Speech by Charles Hendry at McCloskey's Coal UK Conference
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The UK coal community has seen many changes since that first Coal UK conference. Back then, in 1992, our focus was on privatisation of the …
The UK coal community has seen many changes since that first Coal UK conference.
Back then, in 1992, our focus was on privatisation of the electricity supply sector and the preparations for privatisation of the British Coal Corporation, both of which were game-changers for this country.
Let me remind you of some statistics:
In 1992, UK coal production was 91.1 million tonnes, from 152 underground and 135 surface mines, and total direct employment was 48,700, giving productivity of under 1,900 tonnes per man year.
In 2010 (the last year for which full statistics are available) - production was 17.8 million tonnes, from 16 underground and 35 surface mines and total direct employment at a maximum of 6,140, giving productivity of 2,900 tonnes per man year, an improvement of over 50%.
Demand for coal in the UK in 1992 stood at 101 million tonnes, including 78 million tonnes for generation, while demand in 2010 was 51 million tonnes of which 42 million tonnes were for generation - both figures showing a fall of around 50%.
Total UK coal imports in 1992 were already 20 million tonnes, and in 2010 were 27 million tonnes, down 31% compared to the 38 million tonnes - almost twice the 1992 total - imported in 2009.
There are some important changes there!
I should also mention another significant factor in bringing us to where we are today: that in 1992, the International Panel on Climate Change was not yet five years old; and that its second report , the one which highlighted the risks to global climate of rapidly increasing levels of carbon in the atmosphere, would not be published for another three years.
The role of coal in the UK changed dramatically in the last 20 years, but I’m afraid that there are a few of us in this room who are old enough to know that change - continuing change - is one of the certainties of life.
Having said that, another certainty is the advantage of a continuing role for coal in the UK energy mix for the foreseeable future.
The Government recognises that advantage, even against the background of the need to decarbonise our energy supplies.
It values its flexibility and responsiveness of coal-fired generation, particularly its ability to balance a grid with significant intermittent sources, as well as its contribution to ensuring security and affordability of energy supplies.
Nevertheless, the longer term future of coal in the UK energy mix depends on the deployment of commercial-scale carbon capture and storage technologies.
The Government is firmly committed to working with industry to enable cost-competitive deployment of CCS. A number of promising projects are proposed in the UK, and this spring we will be launching a new accelerated process to select those to benefit from Government funding.
Let me make it absolutely clear, that £1bn remains available for this new process.
This will be made available when the projects need it, which is likely to be split across spending review periods - and is of course dependent on which projects are selected.
So I cannot speculate on the detailed profile of spend until we know which projects have been selected and when they require funding. All I can say is that this funding remains available.
Other potential sources of support for CCS projects will be low carbon Contracts for Difference and money available through the European NER300 competition.
Taking these together, we believe we will be making one of the best offers from any Government to support CCS deployment going forward.
The overall objective we are looking for from the new programme is to make CCS deployment cost-competitive in the 2020s.
That is to say, that in the 2020s private sector electricity companies should be taking investment decisions to build CCS-equipped fossil fuel power stations without Government capital subsidy and at an agreed Contract-for-Difference strike price that is competitive with the strike price of other low carbon technologies. Our goal here is to create a CCS industry, not just a series of pilot projects.
We know that in order to achieve this, we need to create certainty around the levels of investment needed to get CCS operational, and also around the additional running costs. We will be designing the new process to make sure we reach this overall objective as quickly as possible, and at best value.
We will be talking to industry at an industry day later this month before launching the process as soon as possible after that.
Our aim will be to take decisions on which projects to further support in time to allow us to synchronise with the NER300 timetable.
It is clear there is still significant industry interest in participating in the new programme. There were more than 130 attendees at the December Industry Day, and a similar number are expected at our February event. We look forward to continuing to work with them over the coming months and years to make CCS a reality.
I could not address this conference without pausing to reflect on the tragic incident at Gleision colliery last September, when 4 miners lost their lives. This was the biggest loss of life in a UK mine since 1979, and I would like to take this opportunity to extend my condolences to families and friends of the victims, and to praise the valiant response from the Mines Rescue Service, the emergency services, from two local mines - Walters Energy’s Aberpercwm Colliery and the Unity Mine, as well as from equipment suppliers and others involved in the rescue operation.
That incident and the subsequent fatal accident at Kellingley colliery - and indeed, the fatal accident record of all UK mines since 2006 - clearly demonstrate the importance of safety in the UK mining industry.
We all recognise that mining is inherently hazardous but there is no reason why it cannot be carried out safely. Vigilance and steady adherence to safe practice are the most reliable ways to manage its risks. Most importantly, there can be no room for complacency in any part of any mining operation.
There will doubtless be lessons to be learned from these recent incidents. The Health and Safety Executive, which leads on these issues, is committed to making these publically available as soon as there is no risk of jeopardising the investigations and any potential prosecutions, as well as undertaking a review (which will be subject to full consultation) of all mines legislation as part of its response to the Lofstedt review.
Whilst I cannot comment on the ongoing investigations into the recent fatalities, I can say that the investigation of previous accidents has identified a number of issues relating to human behaviour, safety culture and a lack of leadership in the mining industry, which can only be addressed by those at the top of mining companies taking the lead and driving improvements across the whole of their organisations and indeed, across the whole industry.
To that end, I welcome the setting up of the Mines Safety Leadership Group whose members include senior leaders in the industry, the Trades Unions and HSE. Their aim is to work together to identify workable and lasting solutions to the safety challenges the sector faces. I look forward to seeing the fruits of this work - real improvements in safety at all our mines - in the months and years to come.
So I say that with confidence that there will indeed be years ahead when UK coal production will continue to make its valued contribution to our energy needs and our energy mix.
The Government’s aim is to ensure that this country continues to enjoy secure, reliable and affordable energy, and it knows that keeping coal in the mix will make this easier to deliver.
Even through the relatively mild months of the current winter, coal has contributed more than 45% of total daily electricity generation during many working weeks. Where would we have been without it?
And where would we be if, even allowing for expected plant closures and a reduction in total coal-fired capacity, we did not retain enough stations to maintain the security that comes from diversity in the energy mix.
The Government understands and appreciates that the resilience and responsiveness of coal-fired capacity is likely to retain its value, especially as the proportion of intermittent generating capacity increases.
The Government also knows that it will not always be easy to strike a balance to deliver both secure energy and a low carbon energy future.
We have heard the concerns of UK coal producers that the resulting demand for coal could fall below the level they need to maintain their critical mass.
The experience of recent winters has demonstrated to generators, other coal users and consumers alike the value of continuing access to locally mined coal.
I would therefore say in response to the producers that we are already engaging with generators who have to decide in the next few years whether or not to upgrade existing plant to operate within IED emission constraints so that they can remain part of our supply system. We expect to continue to work with them as their deadlines for decisions approach.
This is in addition to the new CCS Programme I have already discussed, which will also have an important role in determining the amount of coal-fired generation in the mix in the 2020s and 2030s.
I’d like to mention here the meeting I had with the Coal Forum in December, which covered a number of current issues. I found the discussion useful, and I look forward to continuing to a continuing dialogue with the range of interests represented at the Forum.
Localism and Planning
I am also aware that a number of you have some concerns about this Government’s reforms to the planning system. The aim of our reforms is to simplify a system that most people agree has become complex and confrontational, and to emphasise the central and critical role of the local authority plan to decision making. That is why we intend to abolish regional strategies using powers in the Localism Act, and why the Government is creating neighbourhood plans to give communities the power to influence and shape their local area.
This may mean some changes to the way in which proposals for coal extraction are handled. For example, for large sites there will be pre-application consultation with the local community prior to submitting a planning application. Local authorities will have to co-operate with each other on cross-boundary issues as part of the preparation of their local plan.
However, because minerals are a national strategic resource and because of the scale and complexity of minerals planning, proposals for minerals development will not be covered by neighbourhood plans and will continue to be dealt with at local authority level.
Those of you who have been following the discussions and debates on the draft National Planning Policy Framework will be aware that the proposed policies do not seek to change the overarching objective of minerals planning, which is to secure an adequate and steady supply of minerals to support sustainable economic growth. It continues to emphasise the need to take full account of the environmental impacts of extraction, and then to restore the site to a high quality afterwards. I think that, as an industry, you are uniquely placed to help deliver some of our environmental objectives in this respect.
Clearly though I recognise that the question of the “presumption against” coal extraction is something of considerable concern to you. My officials are working with those in the Department for Communities and Local Government as they consider the consultation responses. The Government intends to publish a revised Framework by the end of March.
But let there be no doubt about it: the Government does expect coal to have a continuing role in the UK energy mix - and for there to be no reason why there shouldn’t be a 40th annual Coal UK conference in another 20 years time!