April 21, 2013 3:14 pm

Coal no longer king but still important

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UK Coal Kellingley Colliery

Nearly two decades after he was made redundant on his 30th birthday, John Hays still carries around the metal discs that he, his father and grandfather used to clock on and off from shifts in South Yorkshire collieries.

Now 49, the former miner was among the organisers of a mock funeral for Lady Thatcher in Goldthorpe, near Barnsley, last week, giving locals a final chance to protest about the near-destruction of the UK coal industry in the 1980s.

While much of the discussion since Thatcher’s death has focused on the political legacy of her showdown with the miners and its impact on northern economies, less attention has been paid to the implications for energy policy.

“There’s still coal down there but we bring it in from abroad,” says Mr Hays. “What’s the sense in that?”

Britain still has 2.3bn tonnes of underground coal reserves, and 852m tonnes on the surface – equivalent to 60 years’ supply. But much of this has been sealed off as the number of deep-pit mines has fallen from 170 at the start of the 1980s to just four. This will soon become three after the formal closure of Daw Mill colliery in Warwickshire, which was hit by a big fire earlier this year.

Critics point to the survival of large-scale coal mining in the US – sometimes called the Saudi Arabia of coal – as evidence that Britain shut down its industry prematurely.

Despite efforts to reduce dependence on fossil fuels because of their role in global warming, latest government figures show that coal still accounts for about 40 per cent of electricity generation.

This was up 10 percentage points from a year earlier, reflecting the competitiveness of enduring of coal-fired power compared with natural gas despite the rising cost of environmental regulation.

Nearly 17m tonnes of coal was produced in the UK last year, the bulk from opencast mines. But this was dwarfed by imports of 44.8m tonnes, an increase of more than a third from 2011. Most of this comes from Russia, the US and Colombia.

Despite big productivity gains in surviving UK mines over the past 20 years, imported coal remains cheaper.

Tim Yeo, chairman of the energy and climate change parliamentary committee and former Conservative minister, says the industry has probably been in irreversible decline since the 1970s. Thatcher “may have accelerated the process with her tough line but it did not alter the direction of travel”.

Some pits closed that could have survived for a time – Tower Colliery in south Wales produced successfully for 15 years after a workers’ co-operative bought it.

But Gordon Banham, chief executive of Hargreaves, which closed its Maltby mine this month after geological problems, said: “Unfortunately I don’t see there’s a future for deep mining in the UK long term.”

“When these mines close, they close for ever,” he added. Sinking a new shaft could cost £500m.

However, Hargreaves, a big coal importer, is more optimistic about the outlook for surface mining. The Aim-listed company last week announced a £42m share issue to acquire more UK open cast mining assets. “There’s still a lot close to the surface,” said Mr Banham.

Some power generating companies believe domestic coal production should be encouraged for energy security reasons as North Sea oil and gas output declines. Energy imports exceeded UK production in 2011 for the first time since 1974.

Four power generators agreed last year to write off parts of loans in a restructuring of UK Coal, which supplies 17 per cent of coal-fired electricity needs, to avoid its collapse.

Calvin Jones, of Cardiff University, said policy makers had been short-sighted in writing-off domestic coal. “Industrial policy should try to be more forward-looking instead of based on historic competitiveness.”

Additional reporting by John Murray Brown, Sylvia Pfeifer and Chris Tighe

 

RENAISSANCE EXPECTED TO BE SHORTLIVED

 

Coal has enjoyed a resurgence in Britain despite regulation to curb greenhouse gas emissions, writes Sylvia Pfeifer.

The cost of gas in Europe is still linked to oil prices, which have remained high. Shale gas discoveries in the US have driven domestic natural gas prices there to a 10-year low, sending cheap US coal to Europe.

Coal usage has been encouraged by the EU’s carbon trading scheme which has kept prices for emissions low as the eurozone crisis has cut demand. Britain has enough coal and gas-fired generation to switch between the fuels as prices fluctuate.

Andrew Horstead, analyst at Utilyx, a consultancy, said coal generators were earning more than £25/MWh to generate power compared with £5/MWh for gas.

Energy experts doubt that this signals a long-term trend. The introduction of the carbon price floor, which forces industry to pay a set amount for carbon pollution, will start to bite. Many coal-fired plants are reaching the end of their life and new ones require use of commercially unproven carbon capture and storage technology.

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