Gas hike may hit green initiatives

The cancellation of combined heat and power projects due to soaring industrial gas prices is threatening to undermine the government’s attempts to combat global warming.

The doubling of gas prices over the past year has made the highly energy-efficient CHP —which makes use of excess heat that is usually wasted by conventional power stations — suddenly unattractive, and an increasing number of schemes is being abandoned.

The Paper Federation of Great Britain confirmed last week that two of its members had shelved plans for ‘substantial’ CHP plants, following British Sugar’s announcement at the end of last year that it would no longer proceed with 50MW projects at two of its sites.

David Green, director of the Combined Heat and Power Association, said this was symptomatic of the current trend, and that most of the 1,500MW of CHP capacity that had received consent over the past two years was now unlikely to be built.

‘We know a third of that won’t be going ahead and there’s doubt over another third.’The scrapping of CHP projects — virtually all of which are fuelled by gas — is likely to scupper the government’s target of 10,000MW of installed capacity by 2010, which is a vital plank of its strategy to meet the commitment it gave at the Kyoto summit to reduce greenhouse gas emissions by 10% of 1990 levels.

‘That will definitely be very difficult to achieve in the current climate,’ said Green. He added there was just 4,900MW of CHP capacity installed and operating in the UK, and a study by consultant Cambridge Econometrics in November forecast that there would be no more than 7,000MW installed by 2010.

More immediately, the cancellation of CHP projects is threatening to undermine the agreements under which industry is negotiating 80% discounts on the Climate Change Levy, which will take effect in April.

The DETR announced last week that it had signed agreements with 15 of the 43 eligible industry sectors — including steel, cement and motor manufacturing, but not paper and chemicals.

Environment minister Michael Meacher said he expected to conclude agreements with the others ‘over the next few weeks’.

However, the development of CHP projects will be a vital part of the strategy for some sectors to achieve the necessary reductions. David Gillett, head of environment at the Paper Federation of Great Britain, said his industry — which was ideally suited to CHP — was a case in point, and the reductions would be difficult to achieve without it.

A DETR spokeswoman played down the risk posed by cancelled CHP projects, saying that such schemes would not be suitable for all the sectors involved.The negotiated agreements require the individual sectors to meet targets for reducing their greenhouse gas emissions by 2010, and interim two-year targets along the way.

Martin O’Neill, the Labour chairman of the Commons Trade and Industry Select Committee, called last week for the introduction of the levy to be postponed for a year pending a resolution of the gas crisis.