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Kingsnorth - coal gone west?

Richard Black | 15:57 UK time, Thursday, 8 October 2009

Coal_power_protestSome climate campaigners have been quick to claim that the decision to delay the proposed new coal power station at Kingsnorth in the south-east of England is both a victory for them and an indication that coal has little future as a fuel.

The company behind the plan, E.On, says nothing of the sort - it blames its decision on reduced electricity demand caused by the recession.

The plant - intended to replace an older one that has to come out of service in six years' time because of EU restrictions on sulphur and nitrous oxide emissions - isn't merited until 2016 given new market conditions, it says.

So where does the truth lie? Has campaign power really turned off the juice?

As usual in these issues, the picture is a bit more complex than either side is painting it.

Yes, electricity demand is down this year - by about 8% from last year, according to the government.

And that doesn't only affect what happens this year. When E.On first mooted the project back in 2006, projected demand - and so their forecasts of revenue from the plant - would have been higher than they are now.

On the other hand, there's no doubt that as Bryony Worthington writes in The Guardian, E.On's name has attracted a certain amount of the brown stuff over this plan - and although that may not decide a commercial company's decision, it can influence it, particularly when economic factors are pushing in the same direction.

A third factor concerns competitions for funding for carbon capture and storage (CCS).

Energy and Climate Secretary Ed Miliband declared in April that no new coal-fired stations would be built in the UK unless they included a demonstration CCS capability.

Up to four new plants would be permitted with CCS - and a competition would decide which applicants would receive funding to assist them.

kingsnorthpa300.jpgIn parallel, the European Commission is also going to supply funding for six demonstration-scale CCS plants across the EU.

Liberal Democrat MEP Chris Davies, who has encouraged European action on CCS, is suggesting Kingsnorth will not be the UK's successful contender, and that "within a week", the commission will unveil a rival project near Doncaster in the north of England as a winner.

The UK government, meanwhile, does not know when it will announce the results of its own CCS competition.

These are other factors pushing E.On towards a Kingsnorth delay.

On the global stage, though, the decision means very little.

As the International Energy Agency announced this week, the recession will almost certainly reduce energy demand across the world (and therefore greenhouse gas emissions) this year.

Its conclusions on the investment question, though, are mixed.

The problematic economy may stall investment in new "dirty" infrastructure through reducing demand; but it may also curb forays into cleaner technologies, because companies will have less money to spend.

In Europe, carbon is trading at about 13 euros per tonne - way below the levels needed to stimulate heavy investment in technologies that will curb emissions, according to many studies.

But the presumption has to be that under business as usual, when the red line of economic growth starts pointing upwards, any delayed investment in coal-fired stations will crank up again.

A single decision in one relatively prosperous nation is unlikely to have any bearing on investment decisions far afield - particularly in less developed nations, and especially in those that are currently exploiting their own coal reserves.

With enough coal in the world to last for centuries, this is why you'll often hear politicians and officials maintain that there can be no climate change solution that does not include coal.

Yet the very real practical issues with CCS remain - no-one has yet shown that it can work on a commercial scale, and even if it can, it's likely to hike the cost of generation significantly.

The Kingsnorth decision helps to raise discussion of the coal conundrum; but it doesn't solve it.

Which is why parties keen to see meaningful brakes applied to the world's carbon emissions are far better off looking to Copenhagen than to Kingsnorth.

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