The fracking revolution in the US has had a number of unintended consequences. As well as polluting groundwater and causing other environmental damage, the use of ‘hydraulic fracturing’ to exploit shale gas has lowered US gas prices massively. This has put huge pressure on the US coal industry, which has had to lower its prices in consequence, and also find new markets. These cheap US coal exports have damaged the European gas industry (which has closed or mothballed about 50,000MW of gas-fired capacity over the past five to six years) and led to a ‘dash for coal’, as burning coal doubled in profitability. In November 2013, burning coal was five times more profitable than burning gas, per unit of energy produced.
This has caused some problems.
A lot of British power stations decided to opt out of the European union’s large combustion plant directive, which meant they did not have to clean up their emissions of sulphur dioxide and so on, but they received a fixed lifetime allocation of 20,000 hours of operation – after which they have to close. Britain’s opted-out power stations have been burning through their allotted hours more quickly than expected because of cheap/profitable imported US coal – and so they will shut down sooner than planned.
Coal-burning power stations like Drax in Yorkshire have also been facing higher costs for their carbon emissions during the current (2013-2020) phase of the EU carbon emissions trading scheme. Drax had to pay £78m in 2013 for its carbon allowance, contributing to a significant fall in profits.
Then there is the ‘carbon price floor’, a British tax introduced in April 2013 to ensure that the cost of carbon emissions does not fall below a government-set minimum, even if the EU carbon allowance falls below the ‘floor’.
All this regulation is the background to last December’s opening of a coal-to-biomass conversion plant at Drax (largely funded by government hand-outs).
Partially converting to burning wood pellets (biomass, as opposed to bioethanol or biodiesel) is a strategy for enabling the power station to burn coal for longer.