Generators’ coal deal may pull plug on £4bn gas investment

The big three coal-fired power generators seem certain to demand a de facto ban on further gas-fired stations as a condition for buying more coal over the next three to five years. This would prevent investment of about £4bn in up to 10,000MW of planned gas-fired capacity over the period, at the cost of several […]

The big three coal-fired power generators seem certain to demand a de facto ban on further gas-fired stations as a condition for buying more coal over the next three to five years.

This would prevent investment of about £4bn in up to 10,000MW of planned gas-fired capacity over the period, at the cost of several thousand engineering and construction jobs.

As part of its review of energy policy, the Government yesterday announced a tougher planning consent regime for gas-fired plants, in the hope of persuading National Power, PowerGen and Eastern to buy more coal and prevent the loss of more than 5,000 pit jobs.

But the Government drew back from imposing a five-year moratorium on further gas projects, despite several leaks over the past two months suggesting it would introduce such a measure.

The generators are consequently bound to tie any extra coal purchases to a continuing hiatus on all but small, combined heat-and-power developments.

A senior source at one of the three suggested that any new contracts were likely to include a formula to reduce the volume of coal bought in line with any new gas capacity coming on stream perhaps by 2.5 million tonnes for each additional 1,000MW.

RJB Mining, the UK’s largest coal company, hopes the Government announcement will persuade the generators to sign up for almost double the 13 million tonnes they are collectively contracted for this year.

National Power has signed for 8 million tonnes in 1998/9 and 5 million for the two following years; Eastern has signed for 4 million over the next three years; and PowerGen for 1.5 million in 1998/9.

An RJB spokesman said the announcement would ‘hopefully provide the framework’ for additional sales sufficient to avoid any further mine closures or redundancies. He also expected contracts for further sales to have get-out clauses covering new gas projects.

While RJB does not expect to match the 27 million tonnes it sold to the generating industry in the year to March 1998 the last in the five-year brokered deal set up when it was privatised it has probably already cut its annual deep-mined capacity by 5 million tonnes over the past year through the closure of two entire collieries and production units at two others.