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Labour to combat coal capacity payments

Labour ministers to challenge government plans to allow coal power stations to bid for funds to extend their lifespans

Speaking to BusinessGreen, shadow energy and climate minister Baroness Worthington described the proposals as “a concern.”

She added that Labour was planning to challenge them in today’s House of Lords debate regarding the electricity market reform delivery plan announced last week.

This comes after the government confirmed it would not ban coal power stations from bidding for contracts in the capacity market. Launching next year, the capacity market will see generators bid for electricity supply contracts that will light up homes from the winter of 2017.

Keeping Britain’s lights on

The coalition’s refusal to ban coal power stations from the capacity market could be a response to warnings of a potential blackout in the UK. Experts have said an energy shortage could happen in as little as two years.

This factor, combined with plummeting coal prices around the world, would see coal generation become much more viable.

Despite these developments, governmental and European policies have been brought out which aim to reduce the cost-effectiveness of fuel sources which pollute the environment. These include the £16 carbon floor price which was brought in this year.

In addition, a loophole in the Energy Bill could see the capacity market fund upgrade work, aimed at helping the UK to meet EU regulations on acid rain pollutants, which would keep coal plants open past 2020. It is thought that a move such as this would certainly break the binding carbon budgets of the UK.

Does coal have a future?

Baroness Worthington warned that if coal plants remain open, investors could lose interest in renewable energy sources, or even gas.

She said: “We think coal has a future but only with CCS [carbon capture and storage]. Prolonging the lives of these plants just leaves more inefficient capacity online.

“Last week, [the government] said only two coal power stations would be online in 2025. That’s just wishful thinking – more than that have opted into the [EU regulations] and the price of coal has hit the floor.”

DECC: Govt will still hit carbon targets

A spokesperson from the DECC commented that EU policies within the Energy Bill would ensure that just 3% of UK power will be provided by unabated coal by the year 2025.

He said: “The capacity market is for keeping the lights on in the cheapest possible way. Ruling out all existing coal plants overnight would add unnecessary cost to consumer bills, and achieve little.”

However, the future economics of coal plants does not “stack up well”, he added, explaining that the combined effects of their age, EU green regulations and the increasing carbon price floor are likely to see them shut down.

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