Photographer: Martin Divisek/Bloomberg

U.K. to Phase Out Dirtiest Coal Plants, Prioritize Gas

  • Renewables must pay costs of intermittency: Energy Secretary
  • Gas and nuclear `central' to U.K. energy, Amber Rudd says

The U.K. will phase out the dirtiest coal-fired power plants and spur both nuclear and natural gas as an alternative, part of a policy to balance reductions in carbon pollution with the need to protect consumers from rising costs.

QuickTake Confronting Coal

Coal plants that aren’t fitted with equipment to capture emissions will be closed by 2025, with restrictions in place by 2023, Energy Secretary Amber Rudd said in a statement Wednesday. Gas and nuclear are both “central to our energy-secure future,” Rudd said in a speech in London, vowing also to support offshore wind installations.

“It cannot be satisfactory for an advanced economy like the U.K. to be relying on polluting, carbon intensive 50-year-old coal-fired power stations,” Rudd said. “Let me be clear: this is not the future.”

The comments capped months of re-calibration on energy policy by Prime Minister David Cameron’s government, which is tilting the U.K. away from subsidies for wind and solar and toward natural gas as a way to meet European Union mandates on pollution. The emphasis is a further retreat from renewables, which have boomed in recent years because of support the government offered for clean-energy technologies.

On Wednesday, Rudd signaled further pain for the renewables, saying wind and solar plants should pay costs related to their intermittent nature. She didn’t give specifics.

“In the same way generators should pay the cost of pollution, we also want intermittent generators to be responsible for the pressures they add to the system when the wind does not blow or the sun does not shine,” Rudd said.

Industry Reaction

The EEF manufacturers’ lobby group welcomed the announcement, saying it marks a “turning point” for the U.K.’s energy strategy and provides a clear signal to build new gas plants. 

“While today’s announcements are reassuring for British industry, they must now be met with action,” Claire Jakobsson, head of energy policy at EEF, said in a statement. “We cannot afford more decades of delay impacting security of supply, risking international competitiveness and, ultimately, costing the consumer.”

The CBI, the biggest U.K. business lobby group, said the move away from coal puts “the right signals in place for investors to build new gas-fired power stations.”

“A smooth transition from coal to gas is critical. We must ensure we have new capacity before we take coal out of the energy mix,” said Rhian Kelly, business environment director for the organization.

Rudd said she expects onshore wind and solar power to be “cost-competitive through the 2020s” with other forms of generation, and vowed to support the development of offshore wind, a sector in which the U.K. has more than half the global installed capacity.

Offshore Wind

“This is a technology which has the scale to make a big difference,” Rudd said. “It is one area where the U.K. can help make a lasting technological contribution.”

Three new auctions will be held between now and May 2020 to spur new renewable energy projects, Rudd said. The first will be in 2016, and they’ll be held under the existing contracts-for-difference program, which offer guaranteed power prices to generators. 

Even so, support for offshore wind will be contingent on costs in the third auction coming down to the current level for nuclear of about 92.50 pounds ($141) per megawatt-hour, her department said. Those plants would then be built by the mid-2020s.

Rudd’s speech will give offshore wind developers “the confidence to invest in the British economy,” the RenewableUK lobby group said. “Wind companies are confident they will be cost-competitive with new gas and new nuclear by 2025.”

Nuclear Power

The government has given the green light for the first new nuclear plant to be built in three decades, subsidized by consumers through their bills for 35 years. Electricite de France SA and China General Nuclear Power Corp. struck a deal last month to build by 2025 the 3.2 gigawatt-plant at Hinkley Point in southwest England.

Rudd said nuclear “could provide up to 30 percent of the low-carbon electricity which we’re likely to need through the 2030s.” She also said it’s “imperative that we get new gas-fired power stations built” in the next decade.

For environmental groups, the emphasis on nuclear and gas is a blow to renewables, which has taken a battering since Cameron’s Conservative Party won the election in May, ejecting Liberal Democrats who served in a coalition government until then. Ministers have made cuts to programs subsidizing solar power, onshore wind, biomass and energy efficiency, leading to hundreds of job losses in solar companies.

“Switching from coal to gas is like an alcoholic switching from two bottles of whisky a day to two bottles of port,” Simon Bullock, a campaigner at Friends of the Earth, said in a statement.

Solar Trade Association Chief Executive Officer Paul Barwell said it makes “little sense to replace fossil coal only with fossil gas,” and that fossil fuel incentives “distort the market.”

The government will consult “in the spring” on whether to phase out the U.K.’s 12 coal-fired power stations, Rudd said. In a possible rescue for the fuel, it’s already discussing whether to subsidize plants that retrofit carbon capture and storage equipment. That pumps emissions underground for permanent storage.

Coal produced about 30 percent of the U.K.’s electricity last year.

Drax Group Plc, the country’s biggest coal-fired generator, fell as much as 5.8 percent in London to a record low 2.13 pounds and was down 5 percent at 2:30 p.m. Drax has converted two of its six units to burn biomass, and is working on a third conversion.

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