EU coal spurt runs into pollution limits

LONDON: Looming pollution limits will slow and perhaps reverse a recent tilt toward coal consumption in the European Union, with caps due at the end of 2015 and then further ratcheted by 2023.
EU data suggest that about a tenth of European coal-generating capacity will shut down over the next three years rather than be upgraded with equipment to meet the new limits on sulphur and NOX (oxides of nitrogen) emissions, particularly impacting plants in Britain and France.
That would cancel out gains in European coal consumption over the past two years.
One cause is the age of European coal plants more than half of which are over 30 years old, according to International Energy Agency data.
The pollution rules do not mean the end of coal, only of older plants without pollution abatement fitted.
But there are also factors weighing against new coal plants, such as mandated carbon emissions limits as introduced in Britain which require coal power to use expensive, untested carbon capture and storage.
The main candidate to replace the retired coal plants is gas, while biomass offers an option to extend the life of coal plants running foul of pollution controls.
Generators have decided which power plants they will close in advance of the 2015 pollution limits, rather than fit abatement equipment, and must decide by the end of next year which they will additionally close by 2023.
Coal consumption has risen in Europe as a result of a combination of relatively cheap coal, looming sulphur and nitrous oxide limits and the end of windfall profits under the European Union's emissions trading scheme (ETS).
EU coal consumption has grown by a compound annual rate of 3.7 percent over the past two years, after being broadly flat for the previous decade.
Under the EU ETS, power plants have passed on the notional cost of emissions permits — which they got for free - to their customers, allowing them to profit from higher wholesale power prices.
The windfall ends on January 1 2013, when generators in western Europe have to pay for every ton of carbon dioxide emissions, and it may make sense to run coal plants into the ground now which will have to close soon anyway as a result of new pollution limits.
Those regulations set caps on sulphur, nitrous oxide and particulate emissions under the EU industrial emissions directive.
The directive combines the Large Combustion Plant Directive (LCPD) and the Integrated Pollution Prevention and Control (IPPC).
The LCPD effectively requires abatement technology such as flue gas desulphurisation.
Coal and oil-fired power plants commissioned before 1987 can opt out of the limits, but in that case must shut by the end of 2015 or after 20,000 hours of operation from January 1 2008.
The legislation sets further limits beyond 2015 which will require power plants to fit catalytic NOX reduction equipment over a phase-in period. Again they can opt out if they operate for a limited number of hours and close by 2023.
The European Environment Agency (EEA) supplies data on how much power will come off line by 2015 as a result.
The data requires some additional analysis to remove plants which have already closed, as well as to separate coal from oil-fired plant, and to convert watt thermal to watt electrical (taking account of losses from converting heat into power).
The resulting numbers suggest that 19 GW of electrical coal capacity will shut down between now and the end of 2015 as a result of the LCPD.
That is about a tenth of the EU's total coal capacity of 177 GW in 2009, enough to wipe out the last two years' coal consumption growth of 8.2 percent.
The EEA data show that Britain is most affected by the LCPD pollution controls, forcing the closure of some 8 GW of coal-fired electrical capacity, followed by France (3.2 GW), Romania (2.5 GW), Poland (1.3 GW) and Bulgaria (1 GW).
The January 2011 data are rather out of date regarding the number of permitted operating hours left of the plants' original 20,000.
Nevertheless, they show that some of this capacity will likely close long before the end of 2015.
For example, in Britain the unweighted average remaining hours were 8,842 per plant at the start of last year, less than France (12,549 hours), Romania (14,390) and Poland (14,995).
Most affected UK power plants have already said they will shut next year.
A big question looms over how much additional capacity will be shut to meet the next tranche of limits, an issue which generators must decide upon by the end of next year.
The next round of limits halve sulphur dioxide emissions from large, existing coal plants to 200 milligrams per cubic metre from 400 mg, and NOX emissions to 200 mg from 500 mg, and particulate matter to 20 mg from 50 mg.
Given the vintage of European coal plants and the fact some have not fitted NOX abatement it seems inevitable the regulation will accelerate closures.
One factor will be whether NOX abatement costs can be cut from tens of millions of euros per large coal plant.
For those which close, the question is what will replace them.
So far only Britain has introduced an emissions performance standard which limits the carbon emissions of all new power plants, effectively ruling out new coal plants unless they fit expensive, untested carbon capture and storage equipment.
A wider application of an EPS across Europe, as planned in the United States and Canada as well as Britain, would cast greater doubt over the future of coal in Europe.

— The author is a Reuters market analyst. The views expressed are his own.