Twenty years ago few people paid much attention to environmental organisations, and if they had put forward energy policies few, if any, would have taken them seriously. Not today. The advent of climate change has not only elevated the importance of the environment, but these same environmental organisations now carry significant political clout and their suggested energy policies are no longer ridiculed. Indeed there are signs that environmental organisations are now indirectly setting energy policy, which suggests the question – how much influence should environmentalists have on energy policy?
This is not a flippant question. Last year, Greenpeace delayed the UK government’s nuclear policy with a High Court challenge and now it, and other environmental organisations, are seeking to derail any coal policy. In both cases these organisations have viewed energy policy wearing blinkers, dismissing the energy supply security values of nuclear and coal, and focusing only on the carbon-related and, in the case of nuclear, decommissioning issues
In both cases the government has been largely inept. Its failure to hold a full and open nuclear consultation gave Greenpeace an open goal, while its failure to consult on future coal policy is similarly giving environmentalists the upper hand.
E.On’s request that the UK government delay its decision on the company’s planning application for its Kingsnorth coal plant until the consultation on carbon capture and storage is completed later this year is the latest evidence of a government dithering on energy issues that do not resonate with environmentalists.
As Greenpeace executive director John Sauven commented: ‘E.On's Kingsnorth climbdown is a major blow to [business secretary] John Hutton. With the most ardent coal generator now calling for a delay Hutton’s under-fire department is looking isolated. It’s time for the Prime Minister to step in and take control by initiating a full government coal review. It looks like reports of disquiet around the cabinet table are making E.On nervous. Ministers are increasingly concerned about the damage to Britain's climate change reputation if Kingsnorth is approved. The world's leading scientists say new coal stations shouldn’t be built unless the carbon emissions can be captured and buried from day one.’
Greenpeace argues that without CCS technology, which by the department of business, enterprise and regulatory reform’s own estimates cannot be ready for at least seven years, the new Kingsnorth coal plant would emit as much CO2 each year as the 30 least climate polluting countries combined. It continues: ‘And with seven other similar power stations in the pipeline, the consequences for the climate would be disastrous. Yet John Hutton is quite prepared to go ahead with the plan – even if that means going it alone.’
In the two weeks since these comments were made there has been no government response. But the views of Greenpeace and other environmental organisations have been widely reported in the media. So who will the general public believe on coal – the government or environmentalists?
In calling for a full government coal review Greenpeace is effectively calling the government’s bluff. It knows there will be no such review with the government focused on its carbon capture consultation which, it will argue, is required to make fossil fuel generation (including coal) clean. So is there a case for coal?
At face value coal should not be on the agenda. It is the most carbon intensive generation fuel and coal plants are appreciably less efficient than gas plants. With no new coal-fired plant constructed for three decades, and with around 10 GW of UK coal capacity closing by 2015 as a consequence of the Large Combustion Plant Directive, coal could have quietly grown old and then slipped out of the generation mix. Environmentalists hope it will.
A WWF commissioned report by Point Carbon on power sector windfall profiteering in the emission trading scheme paints a similarly bleak picture for coal, which is the main economic beneficiary of the scheme. Making its argument against coal, WWF says: ‘Burning coal to generate electricity already accounts for about 1bn tonnes of CO2 emissions per year within Europe - or about 20% of all the EU's greenhouse gas emissions – and its grip on the European power sector looks set to increase. But the EU Emissions Trading Scheme continues to allow this heavily polluting form of energy to gain billions of euros from a scheme originally created to reduce emissions.’
This assessment by WWF is factually correct, but the benefit to coal is due entirely to the flawed structure of the trading scheme and the government’s providing too many free allowances in the first and second phases to coal plant operators. Increased coal burn increases emissions, and thereby raises the price of EU allowances. Yet if these coal operators have not paid for their allowances to run the coal plant they can pass a higher notional cost of carbon into the wholesale electricity price and increase their generation margins. Simply put, it is a win-win situation for coal.
When presented with this argument, which is the staple fodder of environmentalists, it is difficult to make a positive case for coal. But it is not impossible. Unfortunately, though, this exercise seems beyond the capability of this government. This is not the case in Germany, Europe’s largest energy economy, where coal-fired generation is increasing. The main difference with the UK though is that the renewables share of Germany’s generation mix increased from 11.8% to 14.2% last year, with this increase almost equivalent to the UK’s current share of renewable generation. Put another way, Germany has a more balanced generation mix than the UK and it is through a balanced and diverse energy mix that best ensures supply security.
A case can, and should, be made for coal, but taking the carbon capture route, as the government is, potentially undermines, not supports, the coal argument. Environmentalists know this and are using it to undermine the government’s position and increase public support for a phase-out of coal plant that is not fitted with carbon capture technology.
Carbon capture has been presented as a generation Messiah, yet while it will remove up to 90% of CO2 emissions the technology is at least a decade away from being commercially viable. The UK will not have a demonstration carbon capture project in operation until 2014 and yet by 2015, when the LCPD ends, all the UK’s opted out coal capacity will have closed. And if this capacity has not been replaced by this date there will be an energy supply gap. This decommissioned coal capacity cannot be replaced with new nuclear, with the first new plant not scheduled until 2017 at the earliest and nor can it be efficiently replaced by wind power, as the intermittent nature of this generation means that it will only operate at an average load factor of around 30% given the probability of wind flows and speed.
The obvious replacement for old inefficient coal capacity is new, more efficient coal capacity. E.On knows this, which is why it submitted plans to replace its current Kingsnorth plant with a supercritical boiler coal plant that will produce 20% less CO2 and be designed carbon capture ready More importantly this plant would be operational by 2012, meaning supply security issues are avoided while producing less emissions. But the growing weight of environmental opinion both within and outside government risks undermining coal’s future.
According to media reports, ‘Britain's coal rush’ is provoking furious rows in Whitehall. Environment secretary Hilary Benn is said to be livid that he has responsibility for environment but not energy and that while Defra begs energy companies to insulate old people’s homes, Hutton gladhands them through the planning system. Downing Street is said to be increasingly irritated by the muddle.
Reports of divisions within government indicate that environmentalists are winning the battle not only on coal but on energy policy in general. Gordon Brown hatched a plan to create a ‘super ministry’ of energy and the environment when he was planning his premiership this time last year. He may now wish he had, but he was right to heed the advice of Whitehall mandarins against such a policy. However his weakness in not supporting his energy ministers undermines his decision.
Energy policy should be directed from the energy ministry, not the environment ministry. Unfortunately this UK government has become mesmerised by environmentalists, both within and outside the government, which both undermines energy policy and increases the risk of medium term supply insecurity.
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