Kingsnorth: why does E.ON want to build a new coal plant without CCS?

E.ON’s £1bn plan for a new coal-fired power station at Kingsnorth is waiting for approval from the UK government. Other generators have shifted away from coal. Drax, which owns by far the largest coal power station in the UK, is investing in biomass. Other companies have focused on new gas plants. Why is the world’s largest investor-owned utility pushing ahead with a project to burn coal without carbon capture? The answer, unsurprisingly, is that burning coal to generate electricity is extremely profitable. Very low prices for emissions permits and tumbling coal costs mean that a profit-seeking management team is highly incentivised to try to push for permission to use coal in power stations. This article provides the background calculations for an estimate that the new Kingsnorth will generate an operating profit of about £300m a year if current fuel and carbon prices persist. Additionally, it also tries to show that the cost of fitting CCS equipment and running the plant to capture the large majority of all carbon emissions is likely to add no more than about 1.5p per kilowatt hour to the cost of generating electricity at current coal and carbon prices. This means that a new coal fired power station *with CCS* may have operating costs only marginally above gas power plants

Nevertheless, E.ON has just asked for government subsidy to install CCS at Kingsnorth from day one. The purpose of this article is to offer an estimate of the maximum the government ought to offer E.ON in order to get it to invest in CCS prior to opening the new power station.

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Why might nuclear be necessary?

In the Independent newspaper (London, Monday 23 February) I argued that we may need to accept some new nuclear power stations. I put forward the view that the trench warfare between the pro-nuclear groups and those that support renewables means that progress towards 'decarbonising' electricity generation in the UK is too slow. We probably need to invest in many different types of non fossil-fuel generation as rapidly as we can if we are to meet the tough targets for UK emissions reduction so painfully won by groups such as Friends of the Earth. We no longer have the luxury of ruling out nuclear expansion.

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At last, some good sense on Carbon Capture and Storage (CCS)

A powerful US coalition of large industrial companies, power producers, and environmental defence organisations has produced the first sensible plan for incentivising the early introduction of carbon capture at solid fuel electricity plants. The scheme proposed by the US Climate Action Partnership (USCAP) addresses the most important environmental issue in the world – the burning of coal to generate electricity – in a plausible and coherent way. Coal, which is almost exclusively burnt in power stations or in steel-making, is responsible for about 36% of US emissions. If we can find a way of cheaply capturing the CO2 from power stations and storing it underground, we can then also provide the technology to Chinese and Indian generators.

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Does an economic depression mean slower progress towards green objectives?

We didn’t make much progress reducing emissions when times were good. Will the looming depression makes things worse or better? The discussion of this issue, at least in the UK, tends to be superficial. The only question asked seems to be ‘will people buy less eco-bling when times are hard?’

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Carbon capture at E.ON's Kingsnorth coal plant

E.ON's planned Kingsnorth supercritical coal plant
E.ON's planned Kingsnorth supercritical coal plant

E.ON’s plan to install supercritical coal-burning technology on its Kingsnorth site in Kent was (unsurprisingly) supported by the planning authority. A more interesting question is why E.ON persisted with the application in the first place. Even carbon efficient power stations emit far more carbon than gas plants. A high price of carbon would make the Kingsnorth coal plant uneconomic. The answer to the question must be that E.ON is confident that supercritical coal plants can be economically retrofitted with carbon capture technology (CCS). So even if the carbon price increases dramatically, coal will still be competitive.

E.ON’s US operation is closely aligned with the co-operative FutureGen venture, which plans to build a coal gasification plant in the US within five years. This power station will then capture CO2 and store it in sandstone. FutureGen gasification carbon capture technology is ‘pre-combustion’, unlike the ‘post-combustion’ focus in Europe. US electric utilities are now assuming that coal plants without CCS will not be allowed. But in both the US and Europe there seems to be a prevailing assumption that a $30 per tonne CO2 price is sufficient to cover the cost of CCS technology, meaning coal will eventually be back in the power station mix.

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Patagonia: a clothing company that wears its heart on its organic cotton sleeve

The US drags its feet in climate negotiations. A few hours after being harassed into signing the Bali accord, the White House started to distance itself from the hazy targets agreed by the rest of the developed world. But some American companies lead the world in environmental policies. The best businesses disclose more about their manufacturing processes and their carbon footprint than almost any European or Asian companies. One of the best examples is Patagonia, a highly-regarded maker of specialist outdoor clothing. To jaded European eyes, its environmental plans look almost embarrassingly earnest and idealistic. The admissions of its own weaknesses are delivered with a humility that we rarely see on this side of the Atlantic. What UK business would voluntarily describe the production processes of one of its key products as ‘not sustainable’? Or admit that a complex chemical in the water repellent used in its outer garments (and those of all its competitors) is highly persistent and building up in the environment?

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China is keeping the UK within the Kyoto limits

Post-industrial countries like the UK import an increasing fraction of their manufactured goods from China. The carbon emissions from the Chinese factories making these goods are not included in the UK’s totals. How much greater would the UK’s emissions be if we included the impact of goods manufactured in China?

In this article, we make some estimates based on a briefing note recently produced by the Tyndall Centre. The numbers I use are imprecise – and I am using them for reasons not envisaged by Tyndall – but I believe that the increase in the imports of Chinese goods has probably reduced UK emissions by about 6% below what it would have been. Perhaps more dramatically, the trade deficit is rising so fast that it is depressing UK emissions by a further 2% a year.

Without the safety valve of Chinese imports, the UK would be very likely to breach its Kyoto targets, which only measure domestic emissions. This is important in itself, but a more striking conclusion is that the trade with China has disguised a failure to cut emissions growth below the growth of British GDP. The UK government, and others around the world, regularly claim that CO2 output has been ‘decoupled’ from economic growth. The analysis contained in this note suggests that the apparent decoupling is actually an artefact of the growing deficit in trade with China.

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Video conferencing: at last a good alternative to travel?

Video conferencing has been around for a surprisingly long time. AT&T ran the first call in 1927. Since then, pundits have been consistently predicting that video conferencing was just about to take off. They have been wrong for eighty years. Why should we believe the techno-optimists now?

In the last year, several companies have launched video conferencing products that provide an experience similar to real meetings. The quality is surprising and even sceptics have begun to see the advantages of using a meeting room for an hour rather than spending three days going to Hong Kong and back. Cisco’s Telepresence product is generating enthusiasm that is tempered by the enormous costs of setting up the equipment and providing the bandwidth. But the company says that prices will fall dramatically over the next few years.

Is this going to be enough to get people out of planes? The signs are good. Even low bandwidth alternatives suitable for home use are getting praise from the experts. So if Cisco doesn’t make video conferencing work, Bay Area start-ups like VSee will probably start eating into the market for lower cost products.

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BT’s wind farm proposals

BT uses over half of 1% of the UK’s electricity and is the single largest purchaser of green electricity in the UK. It buys over 10% of the country’s total supply of renewable electricity. It now seeks to develop wind turbines on some of its own sites. It intends to invest in about 120 2MW turbines to produce about a quarter of its own electricity or between 0.1 and 0.2% of the UK’s total need. This is an impressively large plan. The cost is about £250m. The financial return will depend on how much of the electricity replaces power BT would have bought from other suppliers and how much is ‘exported’. Assuming very little is used by BT itself, the return will be approximately £50m a year, yielding a return of about 20% on the initial investment. These figures assume that BT gets a yield of about 28% of the rated capacity of the turbines, which is about the UK average.

These figures depend entirely on finding sites. I think that BT may well have substantial difficulties finding as many 120 places where it can capture enough wind to average 28%. Perhaps more importantly, at many of those sites which do have enough wind, I think it will have problems getting connections to the local distribution network. Two of the three initial sites identified by BT are in the Scottish Islands. Although a typical 2MW turbine is not a huge generator to add to the local network, the islands have quite limited electricity needs. Scottish and Southern may not easily be able to add these turbines to their network.

When I asked BT whether it had approached the local distribution companies to check on this point, I was not given an affirmative answer. This raises the possibility that BT announced these plans before detailed consideration of whether its aspirations are technically feasible. So it may be a great idea to erest wind turbines, but it looks like it will be much more difficult than BT realises. Companies like Ecotricity have been developing wind turbines on industrial sites for years. Though planning permission is easier, there are still huge obstacles to overcome. BT needs Ecotricity's expertise immediately, but it will still struggle to meet its aspirations to grow its wind power capacity.

26m servers in data centres use 2% of world electricity

BT’s green credentials are well established. It is the largest commercial buyer of renewable electricity in the UK, emphasises the importance of carbon reduction across the organisation, and pushes voice and video conferencing at an unconvinced customer base. In any international ranking, BT’s sustainability measures get high marks. But BT has the same problem as many other organisations: its server farms are growing in number and size. The increased power consumption in its data centres explains why the organisation’s electricity demand is growing. Eventually, its brand image will suffer as critics suggest that its public stance on green issues is not matched by its internal behaviour.

BT’s electricity use is about half a percent of the UK’s total, and its server farms represent over 10% of its energy consumption. BT says that data centre use is rising at 40% a year, and the company’s emphasis on growing video businesses, such as BT Vision, is likely to increase data storage and transmission demands into the foreseeable future.

BT’s response has been to attack the power use of the server with radical measures that set best practice elsewhere in the world. Its new data centres use fresh air cooling, not air conditioning, and the company runs its machines at much higher temperatures than used to be considered possible. Since cooling servers uses at least as much power as running them, this is an important step. The second major innovation is to run the farms on DC power, cutting the very significant losses in the multiple AC to DC conversions in a conventional centre. Better ‘loading’ of the computers helps as well. A well-utilised machine uses only a little more power than an intermittently under-employed server. BT claims that these measures can reduce the typical power consumption of a server farm by 60%.

Across the world, data centre energy consumption is becoming a bigger issue. The world has about 26m servers pumping out data day and night. Estimates suggest that they use about 2% of all electricity produced and global growth is probably around 15% a year. BT’s innovations may be a useful model for others to follow. But the unfortunate fact is that at current growth rates the maximum efficiency gains will be wiped out in less than four years.

In an intriguing trend, some companies are dealing with apparently unquenchable growth in data traffic by beginning to move away from thousands of servers based on PC technology towards huge single computers with lower total energy costs. Who said the mainframe was dead?

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Straws in the wind: The Lib Dems' climate change paper

Both the Conservative and Lib Dem parties have produced position papers on climate change in the last few weeks. The Conservative document is over 500 pages long but contains very few specific proposals. To be harsh, it is little more than a prolonged agonising over whether the climate change problem can be addressed using conventional free-market mechanisms. The Lib Dem paper is a tenth of the length but does contain the outlines of a coherent set of policies. This article analyses the Lib Dem proposals. It shows that the Lib Dems are prepared to use the price mechanism to choke off increasing demand for aviation. The party also contemplates extending the Emissions Trading Scheme beyond the 50% of the economy currently covered. On the other hand, it makes completely clear that it has no intention of raising the prices of energy and fuels to domestic consumers.

Although the party presents itself as the only UK political institution ready to grasp the need for an economy-wide carbon price that will bring down emissions by 30% in 2020, the detailed proposals are far less radical. In the material that follows, I try to tabulate the Lib Dem ideas, focusing on whether they use price, regulatory fiat or pious hope as the proposed means of emissions reductions. As in the Conservative paper, estimates of the costs and benefits of their policies are almost completely absent from the Lib Dem paper. It is a shocking commentary on British politics that no major party is prepared to quantify exactly how it proposes to shift taxes towards polluting activities and away from other sources.

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Tesco vs. Wal-Mart vs. carbon emissions

The rivalry between Tesco and Wal-Mart is well known. Tesco's imminent entry to the US heartland of the world's largest retailer may have created an extra edge to the battle. And, unsurprisingly, the two giants are squaring up over carbon issues as well as over such things as employee conditions and global sourcing policies. Tesco said earlier this year that it would eventually put carbon labels on all its 70,000 food lines. It has been trying to find way of doing this using Life Cycle Analysis, putting a greenhouse gas cost on every element of a product's move from farm to plate. This was always a hugely over-ambitious project and recent weeks have seen the company drift back from its early optimism. Now Wal-Mart has come up with a similarly impossible dream – to use the Carbon Disclosure Project (CDP) to assess and manage the energy footprint of its suppliers. These big retailers know that they have to be seen to be doing something about greenhouse gases, so they have both launched incomplete schemes that will achieve little.

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