Uk switch of generation from gas to coal

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UK switch from gas to coal for electricity generation in 2013

UK switch from gas to coal for electricity generation in 2013

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  • 1. Switch of Generation from Gas to Coal The paper I prepared on “Big Six” profits from Generation refers to work I had shared with OFGEM on capacity utilisation and the switch from gas to coal. This will have boosted profitability in the most recent twelve months, a period not yet disclosed, in the dis-aggregated profits which the industry supplies showing earnings from the generation and the supply side of their business. Please find below pie charts showing the switch for each of the major players. Given the reduced input cost of coal in comparison to gas there will have been a significant increase in generation profits over the period. British Gas (Centrica) undertook a massive switch in fuel from gas to coal between 2012 and 2013. Gas fell from 50% of generation in 2012 to only 34% in 2013. Over the same period coal use rose from 14% to 26%. Both renewables and nuclear saw small increases over the year before. Carbon Emissions from British Gas generating capacity will have markedly increased over the period with a commensurate increase in wholesale generation profits for the company’s shareholders. coal 26% natural gas 34% nuclear 28% renewable 10% other 2% British Gas Fuel Used for Generation 2013 coal 14% natural gas 50% nuclear 26% renewable 8% other 2% British Gas Fuel Used for Generation 2012 coal 52% natural gas 31% nuclear 5% renewable 8% other 4% E.On Fuel Used for Generation 2013 coal 32% natural gas 52% nuclear 6% renewable 5% other 5% E.On Fuel Used for Generation 2012
  • 2. As was the case for British Gas, E.On has undertaken a massive switch from gas to coal between 2012 and 2013. Coal used in generation has increased from 32% of the total in 2012 to 52% in 2013. At the same time gas plant provision has fallen from 52% to 31% over the course of one year. This switch will have increased profitability and CO2 emissions to a considerable degree. EDF Energy relies on Nuclear for most of its generating capacity and this reliance has only strengthened between 2012 and 2013. Nuclear rose in percentage terms from 69% to 74% as a source of power generated. EDF was the only company to reduce its coal usage over the period with a fall from 28% to 17% between 2012 and 2013. The company added renewables capacity and this rose from 3% of power generated to 8% between 2012 and 2013. coal 17% natural gas 0% nuclear 74% renewable 8% other 1% EDF Energy Fuel Used for Generation 2013 coal 28% natural gas 0% nuclear 69% renewable 3% other 0% EDF Energy Fuel Used for Generation 2012
  • 3. RWE/npower reacted more cautiously to changes in the market than the other electricity suppliers. They were unable or unwilling to switch with the same rapidity from gas to coal between 2012 and 2013. Coal accounted for 29% of generation in 2012 and rose slightly to 34% in 2013. Over the same period use of natural gas declined from 55% to 51%. There will have been a slight increase in CO2 emissions and a slight increase in profitability as a result. SSE undertook a very significant switch from gas to coal between 2012 and 2013. This will have resulted in a massive increase in CO2 emissions and also in generation profitability. This increased profitability in the wholesale side of their business was not passed on to their customers in the form of lower bills. Indeed SSE cited higher gas prices necessitating an increase in retail prices for customers to maintain the profitability of the supply side of their business. Coal accounted for 54% of generation in 2013 up from 35% of generation in 2012. Over the same period gas usage declined from 49% of generation to 28%. Citing rising gas prices as a reason for increasing bills in these circumstances seems particularly disingenuous – but it went unchallenged! coal 34% natural gas 51% nuclear 0% renewable 14% other 1% RWE/npower Fuel Used for Generation 2013 coal 29% natural gas 55% nuclear 2% renewable 12% other 2% RWE/npower Fuel Used for Generation 2012 coal 54% natural gas 28% nuclear 1% renewable 15% other 2% SSE Fuel Used for Generation 2013 coal 35% natural gas 49% nuclear 1% renewable 14% other 1% SSE Fuel Used for Generation 2012
  • 4. Scottish Power is the last of the “Big Six” suppliers that we’ll look at here. They too show a massive switch from gas use to coal use in the generation of electricity. Coal use increased from 47% of generation in 2012 to 59% in 2013. Usage of natural gas declined over the same period from 40% of generation to 26%. This reduction will have resulted in a massive increase in profit per unit of power generated and a similar increase in CO2 emissions. A final set of graphs shows the overall position in each of the two years: These two graphs show that there was a small but welcome increase in renewable generation between 2012 and 2013. Nuclear also accounted for a slightly higher total in 2013. These changes were however small in comparison with the switch from gas to coal. Coal accounted for 29% of generation in 2012 and 38% in 2013, a massive increase. The position of gas moved in the opposite direction with a huge decline from 41% of generation in 2012 to 28% of generation in 2013. In their evidence to the House of Commons Energy and Climate Change Select Committee the “Big Six” talked about the rising cost of gas as the reason for them having to increase prices for customers. The switch from gas to coal belies this myth. Input costs of raw materials vary widely and the unit price of coal used for generation will be around half of that for gas. Gas fired plants are by their nature more efficient so the input cost of generation won’t have halved but it will have declined significantly by perhaps 25%. In the circumstances, increases in price to consumers were without any foundation or justification and should be reversed without delay. coal 59% natural gas 26% nuclear 1% renewable 13% other 1% Scottish Power Fuel Used for Generation 2013 coal 47% natural gas 40% nuclear 0% renewable 13% other 0% Scottish Power Fuel Used for Generation 2012 coal 38% natural gas 28% nuclear 21% renewable 11% other 2% UK Average Fuel Used for Generation 2013 coal 29% natural gas 41% nuclear 19% renewable 9% other 2% UK Average Fuel Used for Generation 2012