Today the UK government issued its response to the unabated coal closure consultation. It sets out how the government intends to regulate the closure of unabated coal power generation by 2025.
The key policy tool will be an emissions intensity limit of 450gCO2/KWh which will come into force on the 1st October 2025. The emissions intensity limit is an instantaneous limit and will apply to units burning solid fossil fuels with a thermal capacity of over 300MWth*.
We are disappointed that BEIS didn’t take an opportunity to bring forward the phase-out to 2023, in line with their previous modelling of when the last coal plant would come offline.
However, we believe that – for all intents and purposes – this legislation will lead to a complete UK coal phase-out from October 2025. Most likely the UK will be coal-free by the end of March 2025, with stations unlikely to remain open for the final summer.
Concerns have been raised that certain loopholes could allow coal burn post-2025, namely biomass co-firing and powers granted to the Secretary of State to avert supply crises – we believe these fears are overblown and we outline our reasoning below:
It is theoretically possible for a coal station to achieve the emissions intensity limit by co-firing a high proportion of biomass. Therefore coal burn could continue beyond the cut-off date. We consider this unlikely for the following reasons:
- The biomass co-firing percentage would need to be high: the 450g limit includes life-cycle emissions for biomass burnt in the fuel diet, using Drax as the example, its biomass has a life-cycle emissions intensity of 122gCO2/KWh (2016) – if this was co-fired with coal (~800gCO2/KWh) the boiler would have to burn ~ 52% biomass to achieve 450g limit. This percentage will be higher for older and less efficient coal stations.
- The economics of co-firing are poor: biomass co-firing requires subsidies, in September 2017 the government consulted on proposals to ensure that the costs to consumers of new biomass co-firing or conversion under the RO are controlled. A response to that consultation will be published soon. With the consultation stating that “carbon savings from biomass conversion or co-firing are low or nonexistent, and the cost of any savings is high” – it looks highly unlikely the government will provide further financial support for co-firing.
Security of Supply
The Secretary of State will have the power to suspend or amend the emissions intensity limit in the case of significant and imminent concerns about security of supply, potentially offering another loophole for coal burn beyond 2025.
The government’s response states that coal stations are unable to bid into the capacity market auctions for delivery in 2025/26 and beyond – unless they can demonstrate that they will be able to meet the emission intensity limit of 450gCO2/KWh. The first of these auctions (T-4) will be held in late 2021/early 2022, therefore there will be ample time to deliver replacement capacity for the excluded coal stations if there is a forecast need for it. Subsequently, we agree with BEIS’s assessment that it is unlikely that a security of supply issue would arise such that the coal stations would be needed beyond the 2025 cut-off date.
*Given this limit, we are unsure but it may be possible that Uskmouth, a small coal plant in Wales could get an exemption. However, it is very small (2x115MW units), very uneconomic, and is highly related to the steel jobs at Port Talbot.