From the editor: UK deserves praise for ending coal use [Global Gas Perspectives]

The UK should be commended for becoming the first major economy to quit coal power at the end of September. Despite the great political and economic upheaval that the UK has experienced as a result of Brexit, as well as the added strain of the energy crisis, the country managed to fulfil a government commitment made almost a decade ago, not only on time but a year early.

With the closure of the 2-GW Ratcliffe-on-Soar power plant at midnight on October 1, the UK drew a line under more than 140 years of reliance on coal – the fuel that drove the world’s first industrial revolution. As recently as a decade ago, coal was still the country’s biggest source of electricity, occupying a 30% share of its power mix.

The UK has also made laudable progress in reducing its emissions. Its emissions in 2023 amounted to 384mn tonnes of CO2 equivalent, which was 18% lower than a decade earlier, and 52% lower than the level in 1990. Last year marked the first time that UK emissions dropped below 400mn t since Victorian times.

For comparison, Europe’s largest economy Germany cut emissions by only 46% between 1990 and 2023. And even though Berlin’s Energiewende aims to reach net zero five years earlier than the UK, in 2045, the country still generated 16% of its power from coal last year and it does not expect to phase out the fuel completely until 2038.

Notably, Germany’s current emissions might well be lower if the country had not lost its Russian gas supply and went ahead with the closure of nuclear power plants at the height of the energy crisis, forcing it to fall back on coal. Germany’s electricity had a carbon intensity of 381 grams of CO2/kWh in 2023, which was well over twice as high as the UK’s 162 grams.

EU emissions were meanwhile only around a third lower in 2023 versus 1990, and coal still makes up 12% of its electricity supply. The US has made roughly the same progress on emissions, and gets 16% of its power from coal.

Japan meanwhile generated 28.5% of its power from coal in 2023. The country’s clean energy transition was significantly hampered by its decision to scale back nuclear generation in the wake of the 2011 Fukushima disaster.

All the while, there is no prospect of coal use ending in major but developing economies such as China and India for decades to come. China began construction on over 70 GW of new coal-fired power capacity last year, which is nearly 20 times more than the 3.7 GW of new projects started in the rest of the world.

Carbon tax

How has the UK quit coal and decarbonised its power sector so effectively? Historically, the advent of North Sea natural gas supply in the 1960s provided a ready source of alternative baseload energy supply. But more recently, much of the progress can be attributed to the government’s introduction of a Carbon Support Price Mechanism in 2013, which essentially created an additional tax to the EU Emissions Trading System (ETS), which the UK was still subject to until it exited the EU in 2020. The UK then went on to replace the EU system with its own ETS.

The EU ETS has faced criticism for not producing a meaningful carbon price of above €30/MWh until 2020, seven years after the system began functioning completely. The system also granted many sectors allowances for free for many years.

The UK has also supported a significant expansion in renewables, particularly wind power, through the use of contracts for difference. Wind turbines generated 28.7% of UK power last year, second only to natural gas, which accounted for 33.7%. A further 14.3% came from nuclear, 10.2% from biofuels and 4.8% from solar.

More room for gas

In the near term, the end of coal power and the impending phase-out of more nuclear power in the UK is likely to enhance the role of natural gas in stabilising the energy system as more and more intermittent renewables are deployed. While more hostile to natural gas than the former administration, the UK’s new Labour government has accepted that more gas-fired power generation will be required during the energy transition.

The very same government has vowed to end North Sea oil and gas licensing and hike taxes on producers, while indicating it will not make a stand against environmentalists seeking to block project approvals through the courts. Even before Labour’s landslide victory at the election in July, the North Sea Transition Authority predicted that UK gas production would more than halve by the end of this decade.

That means more gas will be imported. Norway was responsible for over 40% of the UK’s gas imports last year, but its production capacity has been maxed out and there is competition for this supply in continental Europe. As such, the UK is likely to resort to more LNG purchases to cover its needs. This will be an opportunity in particular for US LNG exporters, which are expanding their capacity and benefit from close geographical proximity to the UK market.