Select Committee on Trade and Industry Appendices to the Minutes of Evidence


APPENDIX 8

Memorandum by Clarke Energy Limited

  We hold very strong views that the Trade and Industry Select Committee should give utmost consideration to the support of Coal Mine Methane (CMM) as a source of methane-based gas fuel.

  Coal Mine Methane is the waste gas trapped within disused coal mines, of which there are around 900 abandoned mines in the UK. Gas will continue to escape for the next 50/100 years, at a minimum level of 300,000 tonnes/year of CMM.

  The gas has a global warming potential 21 times greater than carbon dioxide and makes a significant contribution to the UK greenhouse gas emissions.

  By 2010 with some incentives there could be an additional 300 projects in operation with a capacity of around 1 gigawatt. It should be noted that the German Government has recognised CMM as a Renewable Energy Source and is giving it an incentive worth 5p/kWh. As a result over 80 planning applications have been made for CMM power plants in Germany, leaving the UK standing. At present it is commercially viable to develop only a minority of the disused mine sites, and a financial stimulus similar to that offered in Germany is required here to develop this industry.

  We therefore thoroughly commend the Trade and Industry Select Committee to strongly consider CMM as a viable economic and supportable source of alternative fuel, for economic, environmental, and strategic reasons. There is no basis for this commodity being held outside a Renewable Obligations type support mechanism for price. The benefits in such treatment are plainly evident and significant.

  The general view from inside the industry is that there is concern to ensure our energy policy and strategy for the future is clear and achievable. There have been instances where initiatives taken in good faith have not delivered, and where market conditions have been affected by government action, or the contrary. For example;

  The Climate Change Levy (CCL) remains largely ineffective with many exclusions providing certain industrial sectors with the ability to stand outside its intended effect. A counter argument that it is a form of taxation on manufacturing industry can be understood, where large energy users are involved, but this is not the point. The intent was to support and develop efficient generation in the UK. The whole purpose of CCL it seems with the Renewables Obligation was to encourage environmentally friendly forms of electricity and to discourage carbon release into the atmosphere, which causes climate change.

  For example, Combined Heat and Power (CHP) is an efficient environmentally friendly method for generating electricity, but recently it has become cheaper to pay for electricity and to accept CCL implications, rather than lose money by burning expensive natural gas and justifying large capital expenditure on plant and equipment.

  Consequently, UK government support to CHP as an efficient method of power generation is presently non-effective, without some form of price support, grant aid, or tradeable benefits. Indeed, the recent debate in the House of Commons (led by Andrew Robathan MP) eloquently supported this view.

  The need to ensure we balance our energy needs sensibly and strategically with a more responsible and enforceable approach to control of emissions is critical to achieving our Kyoto aspirations.

  With regard to specifics.

1. Given the imminent dependence of the UK on energy imports, how can the UK maintain a secure energy supply? What mix of fuels would maximise security?

  In the short to medium term, we will be vulnerable to energy imports with the security implications that go with that. Encouragement of our indigenous industry with the opening up of local (North Sea) gas fields presently undeveloped would support UK independence, and nullify the effect of overseas dumping into our market.

  Development of embedded generation schemes throughout the UK would support environmentally friendly, very efficient and independent electricity generation, at lower cost and by efficiency, greener. In association therewith, a greater role for "green energy" and renewables including biomass, biogas and wind has to be encouraged to spread risk with the inclusion of CMM as a supported fuel for power generation.

2. Is there a conflict between achieving security of supply and environmental policy? What is the role of renewables, and Combined Heat and Power schemes?

  There should be little or no conflict. There is no reason environmentally why green energy cannot be produced the majority of the time through renewables, with more fossil fuel-based generation always being available as backup/base load to maintain central supply as necessary.

  Enactment of Renewables Obligation legislation is critical and urgently needed to provide price support, linking in Coal Mine Methane in a similar way to ensure that technology is brought to bear under a similar regime.

  CHP as an accepted efficient and environmentally friendly method of electricity generation must be further supported to ensure that its accepted benefits are translated into early action within the industry to support the Government's already stated and stretching CHP targets. Much has been done in support of CHP, but action so far has remained ineffective. People are walking away from it, and Government has to act to ensure that this industry requires economic support as highlighted in the findings of OFGEM's report on NETA and the smaller generators.

3. What scope is there for further energy conservation?

  Energy conservation is unlikely without the public recognising its value and the implications of waste. In California for example, the effect of price increases upon deregulation meant energy reduction, with a consequent reduction in demand on the industry. Complete deregulation of the Industry in Europe is essential for supply and demand to reach equilibrium here as capacity reduces as plant ages, and demand grows.

  This of course reinforces the case for increased development of local embedded generation plant for generation nearer the point of use, saving on expensive transmission costs and associated investments, improving efficiency and maintaining flexibility. Such diversification will also reduce risk.

  Increased generation from CMM plants and CHP in the UK will also be part of this diversification strategy.

4. What impact would any changes have on industrial competitiveness and on efforts to tackle fuel poverty?

  Industry having access to efficient forms of electricity generation must have beneficial effects on competitiveness. The converse is also true of unreliable supplies at high cost when demand well exceeds supply. A properly managed and balanced approach to diversifying the nation's portfolio of embedded generation capacity is absolutely critical to achieving such a sensible, and strategically sound, balance. The benefits on fuel poverty are complex but self-evident.

5. Is any change of Government policy necessary? How could/should Government influence commercial decisions in order to achieve a secure and diverse supply of energy?

  Yes.

    (a)  Support CHP effectively and therefore financially.

    (b)  Encourage renewables as an alternative complimentary fuel source and accelerate our renewable obligation legislation. Wind power to be encouraged where possible and planning difficulties eased.

    (c )  Take a sensible pragmatic view that Coal Mine Methane needs similar price support as proposed under Renewables Obligation, if it is to develop as a valuable commercial fuel. There are currently five generating projects in operation generating 30MW and these benefit the environment by capturing emissions equivalent to the removal of around 160,000 cars from the road. By 2010 with some incentives, there could be an additional 300 projects in operation with a capacity of 1 GW. Both politically, environmentally and commercially, this has to be a supportable winning strategy.

    (d)  Take care to ensure environmental emission standards are raised, maintained and enforced to encourage efficient generation. No more coal burning generation for peak lopping.

    (e)  Ensure drivers to encourage embedded generation are created, and eliminate present constraints like high connection costs, planning etc.

26 October 2001


 
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