By Rachel Morison, Todd Gillespie, and Ellen Milligan
June 1, 2022 - The British government is considering paying for coal supplies to keep power stations online that would otherwise be shutting before winter.
In order to ensure there’s ample supply of electricity, the government could purchase coal to be used by Drax Group Plc, Electricite de France SA and Uniper SE in a deal to delay the closure of some coal units in September, according to people familiar with the matter. The plan isn’t fixed and is one of a number of options on the table, said the people, who didn’t want to be named discussing private information.
Drax, Uniper and EDF, who are in talks with National Grid Plc’s Electricity System Operator about the options, didn’t comment on the possibility of the government paying for coal.
The UK is in a tight spot as it aims to bolster its energy security while at the same time cutting emissions and keeping costs affordable for consumers. While imports of liquefied natural gas are supporting the country’s gas supply for now, the situation is looking more precarious this winter for power generation with coal and nuclear plants set to go offline.
European coal prices have tripled in a year
Last Friday, Business Secretary Kwasi Kwarteng urged the grid’s ESO to find a deal “swiftly.” The government could face a steep bill if the plan to purchase coal goes ahead. The price of the power plant fuel in Europe has roughly tripled in the past 12 months as a supply crisis in the gas market has driven utilities toward the dirtier fossil fuel. Demand for coal by UK electricity generators jumped 37% in the last quarter of 2021 compared to a year earlier, according to government data.
“While there is no shortage of supply, we may need to make our remaining coal-fired power stations available to provide additional back up electricity this coming winter if needed,” the Department for Business, Energy and Industrial Strategy said in a statement, adding it’s still the plan to end the use of coal power by October 2024.
A spokesperson for the grid’s ESO declined to comment on the specifics of the plans. “As instructed by BEIS we are in discussions with coal operators,” they said.