (i.e. they bought gas and sold electricity on back-to-back 15 year contracts for almost all their capacity)

d-f-g(2) was late '90s when plants were being built for 'merchant' operations, i.e. keeping at least a large part of their capacity uncommitted, with which to play the spot gas and spot power markets

interesting question as to what business model (3) will be ...