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Malcolm Wicks MP, Minister of State for Energy
London, 08 January 2008
You may recall that I opened this event in 2006. I though it might be interesting to consider what has happened since then.
Perhaps I can remind you of some of the headlines from the January ’06 edition of Coal UK:
Let’s look at that output headline first. Total UK output was down 4.5 Million tonnes in 2005 at 20 Million tonnes. It fell again, to 18 Million tonnes, in ‘06, with most of the drop from the surface side, despite the closure of Rossington, the last coal from Harworth and interrupted production at Daw Mill.
We now know that the ‘07 total was down again, to around 16.6 Million tonnes – around 7.7 million tonnes deep mined and 8.9 million tonnes surface mined. Yet despite the continuing fall in output, the year produced two particularly positive stories:
First, the slow recovery of surface mining in England, with output almost doubled from less than nine hundred thousand tonnes from 4 sites in ‘06 to 1.6 million tonnes from 8 sites in 2007. With another 3 sites in development and 3 new planning consents in the year, the future of this sector is looking brighter.
The second positive story is the on-going work to re-open 3 underground mines – Hatfield, Aberpergwm and Unity.
We have been looking out for the news that Hatfield is in commercial production from the first panel in its new Barnsley area.
I am sure we all congratulate Richard Budge and the Hatfield workforce on their magnificent achievement in reviving the mine.
We also look forward to hearing that both Aberpergwm and Unity also re-start commercial production in due course.
As Coal UK foretold in 2006, Tower colliery has now closed through exhaustion, but not before winning almost 14 years of coal from a mine which was closed as un-commercial in 1993 – another magnificent achievement and an inspiring story of a workforce seizing the opportunity to control their own destiny.
But what was sad news for Tower is good news for Aberpergwm, Unity and others mines or potential mines, especially in South Wales, since Tower’s skilled and experienced workforce is now available to help to take their projects forward.
I believe that the support the Government has given Tower since 2000 – £9 million of operating aid, followed by £3 million of investment aid to help it to access its remaining reserves – together with our support to Energybuild for Aberpergwm, have helped to create a positive climate for the promoters of all of the current mine development projects.
By supporting Tower and Aberpergwm, the Government has also helped to make it possible for any Tower people who want to stay in the industry to find new jobs in the local area.
With regard to imports, Coal UK’s January ‘06 headline only referred to figures for the first 11 months of 2005. Over the full year, coal imports rose to 44 million tonnes compared to 36.2 million in ‘04, an increase of nearly 8 million tonnes. They rose still further in ‘06, to 50.5 million tonnes; but high opening stocks and a mild winter have returned the total to around 43 million tonnes – so, below the ’05 total – in 2007.
Two points to note behind these import headlines:
The first is the rise in imports from Russia: in 2004, at just under 10 million tonnes, they represented around 29% of total steam coal imports. In ‘06, at almost 23 million tonnes this had risen to close to 50%. And although final figures are not yet available for last year, indications are that while total imports fell back compared to ‘06, Russia has maintained its share of this market.
The second is the price of coal, which is, of course, closely linked to the price of gas. In Coal UK in January ‘06, McCloskey’s Aire Valley Marker stood at $71.70 delivered, equivalent to £1.61 per gigajoule.
But look at the latest edition and you’ll see it at equivalent to £2.89 per gigajoule, up nearly 80% in just two years.
Contract prices for UK coal have also risen over the period, if less dramatically. This is now helping UK producers to finance the investments they need to make, particularly at deep mines, to maintain production for at least the next ten years. I’m thinking in particular of the new contract between UK Coal and EDF Energy for coal from Thoresby.
Back in 2006, the Coal UK headline asked if coal was climbing the policy ladder. But I can assure you that it has always been important, and will continue to be while coal-fired power stations continue to contribute around 35% of the UK’s electricity supplies. I can also assure you that even when the policy focus is elsewhere, we don’t lose forget coal’s importance. 35%, of course, an annualised average – I believe it was nearer 43% - three points higher than usual - in the last quarter of 2007.
The fact that around a third of coal feedstock continues to be locally produced is, of course, another important consideration.
The government knows that coal-fired generation is reliable, flexible and affordable. These are more good reasons why securing a continuing role for coal is an important objective of UK energy policy.
I’d like to mention here the work of the Coal Forum, which is proving to be a valuable arena in which representatives of all the relevant stakeholders – coal producers, coal users, equipment and infrastructure providers, trades unions and others – can contribute to the discussion. I know that you will be hearing more about its work later today.
But we all know that for coal to maintain its current role in a carbon-challenged world, its potential environmental impacts must be managed.
Carbon Capture and Storage technologies have the potential to make a significant contribution to cutting UK carbon emissions from fossil fuel power stations. The Government began to pave the way for them through the launch last November of the competition for a demonstration project to be in operation by 2014.
This will be one of the first commercial-scale CCS plants in the world, and represents a huge opportunity for the UK in developing CCS technology. I am proud that the UK, with the US and Norway, are leading the world in this way, but would like to see more competition, such as from the rest of the 12 planned European projects, to develop the scale of roll-out we need for the technology to take off.
I know that getting CCS installed on the scale the world needs is a challenge. We decided to focus the UK competition on post-combustion CCS with this in mind, not just thinking about Europe but about the need to tackle CO2 emissions in countries where this technology will be needed to clean up existing generating capacity.
But if we are to keep coal in the energy mix we will also need new, state-of-the-art power stations, which are, from the outset, both cleaner and more efficient than the stations they replace, and capable of receiving new technologies to manage their residual emissions as these become commercially feasible.
Many of you will be aware of the Planning Bill, which is currently progressing through the House of Commons. This aims to streamline systems for granting development consents for nationally significant infrastructure projects, including generating stations with a capacity greater than 50 megawatts.
The reforms in the Bill are designed to ensure that proper debate on the national need for such developments takes place up-front, rather than during the inquiry phase of applications, when it can detract from consideration of local impacts.
To facilitate this, the Government will draw up National Policy Statements to set out the need for nationally significant infrastructure. Early development has already started on a suite of such Statements, and public consultation on these drafts could begin later this year.
Decisions on individual projects will be taken by an independent Infrastructure Planning Commission, and developers will have to meet defined standards of pre-application consultation. We hope to see the Planning Bill receive Royal Assent by the summer, and to see the establishment of the Infrastructure Planning Commission during 2009.
Following publication of the Energy White Paper in July last year, the Energy Bill has now also started its Parliamentary progress. Although coal does not figure largely in the Bill, the White Paper reiterated the Government’s belief that coal will be part of the UK’s energy mix for the foreseeable future.
Looking round this room today, I recognise many people who share that vision. I look forward to working with you to help to ensure:
