2. Coal is the dominant fuel for the production of electricity globally with about 37% of the world’s electricity generated from it – coal continues to source around one third of Britain’s electricity generation.
3. The strategic importance of coal is further underlined by the fact that there are over 200 years of established coal reserves at present production rates compared with only 50 or so years for oil and gas.
4. In Britain electricity demand continues to grow at about 1.5% pa, a figure well in advance of the output growth of alternative renewable energy sources. While natural gas, itself a fossil fuel, has many advantages, it is not possible to substitute it totally for today’s coal production. At the same time the output from nuclear stations is in decline.
5. It is clear that coal will remain of strategic importance as an energy source for the foreseeable future, so contributing to security and diversity with supplies from a variety of locations/countries including Britain, subject to world market demands.
6. An appropriate EU and British government energy policy framework would help to ensure coal’s availability while the environmental consequences of its continued large scale use can be minimised by the application of clean coal technology.
The contribution of British mined coal to security and diversity
7. The availability of British and imported coal makes it a strategic resource in considering EU and British needs in the context of security and diversity of energy and its supply.
8. The availability of British coal means that an indigenous resource is available to underpin security and diversity for electricity generation throughout the period covered by the EU and British government reviews ie up to 2050, so avoiding an anticipated future unhealthy over dependence upon imported sources of energy (notably gas and coal), the security of which is outside the nation’s control, are vulnerable to disruption and subject to competing claims by others. Current British coal consumption runs at around 59 million tonnes pa, of which 30 million tonnes is British mined and we assess that a continuance of annual production at this level is a realistic forecast for the future.
9. The CA has consulted with the British coal industry and have advised the Cabinet Office Energy Review that estimated established reserves amount to 222 million tonnes with a further known potential of 380 million tonnes; in addition currently un-accessed deep mine and open cast resources potentially (see para 11 below) provide many years of future production at present levels.
10. Whereas the main constraint on working new deep mine coal is the availability of investment capital and economic viability given the volatility of international market prices and the long lead times for investment, for opencast coal it is the reluctance of the planning system to grant new consents for extraction.
11. There is currently no systematic, comprehensive assessment of the remaining British coal resource taking place. We believe that the DTI have accepted that the most effective way to remedy this situation would be to promote amending legislation to enable the CA to actively promote the coal resource and undertake this comprehensive role.
12. Whilst the privatised coal industry sinks occasional new exploratory boreholes, the level of exploration activity is extremely low. Section 5(6)(b) of the Coal Industry Act 1994 specifically prevents the CA from exploring for new coal or proving known occurrences. It is also barred from obtaining planning permission or any other authorisations required for carrying on coal mining operations. In today’s circumstances, this prevents an overall approach being adopted in the public interest. Equally important, known reserves of coal are universally in danger of being sterilised by non coal related surface developments. There is little, if any, effective planning policy to prevent the sterilisation of coal which may be required for working in the future. Unlike the situation with aggregates for example, there is no land banking policy for opencast coal embedded in the formalities of the Town and Country Planning system. Even if Britain's considerable opencast and deep mine coal resources are not to be extensively worked under the existing planning regime, it is important that they should be kept available to facilitate any future change in policy which might favour their exploitation.
13. To give real effect to such an approach, it is important that the CA be permitted purposefully to engage with Mineral and Local Planning Authorities in connection with both their Development Control and Development Plan functions. The CA is not proposing that high environmental and operating standards should be relaxed nor that communities should not be protected from undesirable development - we argue for an objective assessment of the balance between the national community interest in coal worked to high standards, and the level of disruption caused and the planning gains which can often be realised.
Non traditional methods of obtaining energy from coal
14. The ability of the British coal resource to contribute to the UK energy needs is not restricted to extraction of coal through traditional mining methods. Reference is made to coal methane and the potential of underground coal gasification, a potential not recognised in the EU Green Paper.
15. CBM extraction using vertical wells and hydraulic fracturing techniques has proved commercially successful when applied to coal seams that contain sufficient gas content with good permeability and which lie at reasonable depths (less than 1,500m).
As yet the CBM industry in the UK is only at the pilot stage, but in the USA it is commercially and technically proven and has grown from a fledgling business in 1990 to one that supplied 6 per cent (1,200 billion cubic feet per year) of the USA's natural gas demands in 1999 with growth potential forecast at 12%. Whilst it is by no means clear that British coals will produce CBM at the same rate as USA coals, it is in the national interest that the three or so current privately funded British CBM pilot projects should be allowed to run their course to help establish the British CBM potential.
16. CMM is recovered as a free gas from existing and abandoned traditional deep mines. The mining process causes the unworked coal in and around mines to fracture and de-stress, allowing the methane trapped in the coal to escape. This gas either vents naturally to the surface where it adds significantly to the global warming, or can be recovered in a controlled way where it is captured for its energy content. There are more than 900 closed deep coal mines in the UK, from which it is estimated that a minimum of 300,000 tonnes of CMM, equivalent to 6.3 mt of CO2, are seeping into the atmosphere each year. By capturing CMM and converting it into useful energy, the global warming potential of CMM is reduced by 87%. The five abandoned mine CMM capture projects already established in the UK benefit the environment by capturing emissions equivalent to the removal of around 160,000 cars from the roads. At present, projects below 6 MW are not economically viable, limiting growth to about 120 MW or so. If CMM was eligible for the Renewables Obligation (as in Germany which has considerable investment taking place as a result) or its equivalent, then it is estimated that 800 MW could be in place by 2005 (equivalent to the total capacity of live renewable projects in March 2000, excluding large-scale hydro). By 2010 there could be a total capacity of about 1 GW, capable of being sustained for 25 years or so on present estimates. CMM is a proven technology with clear environmental gains which it is in the national interest to achieve.
17. Underground Coal Gasification (UCG) is the partial in-situ combustion of a coal seam to produce gas for use as an energy source. It is achieved by drilling two boreholes from the surface, one to supply oxygen and steam, and the other to bring the gas to the surface. Whilst the basic feasibility of UCG has been proven in trials, further detailed studies are required to prove the drilling technology, burn control, and the overall economics of gas recovery using this method.
The DTI has a UCG research programme in place and it is important that this should be completed in order to demonstrate whether UCG is a viable alternative to conventional opencast and deep mining. It is proposed to transfer this programme back to the CA through new R&D legislative powers in the 2001-2002 Parliamentary session.
18. There are large coal resources under the North Sea and off the Welsh Coast and n areas of outstanding natural beauty which will never be worked by traditional mining methods – these could provide Britain with substantial sources of indigenous energy if research and development into non traditional working of coal was successful.
Clean Coal Obligation
19. The CA is not aware of any generally accepted argument that would exclude a significant role for coal in a secure energy mix for the UK. This is only the case, however, if energy can be released from coal in the future without simultaneously adding unacceptable levels of CO2, SO2 and Nox to the atmosphere. It appears to be established that a coal gasification plant feeding into a combined cycle gas turbine with subsequent CO2 sequestration and enhanced oil recovery has generation costs on a par with renewables and nuclear. Work by the IEA Greenhouse Gas R&D programme suggests that costs of CO2 avoidance at coal generation plant utilising CO2 capture and storage could be as low as £40 per tonne and cut CO2 emissions from coal generation by 80%. This compares very favourably with the £85 per tonne of CO2 avoidance under the government’s current renewables obligation. Given the gains to be achieved by these CCT technologies, there is a considerable incentive for the government to facilitate a major demonstration plant project ideally with enhanced oil recovery as the CO2 storage element.
20. If generators are to invest in new clean coal technology (CCT) capacity, then planning consent would need to be obtained for new plant in a relatively short period of time commensurate with normal business plan timeframes, and once constructed the emission standards for which new plant is designed should not change in an unacceptable manner. If new CCT generating stations are marginally uneconomic, then to square the circle of secure energy but at reduced environmental cost, the CA would favour the introduction of a Clean Coal Obligation along the lines of the support given to nuclear energy in the past and the renewable sector at present.
21. Competition would be preserved by the competitive position of the generators one to another, and the availability of imported coal. Direct financial government support would not be called upon. Imported coal would maintain competitive pressure on indigenous British coal, although utilisation of the EU flexibility to support indigenous energy sources would clearly be welcome to British coal (the 15% limit however, is an insufficient security level to keep the lights on, the nation working and hospitals operating etc.).
22. An alternative, perhaps making more intellectual sense, might be to suggest that, in response to Kyoto, the EU and Governments should not be favouring particular technologies such as renewables or nuclear or even coal, but should instead require generators to provide a significant proportion of their electricity from sources which provide minimal amounts of carbon on a reducing sliding scale over a period. It is, after all, the Kyoto objective to reduce greenhouse gas emissions. Given that Integrated Gasification Combined Cycle plant with sequestration has minimal CO2 emissions, one might expect that in competition with nuclear and renewables, coal too would be utilised. The UK Government might find this attractive as its self-imposed renewables generation targets are not likely to be achieved in the view of most commentators. By establishing a low CO2 generating obligation, the UK Government could look to the generators in competition with each other to produce electricity with much higher carbon and CO2 savings than are likely to arise under the existing obligations approach. The development and operation of this technology successfully in Britain could provide an effective base for the export of the technology and equipment, other countries having the same need for this approach given the world's mutual interest re climate change and emission reduction.
23. If security and diversity is to be faced head on, risk assessment would lead most people to conclude that there should be a policy on the energy mix to reduce vulnerability to outside elements – not more than a fixed percentage from any one energy source, whether of the fuel or the country of origin. This is not inhibiting of competition.
24. Market liberalisation can deliver the meeting of climate change targets and the ensuring security of energy supply as long as the framework for their operation is set appropriately by EU and British government policy, particularly against the long lead times which the scale of the investment requires from all concerned.
ECSC Treaty extension
25. The EU are proposing an extension to the present ECSC Treaty which expires in July 2002 (rolled over to December 2002). The legal advice to the CA is that there are a number of issues to raise if the interests of the British coal industry are to be safeguarded on possibilities in the future through options being preserved – investment permitted in new mines as well as existing mines, ability to undertake small scale adjustments to financial and operational arrangements, non traditional methods of coal exploitation not inhibited, the cap on individual member states historic support levels not to the disadvantage of Britain’s coal industry. These views are known to DTI and the EU and are being reinforced.
26. The ECSC Treaty and the proposed extension is drafted on the basis of a continuing decline of uneconomic coal production – which is the position in Germany and Spain. However, the British coal industry has improved its viability and different issues arise – supporting current operations and securing long term investment in long life economically viable projects are policy options which should be preserved. There is a conflict between degression of aid as against reasonable support to safeguard and encourage the productive working of existing and new indigenous resources and reserves.
Structures
27. There is common agreement that there is fragmentation both at government level through a number of different departments (DTI, DTLR, DEFRA) and between other agencies and organisations. There are different models which would enable an overall view to be taken at a policy level of energy issues and a more effective pattern of delivery to be put in place. The fact that the Minister for Energy is the chair of the Cabinet Office Energy Review will help to ensure that these issues are considered in the light of the review’s conclusions – structure matters in the establishment and implementation of policy with consistency and clarity, as the Minister has himself publicly acknowledged.
Conclusions
28. Britain has significant coal resources which are of strategic significance.
29. These need to be assessed systematically and planning policies put in place to prevent their sterilisation and to encourage their exploitation by traditional and non-traditional means through acceptable development.
30. British coal can continue to make a significant contribution to the security of Britain’s energy needs through investment in CCT generating capacity, which can burn coal from a wide, politically stable supplier base - supported by stockpiling by coal operators, power stations, and ports as required. A clean coal or clean energy obligation would support the required investment by the generating industry and British coal industry. Such a policy would also have the advantage of providing a local market for British produced coal to exploit with all the attendant economic and social benefits which this would continue to bring to the Coalfield Communities and Britain more widely. Further, a policy on energy mix would contribute substantially to both security and diversity.
31. If an assured continuing supply of British mined coal is to be achieved, then this can best be achieved by the introduction of planning and investment support policies which facilitate greater access to known opencast and deep mine coal, and to the exploitation of coal by non traditional means. Utilisation of the EU competition flexibility to support indigenous energy supplies would further support British mined coal, especially if the limit of 15% was raised to a level providing greater security.
32. The establishment of an EU and British policy framework (no market is ever totally free) would provide the certainty which the competitive market requires to deliver on long term investment, climate change, and security and diversity.
33. The fragmentation of responsibility between departments and other public organisations should be examined as part of the Cabinet Office Energy Review to support clarity and consistency in keeping all aspects of energy issues under review and in policy formulation and implementation.
John Harris
Chair
Coal Authority
November 2001
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