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


APPENDIX 36

Memorandum by the Yorkshire Coal Task Force

1.  YORKSHIRE COAL TASK FORCE

  The Yorkshire Coal Task Force is an alliance of local authorities, other elected representatives, coal producers, trade unions and other interested parties who support the deep-mined coal industry in the Region. We work closely with the Coalfield Communities Campaign and the Regional Energy Forum on coal and energy policy issues.

  Although far smaller than it once was, we believe that the UK deep-mined coal industry can and should remain an important part of the nation's energy supplies well into the twenty-first century.

  We are very concerned with energy policy issues and their impact on the UK coal industry and the communities that depend upon it. The organisation has consistently argued for a continued role in the energy mix for UK deep-mined coal and investment in clean coal technology. This needs to be a key element of energy policy to ensure that our coal industry, the most efficient in Europe, should have a viable future within tightening environmental constraints.

2.  ENERGY REVIEWS

  The current review of energy policy, by the PIU as well as the inquiry by the Trade and Industry Select Committee, indicates a willingness to look again at issues that in many aspects have been overtaken by events. Security of supply issues relating to the spread of fuel types and fuel sources had already moved high up the agenda before recent world events. The Yorkshire Coal Task Force therefore welcomes also the Government's decision to look seriously at commercial scale demonstration plant for clean coal in the context of reviews taking place in the UK and by the EU.

3.  BACKGROUND

  A number of reviews of the energy options for the UK have taken place over recent years but none have delivered a long term future for the UK coal industry. In 1993 (DTI, Cm 2235) Government policy dealt with the period of transition from a nationalised to a privatised coal industry. It did not offer much for the long term and was non-committal about clean coal technology. A Trade and Industry Select Committee report at the time that recommended support for clean coal demonstration projects was largely ignored. (HMSO, 12993, page 112.)

  In the 1998 Energy Review (DTI, Cm 4071) some consideration was given to security of supply issues and after a short-lived restriction on consents for gas stations, New Electricity Trading Arrangements and power station divestment were introduced to try to correct market distortions. Again the Trade and Industry Select Committee recommended assistance for clean coal demonstration plant. Clean coal technology was only backed by the Government as a research and development issue, although encouragement was given (through emissions policy) to fit FGD to more power stations.

  By the end of the 1990s, energy prices and markets once again began to show the same kind of volatility that had produced crises in the previous 30 years. The European Green Paper has been a timely reminder that longer-term energy issues needed to be considered again. Along with the proposals to renew state aid to the coal industry, the European Union's attention has turned to finding other ways of maintaining security of energy supplies within Europe.

4.  A CONTINUED ROLE FOR COAL

  Investment in the energy sector and in new power stations in particular in the UK is probably at its lowest for many decades. Give the uncertainties of the market, the private sector is unwilling to take long-term risks, preferring instead to maximise the profit from assets acquired during the privatisation process. Risk-averse companies, constrained by shareholder pressure, are unlikely to embark on any significant investment in new energy technology.

  Fuel used by the major power producers in the UK in the first quarter of 2001 was 5.8 per cent higher than in the first quarter of 2000. Coal use was much higher than a year earlier with 23.3 per cent more coal being consumed. Energy Trends (May 2001) puts this down to higher gas prices which meant that coal-fired generation was able to bid at lower prices than gas. Nuclear's contribution was down 1 per cent compared with the same quarter in the previous year. Coal's share of fuel used at 43 per cent was 6 per cent up on the previous year. Given this trend is unlikely to be dramatically reversed in the near future it would seem logical to invest to make coal-fired power generation both cleaner and more efficient.

  It seems apparent that gas prices have already moved higher than predicted in Energy Paper 68 and that this trend is likely to continue, underlining the need to secure alternative sources of fuel at stable prices. This would mean, we would hope, giving more serious consideration to investment in cleaner coal technologies but also how the UK's reserves of coal can remain available to power generators in the medium to long term.

  The YCTF takes the view that recent commentaries on the UK energy scene, such as the Scoping Note produced for the PIU Energy Review, lay too much stress on projections which show coal generation "likely to have only a limited role" in the future. They also seem to take too little account of the need to pursue issues involved in the current UK FGD programme, (paragraph 19 of the PIU Scoping Note). It is an important part of Government policy and the activities of the generators in their efforts to reduce sulphur emissions. There is a strong case for incentives for FGD stations to be prioritised as the market mechanism in the UK is not likely to achieve this. Further FGD does not of course help with CO2 but is important in reducing sulphur emissions.


5.  CLEANER COAL TECHNOLOGIES

  It is disappointing that the potential importance of investment in cleaner coal technologies seems to have been down-played in the current PIU Energy Review Scoping Note, though the parallel DTI review of the case for demonstration plant holds out hope for movement in this area. The Scoping Note does mention clean coal technology initiatives but does not point out that this is confined to a relatively small research and development programme of about £4 million a year. There were strong indications from Government Ministers before the last election on new initiatives on clean coal technology. We would hope these indications could be turned into a programme of action to include the construction of at least one, if not more, demonstration power plants.

  The current DTI review of the case for cleaner coal technology demonstration plant is welcomed, especially the proposal that it should be tied in with the Energy Review. We would be concerned, however, if firm conclusions were to be made by the Energy Review before the Cleaner Coal Demonstration Plant consultation is concluded. We would also hope that the CCDP review should actually recommend support for investment in cleaner coal demonstration plant, although this can not be guaranteed.

6.  BEYOND RESEARCH

  There has been extensive research on cleaner coal technologies carried out all over the world over the last few decades. Much of it has originated in the UK. It is now appropriate that we make use of such technological progress in the UK to build actual pilot schemes to demonstrate the effectiveness of the new technologies. The experience of cleaner coal power stations operating in other countries needs to be assessed, but there is enough expertise to press forward with a programme of demonstration plants in the UK. This would also give an important boost to the export of these technologies to major coal using countries such as China and India. Although the capital costs of building clean coal plant, such as those using coal gasification, are higher than for CCGTs using natural gas, these costs are coming down. The construction of such plants would, however, need some pump-priming either directly from Government or as part of a levy on the electricity consumer. Incentives in some form are required to construct the next generation of clean coal technology power stations, but this investment would bring enormous benefits in security, diversity, employment, and reducing pollution.

  One way forward could be that, when looking at renewables and proposing incentives, clean coal technologies could be considered as part of this "green" group, as the beneficial impact of investment in cleaner coal technologies on the environment could be dramatic.

7.  COAL IMPORTS

  One of the main problems from the point of view of the indigenous coal industry has been the recent increase in imported coal, with imports in the first quarter of 2001 being 68.6 per cent higher than a year earlier at 8.9 million tonnes. This might have been taken to be a blip except figures show a steady decline in deep-mined coal production in the UK over the last four years. Coal is still a significant contributor to the UK and EU energy supply, however, and the fact that it can be produced at, or near, world market prices should warrant further support beyond the existing subsidy arrangements and the end of the ECSC treaty in 2002.

  The EC Green Paper envisages an increase in the amount of imported coal. This would have an adverse effect on coal-producing member states, especially the workforce in the industry, and on the coalfield areas. There is also the extra impact on the environment of importing coal over long distances, when currently most mines in the UK are located close to the coal-fired power stations they supply. Coal from UK pits to power stations is still delivered by rail or, in some instances, canal barge, both thoroughly sustainable modes of transport.

  One solution would be to strengthen the position of indigenous coal, so that EU-produced coal retains its current level of production, and imports would not reach the predicted increase of 70 per cent in 20-30 years. This can be achieved only if active measures are undertaken to guarantee internal markets for indigenous coal. This will help to encourage investment and ensure that the necessary new mines are sunk. A greater contribution of indigenous coal to the total energy package of the UK and EU would help to reduce dependence on other forms of imported energy. This would have the benefits of securing internal jobs and profits, as well as preventing coal mining communities from suffering the deprivation seen in Britain from mass closures in the 1980s and early 90s.

8.  ACCESS TO COAL RESERVES

  Access to reserves of coal in the EU should be maintained, especially in the UK where they have the greatest opportunity of being mined on a commercially competitive basis. Mines need to be maintained in production because of the importance of retaining skilled employees and up-to-date equipment and the relative costs of opening new mines. Moth-balling, as is the case with Thorne near Doncaster, at a cost of £1 million per year, could only be considered with a small number of mines at most.

  Minimum level stockpiles and reserves proposed by the EC Green Paper for security of supply should include coal. The member states or the EU itself could stipulate that there must be a minimum level of coal, and a percentage of that in producing states should be indigenous coal. This may also help to encourage investment in new mines, by guaranteeing a demand. Agreement could be reached through the creation of a partnership between those member states which still produce coal and the EU itself to decide on coal production levels within a market framework.

  Energy demand is likely to increase, despite energy efficiency measures. Gas will be imported, but no new coal mines are being planned to replace those which will come to the end of their "natural" life in the next decade.

  More efficient coal burning could meet increases in demand without increasing coal burn. In the UK we also have the potential for security of supply with hundreds of years of coal reserves, although actual economic reserves need to be established. There may be problems of coal supply when the Selby complex comes to the end of its accessible reserves.

  Coal-fired generation currently supplies roughly one-third of the UK energy requirements, and can respond quickly to any crisis. We were forcibly reminded of this in 2000, when coal burn increased to meet the demand created by a lack of electricity from other sources eg nuclear/gas/interconnector.

9.  RESTRAINING NATURAL GAS CONSUMPTION

  Domestic use of natural gas should be prioritised. Already Sweden has indicated an unwillingness to use gas to produce electricity. If the use of gas for electricity generation were to be limited, as was formerly the case, this would release more gas for domestic use, and increase the life span of UK and EU gas fields.

  Research has also shown that coal liquefaction was potentially economically viable. As oil prices rise and imports increase, it should be considered as an option to replace conventional oil forms when necessary.

  Long-term planning to replace current facilities (power stations, coal mines, etc) is not being done, and needs to be integrated. North Sea oil and gas reserves are likely to be depleted within the next 20 years—urgent planning needs to be undertaken to ensure that when that time comes, we have enough and suitable power generation, and are not dependent on imports. With the lead time for building such plant, time-scales need to be considered, and to be treated as a matter of urgency.

10.  COMPETITIVENESS AND OTHER FACTORS

  The UK has by far the most competitive coal industry in the EU, but EU coal as a whole is considered to be "uncompetitive" compared to imported coal according to the EC Green Paper. A strong case needs to be made within the EU that the most competitive coal capacity in Europe needs to be kept available for the sake, not just of UK security and diversity of supply, but that of the rest of the EU as well.

  Other factors need to be considered, such as the social and economic impact of reducing coal mines from the current level; the consistent quality of UK coal compared to imported coal; the impact on the environment of transporting coal from outside EU, also moving it across the EU. Safety of the workforce, working conditions, the care of the environment which UK and other EU producers demonstrate should be balanced against the price factor of imported coal.

11.  COAL INDUSTRY EMPLOYMENT IN THE YORKSHIRE AND HUMBER REGION

  The setting up of the Coalfield Task Force in 1998 and its subsequent report was a welcome recognition by Government of the disastrous effects of the sudden contraction of the UK coal industry. The need to prevent further closures which would cut off reserves of coal and further detract from coalfield regeneration efforts is a priority.

  Employment in deep-mining and related industry in Yorkshire is still an important factor in the regional economy:
Selby Complex2,300 including Stillingfleet, Wistow, Riccall and Gascoigne Wood
Kellingley555
Prince of Wales540
Maltby555
Rossington380
Monkton Coking Works130
Harworth (just outside the region)590
Harworth, UK Coal HQ300
Hatfield250
Total4,460


  This represents over 50 per cent of coal industry employment in England.

  Other coal-related employment has not been accurately estimated but would include numbers employed at opencast sites, coal-fired power stations at Drax, Eggborough and Ferrybridge, transport and mining supplies/engineering. These issues have been taken up with the regional development agency, Yorkshire Forward, which has helped establish a Regional Energy Forum. The recent Energy Forum Foundation Study produced by ECOTEC states:

    "As time progresses coal is highly likely to feature in the generating mix (of the Region) and clean coal technology is the obvious choice. Expertise retained and developed now has a high potential future pay-off . . . it offers jobs not only in the design and installation of plants world-wide but also offers a way of protecting existing regional jobs in coal mining (5,000 jobs) and in coal-fired generating plant (1,000 jobs)." (ECOTEC/Yorkshire Forward, p 31).

12.  UK AND EU ENERGY POLICY

  There are profits to be made by trading in energy and we should be keeping those profits within the UK whenever possible. Establishing a framework that will ensure a market for UK-produced coal within the EU will ensure that jobs and profits will stay within the EU. We cannot foresee, either, what energy demands there may be elsewhere in the world, which may have an impact on prices and availability—another reason to ensure an internal supply.

  It can be too late to implement an energy policy in order to respond to a crisis. Every EU member state should adopt an integrated, balanced energy policy which plans ahead for at least 30 years, taking into account all known factors for that state (indigenous fuel sources, local needs, etc) and for the EU as a whole.

  It does not necessarily follow that a decline in the coal industry is inevitable. It is still not too late to prevent this. This can be achieved by investment in the industry which will be more likely if there is a guaranteed market. It is not really possible to make the necessary long-term investments in the domestic coal industry on the short-term contracts that have followed privatisation.

13.  A SUSTAINABLE INDUSTRY

  Coal's decline has not only been due to legislative changes but also by governments allowing gas burn for electricity generation. When looking for a minimal coal capacity to be maintained, we need to decide how to set this level. We believe that this should not be less than current capacity or it will not be a sustainable industry. However, current mines have a limited life span, we need to start planning now for the next generation of mines, also to recruit and retain the workforce to access the reserves. Coal also has a big advantage as a back up fuel, but we need the stockpiles to ensure this. There are also many regional economic and social reasons not to reduce coal production capacity from current levels. Although the EU Green Paper considers coal mining to be a high labour intensity industry, this is not the case in the UK, which is very efficient in its use of its labour resources. We need a production base to give access to our reserves, also to use advanced technologies, but that base should be no smaller than at present.

  There is concern that a nuclear wind-down will take place at the same time as coal mines are being closed, and existing coal fired plant run down—this would cause a virtual energy vacuum. There will also be an impact when EU oil production beginning to run down, and world prices rise.

  Market trends expect to see an increase in the use of gas for electricity generation, replacing coal burn. However, gas prices are affected by increase in oil prices and mostly out of EU control, with inevitable dependence on countries outside the EU. This could have a considerable negative impact if there are any major changes or price rises, particularly with dependence on one major supplier. This constitutes the overriding reason to keep as much as possible of our indigenous energy resources to retain maximum independence.

14.  STATE AID

  There needs to be revision of the current framework, and transitional arrangements beyond 2002 and the end of the ECSC treaty. We need to include transport and energy policy issues in deciding on state aid, as well as security of energy supply. The need to promote renewable energy versus the same investment in cleaner coal technologies should be evaluated for their relative environmental benefits. We should also take account of social aspects and the possibility of being more self-sufficient in energy. State aid policies may still be needed for the time being. A cost benefit analysis of the closure of a coal mine versus the regeneration measures needed to replace it in the local economy could be a part of bringing energy, economic and regeneration policies closer together.

15.  LONG TERM INVESTMENT AND STRATEGIC PLANNING  

  When electricity/gas/coal were in the public sector, the Government through the relevant boards had to invest in order to ensure sufficient power stations, coal mines etc were available to provide for the energy needs of the nation. Now that they are in the private sector, there is a reluctance to invest in costly projects with the new market-led emphasis on short-term contracts for electricity supply. There is a "duty of care" for Government to ensure that future energy needs will be provided for and ensure a balance in sources of power supply.

  The situation of an ageing workforce and lack of skills also needs to be addressed; however, if the industry once again has the reputation of being an attractive and long-term business, it should prove easier to recruit and retain employees.

  The long-term future of the industry is not only achievable by investment in cleaner and more attractive coal-fired power stations but also in the industrial and domestic markets. Coal use in large-scale CHP and community heating is well established in other countries.

  In the past, closing down coal-fired power stations has been seen as an easy option, as compared with cutting emissions from transport for instance.

16.  FORECASTS

  We agree that there will be, and need to be, continuing improvements in energy efficiency and in opening up markets. Restructuring of electricity markets, whether as EU policy or in member states, will need policies on renewable energy and investment in a variety of energy sources. Other factors which will have an impact will be the possible phasing out of nuclear power, and price increases of gas and oil. Winding down of indigenous coal industries within the EU cannot be seen as a positive contribution, especially in the case of the most efficient of these, the UK industry.

  We note that the gross energy demand for the EU is projected to be 11 per cent higher in 2030 than in 1998. It is interesting to note that with a GDP expected to increase by 90 per cent, energy prices will be de-coupled. This gives more weight to arguments other than just pricing to be used when formulating an energy policy and energy structure for the future.

17.  CONCLUSIONS

  An increase in gas consumption would increase energy dependency and deplete UK and EU stocks more quickly. It is interesting to note that despite an expected decline in solid fuel by 2010, according to EC forecasts, it is then expected to increase again so that it will be one-third higher in 2030 than it was in 1998. It would make socio-economic sense for as large a proportion as possible of this solid fuel to be indigenous and not imported. YCTF recommends that coal use should at least be maintained at the current levels with less reliance on imports.

  If clean coal technology power stations, particularly using gasification, were to be built, this might change the outlook and forecast trends considerably. The adverse impact of closing coal mines and the lack of new mines being sunk needs to be considered. It may be possible for Government to undertake the capital costs of sinking such mines, and leasing them to operators for example, through the Coal Authority.

  There are limits to the scope for an increase in energy provision from renewable sources and we should extend support for renewables to include other "clean" forms of energy, especially cleaner coal technologies on a commercial scale. We see support for renewables and cleaner coal technology deployment as complementary rather than mutually exclusive.

  Investment in cleaner coal technology power stations is likely to have a beneficial effect on industrial competitiveness and fuel poverty by ensuring stable electricity prices over a long period.

  Coal can also be used in Combined Heat and Power schemes, although the infrastructure for community heating is not extensive in the UK compared to other countries.

  With the higher costs of imported gas and oil, less heavy reliance on these now would lead to slower depletion of stocks, and therefore delay the time when we would rely solely on imports.

  The EC Energy Green Paper, while still seeing a smaller role for an indigenous coal industry, does point to the need for:

    "Investments in energy both to replace the obsolete infrastructures and to meet growth in demand will be necessary in the next 10 years."

    "The opportunity should be seized to promote a coherent energy policy at the Community level." (EC Green Paper, page 9)

  The question of investment in cleaner coal technologies and pursuing a coherent energy policy which includes a long term future for the indigenous coal industry should be pushed to the forefront of the debate in the reviews of UK energy policy.

  As the consultative document on Cleaner Coal Demonstration Plan (CCDP) points out:

    "Given the significant reserves of coal, both in the UK and . . . world-wide, if used in an environmentally acceptable way, coal could (our emphasis) have a long-term role in meeting the Government's objectives of ensuring secure, diverse and sustainable sources of energy." (CCDP report p3)

  It is the view of the Yorkshire Coal Task Force that there is an urgent need to move from the "could" to the "shall" in this statement and to achieve these objectives using a substantial proportion of UK deep-mined coal. This would demand a change of Government policy, though, as is often the case, to grasp the nettle now may well prevent negative consequences in the longer term.

REFERENCES

  DTI (1993) The Prospects for Coal—Conclusions of the Government's Coal Review. Cm 2235.

  Trade and Industry Select Committee (1993) First Report: British Energy Policy and the Market for Coal.

  DTI (1998) Conclusions of the Review of Energy Sources for Power Generation and Government response to fourth and fifth Reports of the Trade and Industry Committee. Cm 4071.

  ECOTEC/Yorkshire Forward (2001) Regional Energy Forum Foundation Study.

  European Commission Energy Directorate (2001) Energy Green Paper.


 
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