IS THERE AN IS THERE AN ENERGY CRISIS?ENERGY CRISIS?
David Brewer, BA., ACMADavid Brewer, BA., ACMA
Director GeneralDirector General
Confederation of UK Coal ProducersConfederation of UK Coal Producers
Presented to RICS Minerals and Waste ManagementPresented to RICS Minerals and Waste Management
Faculty's Annual ConferenceFaculty's Annual Conference
Hilton Hotel, York,19th March 2004Hilton Hotel, York,19th March 2004
ENERGY WHITE PAPERENERGY WHITE PAPEROUR ENERGY FUTURE – CREATING A OUR ENERGY FUTURE – CREATING A
LOW CARBON ECONOMYLOW CARBON ECONOMYFOUR POLICY GOALSFOUR POLICY GOALS
Path to cut CO2 emissions by 60% by 2050 Path to cut CO2 emissions by 60% by 2050 with real progress by 2020with real progress by 2020Maintain reliability of energy suppliesMaintain reliability of energy suppliesPromote competitive markets to raise rate of Promote competitive markets to raise rate of sustainable growth and improve productivitysustainable growth and improve productivityEnsure every home adequately and Ensure every home adequately and affordably heatedaffordably heated
ENERGY WHITE PAPERENERGY WHITE PAPEROUR ENERGY FUTURE – CREATING A OUR ENERGY FUTURE – CREATING A
LOW CARBON ECONOMYLOW CARBON ECONOMY
Primary goal, as the title suggests, is to Primary goal, as the title suggests, is to reduce COreduce CO2 2 emissionsemissionsHas this lead – or will it lead – to an Has this lead – or will it lead – to an energy crisis?energy crisis?Where have we come from, where are we Where have we come from, where are we now, and where might we be going to?now, and where might we be going to?
Share of Total Energy Consumption by Fuel
0
5
10
15
20
25
30
35
40
45
50
%
Coal Oil Natural Gas Nuclear Other
Fuel Used for Electricity Generation
0
10
20
30
40
50
60
70
80
%
Coal Oil Natural Gas Nuclear Other
Electricity Production by Fuel
0
10
20
30
40
50
60
1995 1996 1997 1998 1999 2000 2001 2002 2003
%
Coal Oil Natural Gas Nuclear Other
Coal Burn at Power Stations
0
10
20
30
40
50
60
1996 1997 1998 1999 2000 2001 2002 2003
mtp
a
The Energy Ratio
0
50
100
150
200
250
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Ind
ex
GDP Energy Consumption Energy Ratio
Electricity Consumption
0
50
100
150
200
250
300
350
400
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
TW
h
UK Oil & Gas PricesUK Oil & Gas Prices
0
5
10
15
20
25
30
35
'99 J '00 J '01 J '02 J '03 J
$/Barrel
0
5
10
15
20
25
30
35
p/Therm
OilGas
Source: International Petroleum Exchange
International Coal Prices CIF NW Europe
0
10
20
30
40
50
60
70
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
US
$/t
on
ne
InternationalInternational CoalCoal PricesPrices
International Coal Prices
0
10
20
30
40
50
60
70
J F M A M J J A S O N D J
$/te
MCIS CIF NWE $/te FOB SA $/te
0
10
20
30
40
50
60
70
J F M A M J J A S O N D J
$/te
MCIS CIF NWE $/te FOB SA $/te
InternationalInternational FreightFreight RatesRates
0
5
10
15
20
25
30
35
J 03 F M A M J J A S O N D J 04
$/te
Freight Rates SA to ARA
EFFECT OF ENVIRONMENTAL EFFECT OF ENVIRONMENTAL MEASURES ON COAL-FIRED MEASURES ON COAL-FIRED
GENERATIONGENERATIONLarge Combustion Plants Directive – limits SOLarge Combustion Plants Directive – limits SO22, , NONOXX and Dust and Dust
Implementation by Emission Limits or National Implementation by Emission Limits or National Plan. National Plan discriminates against high Plan. National Plan discriminates against high sulphur indigenous coalsulphur indigenous coal
Non-FGD stations will start to close from 2008. Non-FGD stations will start to close from 2008. EU Emissions Trading Directive – limits COEU Emissions Trading Directive – limits CO22
EFFECT OF EUETS NATIONAL EFFECT OF EUETS NATIONAL ALLOCATION PLANALLOCATION PLAN
Carbon allocations to coal stations will permit Carbon allocations to coal stations will permit burn of about 38 mtpa for 2005 to 2008burn of about 38 mtpa for 2005 to 2008BUT BUT total NAP allocations not enough to keep total NAP allocations not enough to keep the lights on unless new entrant reserve usedthe lights on unless new entrant reserve usedMay be further switch from coal to gas through May be further switch from coal to gas through carbon trading, or purchase of allowances from carbon trading, or purchase of allowances from other sectors, or from Europeother sectors, or from EuropeDepends on relative coal/gas prices and market Depends on relative coal/gas prices and market price of carbonprice of carbonElectricity prices Electricity prices willwill increase – how much? increase – how much?Coal burn could fall furtherCoal burn could fall further
EFFECT OF ENVIRONMENTAL EFFECT OF ENVIRONMENTAL MEASURES ON COAL-FIRED MEASURES ON COAL-FIRED
GENERATIONGENERATION
Effect of EU Emissions Trading Scheme Effect of EU Emissions Trading Scheme will be to disincentivise further investmentwill be to disincentivise further investment
Coal-fired power stations might close by Coal-fired power stations might close by 2016 because of Large Combustion Plants 2016 because of Large Combustion Plants Directive NODirective NOX X requirementsrequirements
But there will remain significant coal-fired But there will remain significant coal-fired capacity well beyond 2010capacity well beyond 2010
THE END OF NUCLEAR THE END OF NUCLEAR POWER?POWER?
Magnox Stations close by 2011Magnox Stations close by 2011
AGR Stations close by 2020AGR Stations close by 2020
Only Sizewell B (PWR) remains open after Only Sizewell B (PWR) remains open after 2020 2020
Generating Capacity
0
10
20
30
40
50
60
70
80
GW
Generating Capacity Maximum Load
Installed Capacity
0
5000
10000
15000
20000
25000
30000
35000
35.9
Coa
l
36.3
Gas
15.1
Nuc
lear
2.1
Oil
5.3
Hydro
1.9
Renew
able
s
3.3
Inte
rcon
nect
ors
MW
Oil Reserves
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
M T
on
ne
s
Cumulative Production Remaining Reserves
Oil Production as Proportion of Reserves
0
1
2
3
4
5
6
7
8
9
10
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
%
Gas Reserves
0
500
1000
1500
2000
2500
3000
3500
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Bil
lio
n C
u M
Cumulative Production Remaining Reserves
Gas Production as Proportion of Reserves
0
1
2
3
4
5
6
7
8
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
%
FUTURE ENERGY PRICESFUTURE ENERGY PRICES
A double whammyA double whammy
The price of carbon - £8/MWh – twice the The price of carbon - £8/MWh – twice the price of Germanyprice of Germany
Increased demand for gas means higher Increased demand for gas means higher gas pricesgas prices
Carbon price and higher gas prices will Carbon price and higher gas prices will BOTH increase electricity pricesBOTH increase electricity prices
Both gas and electricity prices higherBoth gas and electricity prices higher
IS THERE A MARKET FOR IS THERE A MARKET FOR INDIGENOUS COAL? INDIGENOUS COAL?
Depends on implementation of Large Depends on implementation of Large Combustion Plants Directive by ELV Combustion Plants Directive by ELV optionoption
Gas prices will be highGas prices will be high
Significant coal-fired generating capacity Significant coal-fired generating capacity will remain until at least 2015will remain until at least 2015
There will be a market well beyond 2010There will be a market well beyond 2010
International coal prices may stay highInternational coal prices may stay high
CAN WE PRODUCE IT?CAN WE PRODUCE IT?
A Forecast of UK Production to 2010A Forecast of UK Production to 2010 mtmt mtmtEnglandEngland deepdeep 1313
surfacesurface 3 3 1616ScotlandScotland surfacesurface 7 7WalesWales deepdeep 1 1
surfacesurface 1 1 2 2
TotalTotal 2525
England - Surface Mine Reserves
0
5
10
15
20
25
30
1997 1998 1999 2000 2001 2002 2003
m t
on
ne
s
Output Consented Reserves
ENGLISH SURFACE MINE ENGLISH SURFACE MINE RESERVESRESERVES
Over 500 m tonnes of potential surface Over 500 m tonnes of potential surface mine reservesmine reservesOnly 5.7 m tonnes of consented reserves Only 5.7 m tonnes of consented reserves remaining – less than 18 monthsremaining – less than 18 monthsA viable, profitable industry is being A viable, profitable industry is being destroyeddestroyedWe are importing coal we could be We are importing coal we could be producing – and exporting jobsproducing – and exporting jobsWe are exporting environmental impactsWe are exporting environmental impacts
GAS WON’T GET US THEREGAS WON’T GET US THERE
Gas is a carbon-rich fuelGas is a carbon-rich fuel20 – 30% renewables the maximum for 20 – 30% renewables the maximum for electricity generation? Intermittentelectricity generation? IntermittentWhat about domestic and transport energy What about domestic and transport energy demand?demand?Renewables and 70 – 80% gas for Renewables and 70 – 80% gas for electricity won’t achieve a 60% carbon cutelectricity won’t achieve a 60% carbon cutAre we going down the wrong route if the Are we going down the wrong route if the coal and nuclear options are lost?coal and nuclear options are lost?
IS THERE AN ALTERNATIVE?IS THERE AN ALTERNATIVE?
New nuclear? – Very expensive, but New nuclear? – Very expensive, but cheaper than some renewablescheaper than some renewables
Clean coal technology with carbon capture Clean coal technology with carbon capture and sequestration? – Expensive but and sequestration? – Expensive but cheaper than nuclear and many cheaper than nuclear and many renewablesrenewables
Capturing COCapturing CO22 produces hydrogen produces hydrogen
THE HYDROGEN ECONOMYTHE HYDROGEN ECONOMY
Mix of fuels for electricity generation – gas, Mix of fuels for electricity generation – gas, renewables, nuclear and clean coalrenewables, nuclear and clean coal
Carbon capture and sequestration from Carbon capture and sequestration from fossil fuelsfossil fuels
Hydrogen for transportHydrogen for transport
Expensive but cheaper than relying on Expensive but cheaper than relying on renewables and gasrenewables and gas
The cheapest way to a low carbon future?The cheapest way to a low carbon future?