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more analysis on the Eon Kingsnorth annoucement

custard queen | 08.10.2009 15:13 | COP15 Climate Summit 2009 | Analysis | Climate Chaos | Energy Crisis | World

EON confirmed to us that they are shelving any investment in Kingsnorth for 2-3 years, reasoning that a reduction in electricity demand in the UK due to global recession meant that new coal isn’t necessary right now, and that the marginal economics of coal now when compared to alternatives like gas mean they cannot justify an investment case. They are keen to stress this is suspension rather than a cancellation, that they remain committed to coal and CCS, and that they intend to remain part of the Government’s plans. What is significant is that we have turned the process of building plants like Kingsnorth in to such a drawn-out, expensive and unpopular mission that it is no longer worth the effort. Kingsnorth was originally expected to gain approval 2 years ago, with construction starting about now. Instead, there is still no decision on Kingsnorth, the Government still doesn’t have a coherent coal policy and the lifeline for new coal of money for CCS still hasn’t materialized. Worse for them, it is now not possible to build completely unabated coal plants at all in the UK, which means they have to take a risk on trialing an untried, untested additional technology. So it’s a very hard place to do business if you want to build coal.

Why now?

This is a good question. The timing of the announcement doesn’t really make sense. The Government has closed it’s consultation on a new coal policy, and is expected to make an announcement in a matter of weeks. There is a bill expected to go through Parliament in November that will enable utilities to charge a levy to consumers to pay for CCS demonstration, and the Government’s competition to fund one CCS demonstration is still ongoing. Why then pull out when lots of current barriers are about to removed? It could be perceived as a conspiracy to pressure to Government in to coughing up more money for CCS just before the announcement, but I am now convinced that the real reason for this odd timing is a misunderstanding between EON headquarters in Germany and EON UK. In short, EON UK were as surprised by this announcement as we were. It originated from a presentation given by the Vice President of Generation to a closed meeting in Essen. It appears a Platts journalist picked it up, and started to filter back to the UK. EON UK then started getting calls, and were forced to clarify their position. We received confirmation at about 6.30 last night, and just about made it into yesterday’s news cycle.

What does this mean for coal in the UK?

It is the suspension of the key project that has so far defined the battle over new coal in the UK. It is therefore highly significant, but not a fatal blow. The investment freeze could be un-frozen with the right level of subsidy, and has no direct impact on the other plants being considered for CCS demonstration. There is now a new threat emerging at Hunterston in Scotland, from a consortium including RWE and Dong energy (a Danish utility) for a plant identical to Kingsnorth, and they are claiming they will build with or without Government assistance. The real goal then is to secure regulation that rules out emissions from new coal across the country for good, rather than plant by plant, and we won’t let up until we have this. In terms of a general case for coal though, a major utility pulling out because the demand for coal fired electricity doesn’t exist, and because coal is too expensive has dealt a major blow to prospects for new coal per se. In which sense, it is a massive victory.

custard queen


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yes but...

09.10.2009 08:52

great news, indeed, oh slimer-of-the-mandelson, but what about the workers - what's been happening down at that house in kingsnorth. haven't heard much.

i should be overjoyed that kingsnorth has been delayed - not least it means that all that work that i and my mates put in a couple of years back - and means all that police harassment/violence wasn't for nothing - if it does have wider significance for future policy - but instead i have a hollow feeling that nothing has changed much - the perception of our movement is that is primarily environmental one - and has even less concern for social justice issues than before, and has become just another lobbying tool.

make me feel better about it all.

climate camper