Government is now in a hole over coal

Can the coal industry be saved in Britain? It looks unlikely. And the Government is running out of time. The moratorium on gas-fired construction has come too late. Gas-fuelled generating capacity either operating or under construction will total 18,000MW around the turn of the century, with plenty more projects in the wings with all the […]

Can the coal industry be saved in Britain? It looks unlikely. And the Government is running out of time. The moratorium on gas-fired construction has come too late. Gas-fuelled generating capacity either operating or under construction will total 18,000MW around the turn of the century, with plenty more projects in the wings with all the required planning consents.

Gas will consequently account for about 40% of the generating market within the next three years. Nuclear power will continue to have 25% share, CHP and renewables probably 5 10%.

That leaves no more than 25% for coal. Generators estimate that a fall in annual demand of 12m tonnes of coal is inevitable. RJB Mining will be hit hardest.

The other more immediate measures open to the Government include a cap on pool prices, which remain too attractive to new gas-fired entrants. But any deal to find an additional market for coal would depend on the acquiescence of the big generators, which would look for some kind of regulatory quid pro quo.

Nor will other short-term fixes work. An additional tariff on gas, confined to power generation, would be discriminatory and vulnerable to legal challenge. Any wider measure would do far more damage to industry at large.

A helping hand for coal would also make the Government’s emissions reduction targets impossible to achieve unless it was prepared to hammer motorists with a 100% carbon tax to compensate. And the clean coal technology that might offer a part solution to this difficulty will not be developed in time to have any impact on the current crisis.