Monday, March 26, 2012

Could the Climate Change Act be used to curb new gas-fired plants?

DECC's decision to set EPCs at 450gCO2/kWh could be open to legal challenge.

It is now fashionable to term natural gas a “transitional" fuel on the road to a low or zero carbon economy at some vague point in the fuzzy future.

Just as many thought carbon capture and storage would be a “get out of jail free" card enabling business as usual (note: this does not include the International Panel on Climate Change), in the same way that many people once believed that quack doctors' miracle cures for ailments actually worked, gas is now the favourite conventional temporary solution to our climate change problems.

In January, I wrote that "low gas prices are the biggest threat to renewables", and this was borne out by the Chancellor's Budget and Ed Davey's announcement this week.

Ed Davey has decided that Emissions Performance Certificates for new gas-fired power stations can be set at 450g of CO2 per kilowatt hour until 2045, 15 years beyond the date recommended by the Committee on Climate Change.

To comply with the recommendations of the Committee, the emissions level would need to fall to 50g/kWh at 2030.

In that column, I wrote that "we must particularly guard against constructing more gas-fired power stations as this would lock us into higher emissions for twenty or more years".

Tory George Osborne and Lib-Dem Ed Davey seem to be united in this Coalition vision. We may not have shale gas in this country (yet) and it's unlikely that we ever will, nor is gas currently as cheap as coal to burn in power stations.

No, its big advantage is that a gas-fired power station can be up and running in two years, making electricity cheaper than wind power, with around half the emissions of coal.

Last week, Green MP Caroline Lucas asked Charles Hendry if he thought that the Committee's requirement that an 80% reduction in emissions by 2050 required that electricity generation be almost entirely decarbonised by 2030.

His response referred to last December's Carbon Plan, which looked at different scenarios consistent with meeting carbon budgets. He said that "Government are not setting an explicit decarbonisation goal for electricity generation in 2030 at this point, given the uncertainties involved in setting a target this far out, which include levels of electricity demand and cost-effectiveness of different technologies".

But the Government is setting the level of the playing field which helps define the cost-effectiveness of different technologies. Davey's pronouncement is part of that.

And it can also estimate very well for how long a gas-fired power station will continue generating if built in the next three to four years; it will certainly be doing so by 2030, just 14 years later.

According its own recent estimates, published in DECC’s Updated Emissions Projections in October 2011, an additional 4.9 gigawatts (GW) of new gas-fired electricity generation capacity is projected to come online by 2020.

Of this, 4.1GW is projected by 2016, but in reality it's even more than this: new gas projects with government consent currently amount to 16.2GW.

Information from National Grid and New Power shows that all of these projects could be online before 2020.

This level of unabated gas operating at 450g/kWh at 2030, let alone 2045, would make it impossible for the UK to meet its long-term carbon emission reduction goals.

Hendry is talking disingenuous nonsense.

The wind/gas future

Recent analysis by Platts on the electricity market argues that 'transitional' gas and wind power will form the backbone of the system in the near future.

They write: "This will be combined with baseload power from biomass and a declining amount of legacy coal and nuclear.

"Gas will act as the hydrocarbon bridge to a more sophisticated low carbon smart energy system that will include a greater range of RES, backed by demand response, storage and other clever means of balancing electricity supply with demand."

Platts' conclusion is that energy companies have two choices: either enter a declining competitive market or pursue renewables.

Platts calls renewables “subsidy-backed", but as we have seen from the Budget gas and oil are subsidised in their own way, by tax breaks for example, just as any other form of electricity generation.

Nevertheless, in simple levelised cost terms, seen from this point of view, wind has just about reached what we could term grid parity.

In this picture, gas is required to fill in the gaps when the wind isn't blowing sufficiently, and the gas power stations will remain idle when it is.

This gives us a picture of the future. In a competitive market, with a smart grid, buyers will choose whichever is the cheapest power source at that moment.

In the UK, the question is whether such a pattern will bring down emissions sufficiently to meet the U.K.'s legally-binding requirements under the Climate Change Act.

The next legal challenge

I have no doubt that Friends of the Earth, currently celebrating their third victory over the Department for Energy and Climate Change over solar feed-in tariffs that was announced on Friday, will be watching carefully to see if they can to mount a legal case themselves against Ed Davey's decision, on the grounds that it could lead to the UK failing to meet its carbon budgets under the provisions of the Climate Change Act.

Under this, the UK must have reduced its carbon emissions by 35% by 2022 and 50% by 2027.

As they have calculated, with this amount of gas generation that will be impossible.

Rhian Kelly, CBI Director for Business Environment policy, has commented on the Supreme Court’s ruling on feed-in tariffs, saying: “What’s important now is that the Government learns the lessons from this sorry solar saga.

“As it puts the finishing touches to reforms to electricity markets and the Green Deal, it must be sure it creates a stable, predictable policy framework which leads to investor confidence and generates jobs.”

Rhian Kelly, that is a nice dream. Government energy policy remains as stable as a galleon in a gale.

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