This is a good question. The timing of the announcement doesn’t really make sense. The Government has closed it’s consultation on a new coal policy, and is expected to make an announcement in a matter of weeks. There is a bill expected to go through Parliament in November that will enable utilities to charge a levy to consumers to pay for CCS demonstration, and the Government’s competition to fund one CCS demonstration is still ongoing. Why then pull out when lots of current barriers are about to removed? It could be perceived as a conspiracy to pressure to Government in to coughing up more money for CCS just before the announcement, but I am now convinced that the real reason for this odd timing is a misunderstanding between EON headquarters in Germany and EON UK. In short, EON UK were as surprised by this announcement as we were. It originated from a presentation given by the Vice President of Generation to a closed meeting in Essen. It appears a Platts journalist picked it up, and started to filter back to the UK. EON UK then started getting calls, and were forced to clarify their position. We received confirmation at about 6.30 last night, and just about made it into yesterday’s news cycle.
What does this mean for coal in the UK?
It is the suspension of the key project that has so far defined the battle over new coal in the UK. It is therefore highly significant, but not a fatal blow. The investment freeze could be un-frozen with the right level of subsidy, and has no direct impact on the other plants being considered for CCS demonstration. There is now a new threat emerging at Hunterston in Scotland, from a consortium including RWE and Dong energy (a Danish utility) for a plant identical to Kingsnorth, and they are claiming they will build with or without Government assistance. The real goal then is to secure regulation that rules out emissions from new coal across the country for good, rather than plant by plant, and we won’t let up until we have this. In terms of a general case for coal though, a major utility pulling out because the demand for coal fired electricity doesn’t exist, and because coal is too expensive has dealt a major blow to prospects for new coal per se. In which sense, it is a massive victory.