The announcement last week that RJB Mining and Texaco were to examine the feasbility of building the UK’s first commercial-scale power station using a clean coal technology, was greeted enthusiastically by those worried that the country is sliding towards a dangerous dependency on natural gas for its electricity.
While it would be churlish to pour cold water on the undertaking before the 12-month study has even begun, there are some stark realities that will confront any such project for several years.
The first is cost. The integrated gasification combined-cycle (IGCC) technology proposed is more expensive to build per megawatt than a combined-cycle gas turbine (CCGT) plant. This is not surprising, as the former – in effect – simply adds a complex gasification plant to the front end of the latter.
National Power, the largest generator in the UK which has an interest in the 335MW Elcogas IGCC project in Spain, reckons gas prices in the UK would need to double to make the technology competitive. `Compared with pool prices today, it’s getting on for twice the cost,’ said a company spokesman.
RJB Mining predictably takes a more optimistic view. Based on an initial estimate of a £300m capital cost for a 400MW plant on the site of its Kellingley colliery in West Yorkshire, a spokesman said it should produce power at 3p/kWh – about 30% more expensive than the cheapest gas-fired generation. He conceded that the project would require a subsidy of about £12m a year `to compete with gas plants’.
One awkward fact of life on the cost issue is that coal is not the most efficient fuel for IGCC plants – heavy refinery residues and orimulsion do not require as much preparation or oxygen to gasify.
The driver for the RJB project is to secure a future market for the 38 million tonnes of coal that the company produces annually. This has become a matter of urgency as the five-year contracts with the big coal-fired generators that RJB inherited from British Coal are due for renewal at the end of March 1998. National Power, PowerGen and Eastern are certain to cut their collective commitment of 30 million tonnes a year – over 80% of which comes from RJB – considerably.
An irony of the situation, however, is that as the power market currently operates, RJB’s project, and any other clean coal scheme, would replace existing coal-fired capacity rather than expand the market for the fuel. This is because it is only coal-fired plants that presently provide non-baseload requirements to any meaningful extent. Any new capacity coming in at the baseload/mid-merit level would simply push the oldest coal-fired peaking plants off the system altogether.
Brian Count, National Power’s executive director, made the point that IGCC plants could even reduce the power industry’s coal consumption, as they would be more efficient at turning the fuel into electricity.
So while political support for subsidising clean coal projects seems to be mounting – Labour suggested last week that in government it might reclassify the Non-Fossil Fuel Obligation to include such schemes – subsidies on their own will not protect, let alone expand, the market for coal in UK power generation. More direct government intervention will be required to do that – most notably measures to restrict the construction of more CCGTs.
National Power believes that a moratorium imposed now on gas-fired projects that have yet to receive planning consent would have a huge impact on preserving the market for coal over the next three years. A consultant’s report in September suggested that 14-23GW of additional CCGT capacity would be built by 2002-03.
`You could save some 20 million tonnes a year by the turn of the century if you acted now,’ said National Power’s spokesman.
For a Labour government, such a move would not be too difficult – it could even be achieved indirectly through a prolonged Monopolies and Mergers investigation into the issue. For the Conservatives, however, it would amount to an admission that its policy of leaving the production of electricity to market forces had failed.
Even if the political resolve is found, there is a further debate as to whether IGCC plants represent the most cost-effective way of securing the future for coal in an environmentally acceptable way. The large generators point out that fitting flue gas desulphurisation plants to existing stations offers a far cheaper means of creating `clean’ coal capacity – about £300m for a 2,000MW plant. Such plants, they maintain, could compete with CCGTs on baseload and have a cost advantage on mid-merit operation.
This approach would be relatively short-term, at least in the UK context. `It’s like fitting zimmer frames to geriatric technology,’ complained one IGCC proponent.
The long-term benefit to the UK of developing clean coal technologies is indisputable – coal reserves will last more than 100 years while self-sufficiency in gas may not endure more than another 20.