All fired-up about coal : technology & policy recommendations for the 2030 United Kingdom energy strategy

Abstract

Given United Kingdom (UK) carbon dioxide emissions policies that direct attention at the electricity segment, the focus is on the largest electricity polluter, coal, and the immediately pressing issue of UK coal policy. There is also some consideration of overall energy systems impacts. Coal is an abundant, yet environmentally damaging fossil fuel at every stage of use. In the European Union (EU), regulation will require Flue Gas Desulphurization (FGD) technology on all existing coal plants by 2016, which represents a large capital expenditure. In addition, the European Union Emissions Trading Scheme will likely require future carbon abatement technologies on coal plants. In fact, several proposed UK coal generators are currently considering uncertain technology solutions to carbon emissions, Carbon Capture and Sequestration (CCS). For these reasons, the future price of coal generation remains largely uncertain with a wide confidence band. This thesis uses real options analysis to develop low, medium, and high coal and carbon prices in the year 2030 to account for future uncertainties. These scenarios are compared against current and proposed coal and carbon policies to determine investment scenario paths, which will allow for investment decision modifications as price and policy factors change. The major conclusion of the analysis is that when accounting for high carbon and fuel price uncertainties, it is cheaper to build a new supercritical plant than it is to retrofit an existing plant. This is especially true for older plants and if the FGD and CCS technologies will be implemented in stages. Therefore, it is a finding of this thesis that the UK should set stringent coal policy, and support that policy with stringent emissions regulations and planning processes, to send strong price signals immediately to invest today either in new clean coal infrastructure or, preferably, in other sustainable technologies rather than face a costly further delay of energy system investments.