rose to ask Her Majesty's Government whether they support the case for a cleaner coal demonstration plant.
My Lords, after I had applied for this debate, I was alarmed to read a front-page article in the Yorkshire Post on 8th November, headlined,
"Britain 'to pull plug on coal industry'".
I have no way of knowing how factual was that report, but it certainly set the alarm bells going in my mind.
Today I feel that I am just going over the same ground as I have done for many, many years. My mind goes back to the Energy Select Committee in another place, which in 1991 took evidence and produced a report on clean coal technology. I do not have time to detail the recommendations of that report, but regrettably, like many Select Committee reports, it was pigeonholed and, I suppose, is now covered with dust.
The West's dependence on Middle Eastern oil is being eclipsed by growing dependence on gas from non-OECD countries. The security implications are massive and predictable. Natural gas is a premium fuel that can be used very efficiently in household applications, in commercial plants which generally combine heat and power and in vehicles to reduce traffic pollution. Yet the UK has depleted its own reserves on a brief foray into power generation. In 1990, the remaining lifetime of total UK gas reserves stood at 36 years. By 2000, this had fallen to 14 years with just six years of proven reserves. The UK will soon become a net importer of gas and by 2020 will import between 50 and 90 per cent of its requirements.
Coal offers long-term security and a diversity of supply at an affordable cost. The UK has at least 50 years of reserves and internationally traded coal is available from politically stable countries around the world. I believe there is a logical choice for the UK: we can become dependent on gas from Russia and the Middle East; we can turn back to nuclear; or we can embrace clean coal. I suggest that the latter is the sensible thing to do. I could turn my Question on its head and ask what will be the implications for our nation if Her Majesty's Government fail to support the case for a cleaner coal demonstration plant.
Looking ahead to 2020, I suggest that there will be three such implications: first, an acknowledged overdependence on imported natural gas from regions that are less than politically stable; secondly, an inability to reduce our pollutant emissions to the targets agreed in international protocols, and certainly no possibility of reducing carbon dioxide emissions to the levels demanded by the Royal Commission on Environmental Pollution; and, thirdly, high energy prices slowing economic growth and leaving too many people suffering from continued fuel poverty.
I address those issues in turn. The oil companies tell us they can supply the UK's gas needs from Norway, Russia and more distant regions such as North Africa and the Middle East. I understand that it would cost 35 billion dollars to build the Yamal pipeline from Siberia, and that the UK would be at the end of it. One can only guess at the future price of that gas and how often the supply would be interrupted by the action of producer cartels, disgruntled transit countries or, God forbid, terrorists. It will not be cheap and it will not be secure. Gazprom in Russia and the Iranian National Oil Company control half of the world's gas reserves. Should we become dependent on those powerful companies?
As regards emissions, the Government bask in the glory of past energy policies that leave us able to meet our immediate targets more easily than other countries. However, coal-miners suffered from those policies. I believe that it will be the public at large who will suffer next if the UK becomes dependent on foreign gas in the same manner that the USA is now dependent on Middle Eastern oil.
The Prime Minister spoke on climate change at the Labour Party Conference in 1997. He presented a vision of the UK shining out as a beacon to the world. With clean coal technologies we have the opportunity to be that guiding light. The technologies exist to build coal-fired power stations with near-zero emissions. That includes elimination of carbon dioxide. We are not looking at futuristic technologies. Carbon dioxide can be captured from gasified coal prior to sending hydrogen gas to a gas turbine or fuel cell for power generation. In the UK we have an economic use of carbon dioxide—to enhance the recovery of North Sea oil. Two million tonnes per annum will be needed shortly to extend the life of the massive Forties field. All the components are in place to establish a demonstration project that would indeed be a beacon showing the world how coal can be used to provide energy security and affordability with minimal environmental impact.
Affordability should not be ignored. It is all very well liberalising energy markets and claiming that that is good for consumers because prices fall. That is the case in the short term, but what of the longer term? Free markets do not properly value energy security until it is too late. In California, a mixture of poor regulation and environmental Nimbyism led to a short-term investment climate that favoured natural gas, but consumers could not afford that so it ended with power cuts .
The UK Government cannot ignore their responsibility under the Utilities Act,
"to protect the interests of consumers" and
"to secure a diverse and viable long-term energy supply".
We must press ahead with clean coal projects that lead to near-zero emission power stations. The Government have it within their power to encourage such development with financial incentives. I believe that now is the time to exercise that power.
I understand that the steering committee overseeing the DTI's cleaner coal technology review met yesterday for the last time. Conclusions from the review point towards a longer term need for clean coal and power stations with carbon capture. The possibilities of recovering oil from the North Sea, using that carbon dioxide, feature strongly. That is good news. However, we must not ignore the energy security value of coal. In the short to medium term that means encouraging the commercial deployment of clean coal technologies. With a clean coal obligation on suppliers, the UK could continue to benefit from affordable electricity while meeting our environmental objectives. I suggest that after many years of pressure on various administrations the Government now have no alternative but to act if they want to protect our energy needs for the future.
My Lords, I am delighted to follow my noble friend Lord Lofthouse and to congratulate him on securing the debate which is both timely and relevant. As a number of us know well, my noble friend has deep knowledge of the coal industry, a long involvement in it and, as a political representative of a Yorkshire constituency, he has maintained that knowledge and used the experience he has amassed over the years. Like me, my noble friend will from time to time over recent decades have looked at the many forecasts of energy supply and needs that are regularly published. I believe that we are not alone in having recognised that usually they are entirely wrong, even in the short term. As for long-term estimates, they are frequently proved to be ridiculous.
But whether or not the forecasts are accurate, I think we can all agree that we need energy, it has to be provided and we need to ensure that it is both produced and used cleanly. However, we must also recognise that, whatever is said in Westminster, the world will use vast quantities of coal as far ahead as one can see. Today, two-fifths of the world's electricity is provided from the combustion of coal. Two-fifths of the electricity in this country is also provided from coal. Unfortunately, it is often burnt crudely and the atmosphere suffers. Therefore, in my view, it is beyond all doubt that both here and abroad we should be moving rapidly into clean coal combustion, as that can achieve a great deal. It would be useful if we recognised that the move to clean coal combustion was essential and that in this country it would provide substantially for the engineering industry, which can make use of such a move.
I am reminded of Mr Ian McGregor—later, Sir Ian McGregor; I believe that he was rewarded for his service, limited in scope and vision, to the industry. I and, I believe, the noble Lord, Lord Ezra, attended an enormous exhibition held at the National Exhibition Centre where the British mining engineering industry demonstrated the machinery and inventions which its engineering and technological skills had produced.
I attended a lunch which was to be addressed by Mr McGregor. There, to the slavish adulation of those who wished to maintain his favour, he pronounced the theory that there should be no coal reserves unless it could be proved that, today, they could be mined profitably. That was the most myopic and irresponsible statement that I have ever heard from a leader of an industry. Even if we were to say that we would mine coal reserves today, there would be a lead time of up to 10 years before coal was produced. Not even Mr McGregor could decide what the price of coal would be in five or 10 years' time.
At that time, I was chairman of my party's energy committee, and we took a deep interest in this matter. I remember going to Grimethorpe to look at fluidised bed combustion. That project was supported by British Coal and internationally, but it stopped. I went to Fife to see British Gas's research into gasification. I found it most interesting because the day that I visited they were examining samples of coal from collieries in my own constituency. The results were of real interest. However, all those pits closed within a very short time, sometimes locking away substantial tonnages of coal. That coal is locked away forever unless, of course, we develop underground gasification. That is another area of research which should receive substantial support and, again, it offers substantial opportunities in world markets.
However, the price of coal from abroad is highly volatile. Earlier this year, Australian coal prices rose by 23 per cent in one month. Not only is such coal highly volatile in price, but it is not necessarily secure in terms of guaranteed supply. We should be unwise if we were to become dependent on imported coal. We certainly could not replace coal with oil and gas. Even on Mr McGregor's estimates, we have four times as much coal as gas or oil in and around these islands. We certainly cannot rely on nuclear power. We could perhaps do so in our country because we are stable, but in a large number of countries in the world we could not advocate a development of reliance on nuclear power. If Mr bin Laden were able to escape the CIA, one wonders whether he would seek to become a member of a board in a privatised nuclear industry.
We are talking about serious problems in a century which may come to be regarded historically as the century of terrorism and instability. There is stability in being reliant upon home-produced energy such as lies beneath our feet. However, I do not want that coal to be burned dirtily. I spent a great deal of my life in keen support of energy conservation and of conservation generally. I want to see clean coal technology.
I turn to the latest information available from the British Coal Authority, which has, I hope, adequately briefed my noble friend. The authority tells me—I hope that my noble friend will be able to confirm it because I would not claim in any sense to be a technologist—that a coal gasification plant which feeds a combined cycle gas turbine can produce the goods and can compete with renewables. The Greenhouse Gas R&D Programme of the International Energy Agency suggests that approximately £40 a tonne can be attained in going along the route of using equipment of the type that it envisages, whereas I believe that the Government gave a figure of £85 per tonne in relation to qualifying renewables.
I am a little uneasy about renewables. Sometimes programmes that appear to be very attractive are not very popular. They may be fashionable but they can also be harmful. I do not want to see local communities having to accept large wind farms which would spoil the view and would certainly damage their quality of life. I do not want to see large wind farms on the migratory routes followed by birds. I do not believe that people would wish to see huge bird mortality as the large windmill sails turn round.
We must go along the clean-coal route and we must go along a route which is sensible for our own nation's energy requirement. That is why I believe that we must ask the Government to do four things. First, they must urgently pursue the provision of a demonstration plant of clean-coal technology. In order to facilitate that development, they must ensure that action is taken very soon so that, for example, planning consents are obtained.
Secondly, we need to ensure that the Government, both in this country and in the review in Europe of energy requirements up to the year 2050, take more urgently into account the need not only to sustain the UK and European coal industries but the clean burning of that coal.
Thirdly, I believe that the Government need to understand that the economic opportunities are substantial. Therefore, in relation to the British mining engineering industry they should seek to ensure that adequate research takes place in engineering, technology and clean coal combustion. They should also ensure that the tremendous improvement in productivity in the British mining industry, which, as the noble Lord, Lord Ezra, knows, began years before Mr McGregor's time and has continued in an almost unimaginably powerful way in recent years, is maintained.
I come to my fourth and final point. In considering the matter of clean fuel, we should look to an early advance in the utilisation of coalfield methane. When one takes into account that it could very quickly provide one gigawatt a year of electricity at virtually no cost, prudence suggests that there is advantage in that field just as there would be wisdom and advantage in the pursuit of clean-coal technology.
My Lords, first, I congratulate my noble friend Lord Lofthouse on initiating this debate. It is a subject that he has followed for many years and it is still worth listening to him on this matter.
The question before us is: do the Government support the case for a cleaner coal demonstration plant? In 1968 I was Minister of Power, during the course of which I began to raise moneys for a research and development project to, it was hoped, develop a cleaner technology coal-burning plant. My ministry was strapped for cash. Therefore, I approached the Americans and, between us, we helped to finance research in Leatherhead to develop a fluidised bed concept—a cheaper, more efficient, cleaner coal-burning plant. The research proved sufficiently encouraging to sanction in 1975 an experiment at Grimethorpe Colliery near Barnsley to test its commercial and economic viability.
Foreign interests became involved—Americans and Swedes—and primarily a German and British consortium was involved. Work was carried out until 1985. Unfortunately, the consortium broke up and then the Central Electricity Generating Board and the British Coal Corporation carried out more test work. However, soon afterwards, the project closed down. We were in those days, in research and plant test development, ahead of the world.
Much of the interest in this work was taken up by ABB Carbon in Sweden. Since then, it has achieved a significant degree of development, and it has been applied to a number of demonstration and commercial power plants. This history has been a tale of failure to exploit an early UK technological lead due to official indecision and a reluctance in industry at that time to commit funds for investment. Therefore, today the market for pressurised fluidised bed combustion plant and related equipment is led by ABB Carbon.
A 1991 report, Clean Coal Technology and the Coal Market, by the House of Commons Select Committee on Energy highlighted the wrangling between British Coal, the Department of Energy and industry partners. The problem was still going on. My noble friend Lord Lofthouse was a member of that committee. On cleaner coal technology, the committee stated,
"that a prerequisite for a satisfactory UK clean coal policy will be significant assistance towards demonstration plants"— by that is meant significant financial assistance. I doubt whether the £4.3 million allocated to clean coal technology would satisfy that prerequisite.
What of the situation now? The DTI's recent paper, The UK Cleaner Coal Technology Programme, states that the policy is: to encourage cleaner coal technologies; to protect the global environment through the Kyoto Protocol; to respond to the Foresight Initiative, which is bringing together business, the science base and government, and to the emerging opportunities in markets and technologies; and to exploit the market potential.
That is where we are now; we have the Foresight Initiative and we are setting up panels and study groups and exploring opportunities. I ask the Minister whether we can catch up. We are facing considerable competition in this field. Can we even meet our Kyoto targets? Are the vast markets of China, India and North America being researched and tapped? Indeed, what have we to show in terms of practical technological development?
Words from the conclusion of the DTI's policy paper are not very encouraging. It states:
"Government support for demonstration is not"—
I emphasise that word—
"perceived to constitute value for money in a country with surplus coalfired capacity that is moderately efficient. However, the Foresight Taskforce has identified a case for demonstration after about 2005".
To the coal-mining industry, power plant manufacturers and all who are involved in research and development in this field, that is not very much encouragement.
I conclude by quoting from the House of Commons Energy Select Committee report of July 1991. That report, Clean Coal Technology and the Coal Market, states:
"Without Government assistance no demonstration plants will be built. Without demonstration plants, the United Kingdom's clean coal projects cannot proceed towards commercial implementation. Without commercial implementation, the United Kingdom's research and development in this field will have been largely futile".
That was said in 1991. I ask the Minister: how far have we advanced in the past 10 years?
My Lords, I am delighted to speak after three noble Lords who have played such an eminent part in the coal industry's long, illustrious and difficult history. I have to declare an interest. I have been actively involved in the energy sector since 1947 and have recently started a new company—one is never too old to start a new company—called Micropower, which promotes the small-scale generation of electricity. That is of some relevance to this debate.
As the noble Lord, Lord Lofthouse, pointed out in his emphatic and positive speech, cleaner coal technology has to be seen in a wider context. That wider context is currently being considered in the PIU energy review—it is that we as a country will shortly no longer benefit from the abundance of the North Sea. The noble Lord pointed out that the PIU estimated that if present trends continue, by 2020 we could be importing as much as 90 per cent of our increasing demand for gas. There will also continue to be a substantial—and increasing—importation of oil. In that circumstance we should think again about how we should in future resource ourselves in terms of energy. I hope that the PIU study will reflect that. That consideration has been dramatically heightened by the unfortunate events of 11th September.
The question of the role that coal can play in all of that has been much debated. The trend in the usage of coal has massively diminished. In my time in the coal industry, we were supplying up to 80 per cent of the coal used in power stations. The figure is now between 30 and 40 per cent. The DTI estimates that by 2010 the figure could fall to 15 per cent or lower, and could gradually fade out entirely.
In the new situation it must be asked whether that is sensible. However, there is another aspect to the matter; that is, technology. The way in which coal is currently used in power stations is based on pulverised fuel. That technology was developed some 40 or 50 years ago, and has not changed much since then. It is about time that we introduced a new technology for the use of coal in power stations. That technology is at hand through the cleaner coal processes and CO2 recovery. Those processes are now widely adopted—no fewer than 74 projects use CO2 recovery in the United States—and the resultant product that is combusted can be virtually free of CO2. That would put coal on the same basis as renewable energy. We would have in coal a new source of renewable energy and it would be available in unlimited quantities. Considerable skills are required to produce it but, fortunately, we still have them. As the noble Lord, Lord Lofthouse, pointed out, we should add to that the possibility of using recovered CO2 for enhanced oil recovery. The degree of enhancement can be as much as 10 or 15 per cent.
What an extraordinary combination of circumstances we now face. We are becoming short of the self-sufficiency from which we have benefited in the North Sea and we will have to depend increasingly on importing gas and oil. However, we now have an opportunity of looking once again at coal, which can provide us with a source of energy that is virtually free of CO2 and that CO2 could be used to enhance our rapidly diminishing oil resources.
That is not a pipedream. I turn to the report of the International Energy Agency. There are many enhanced oil recovery plants in operation, and the report mentions one; that is the Weyburn project in Canada. The report states:
"CO2 captured in a large coal gasification project in North Dakota, USA is to be transported 200 miles by pipeline and injected into the Weyburn field in Saskatchewan. Initially 5,000 tonnes per day of CO2 will be injected".
If a project of that sort, transporting CO2 by pipeline for such distances, can be undertaken, in our situation, where the distances are much less, where the need for enhanced oil recovery is much greater and where the need to find another source of energy that we can control is also greater, surely we should seize that opportunity.
Noble Lords have mentioned the long delay in getting ahead with cleaner coal technology plants. There has been a very long delay. I was much involved in the Grimthorpe project to which the noble Lord, Lord Mason, referred and I much regretted its closure. But now we must come to terms with the situation. I found the DTI consultative document on clean coal technology plants to be extremely good. I believe that it fairly states the position.
On 22nd October I attended a workshop that the department organised which looked at the matter closely. In my opinion, what came out of that workshop was that we should proceed with a demonstration plant of sufficient size—there is a project at Kellingley, for example, that could meet that requirement—to utilise the most advanced form of clean coal technology associated with CO2 recovery. That cannot be put in hand without some support. There was much debate about the form of support. The unanimous conclusion was that a direct injection of government funds into a particular technology was not desirable—it should be left to the market to decide—but that some framework of support was required.
As the noble Lord, Lord Lofthouse, mentioned, a clean coal obligation on similar terms to the renewables obligation would appear to be the most desirable way. That would put no costs onto the Exchequer; it would be borne initially by consumers who ultimately would benefit by the increased security that would arise from such processes.
I conclude by saying to the Minister, whom I know is sympathetic to these matters, that now is the time for decision. We have spent too long waiting. We now have a great opportunity, particularly in the light of the greater risks that we run in our energy supply in the future, to move ahead with a new technology that will bring an old form of energy back in a new form.
My Lords, I join other speakers in thanking the noble Lord, Lord Lofthouse of Pontefract, for having introduced this important and particularly timely debate and to say how much I have enjoyed listening to all the contributions from noble Lords who have so much experience in this area.
The debate is timely because recent events have again focused minds on the need for what is loosely called the West, and particularly the USA, drastically to reduce its dependence on oil from the Middle East. But the phrase "cleaner coal" is a contradiction in terms. It admits that coal by its very nature and composition is not clean. Coal is largely made from carbon, with the addition of oxygen and hydrogen. When it burns the carbon combines with its own oxygen and oxygen in the air to produce carbon dioxide—the infamous greenhouse gas—which inexorably produces an ecological disaster that will affect the entire world. It also produces in large quantities the poisonous oxides of nitrogen and sulphur, to which I shall refer again in a moment.
Burning coal produces another phenomenon of which we have heard little lately as global warming, rising seas and encroaching deserts have impinged themselves on the public conscientiousness. I refer, of course, to acid rain, which was, and presumably still is, decimating large areas of forest and grassland.
The dangers of burning coal are not well publicised or generally known. As long ago as 1975 a US Senate Committee on air quality reported that every coal-burning plant produces 25 deaths and 60,000 cases of respiratory disease as a result of the pollutants that it emits, and that is apart from the property damage those pollutants cause. That is why this debate about a cleaner coal demonstration plant is so very important and timely.
Coal, which is stable and the safest fossil fuel to transport and store, is in abundant supply. Unfortunately, I fear that even if the noble Lord, Lord Lofthouse, induces the Government to give more support to research into the development and use of cleaner coal, it may not do our domestic coal-mining industry much good. Increased coal consumption is likely to be supplied from countries where the extraction and export of coal, even allowing for transport costs, is cheaper than in the United Kingdom.
Three main types of clean coal technologies are used to produce material for the generation of electricity. I want to look at the Government's record in this area. In July 1998 the honourable Member for Wansbeck secured a debate in the other place on clean coal technology. In response the Minister for Science Energy and Industry said,
"I assure my hon. Friend that the Government support the development of clean-coal technology".—[Official Report, Commons, 22/7/98; col. 1081.]
That was in 1998. In 1999 Britain's leading share in this technology in the world market fell from 12.5 per cent to 11 per cent. In the same debate in the other place, the Minister said:
"Clean coal technologies have an important part to play"— in reducing the emission of greenhouse gases—
"We are keen to support cleaner coal technologies".—[Official Report, Commons, 22/7/98; col. 1081.]
Two-and-a-half years passed by and in a debate in the other place on 22nd November 2000, almost a year to the day before today's debate, the Minister for Energy and Competitiveness in Europe said:
"Several hon. Members have raised the issue of cleaner-coal technology . . . We are conducting an analysis and will do so in even more detail as we proceed with examining the technology". [Official Report, Commons, 22/11/00; col. 405.]
Have any of your Lordships ever come across a more meaningless piece of waffle? What does it mean? In that same debate, my honourable friend the Member for Bognor Regis and Littlehampton reminded the Minister that in 1996, when Labour was in opposition, they promised that Labour would seriously consider offering clean coal technology as part of the existing £400 million subsidy for renewable energy.
The extent of the Government's so-called serious consideration when they came to power was that they said that they would contribute to a £60 million portfolio of research and development projects over the next few years. I believe that that was a typical piece of creative bookkeeping, double counting and double speak. It is not £60 million from the Governments coffers. I quote from the DTI energy paper 67 which says that it is merely a contribution,
"forecast to generate projects worth £60 million".
The £60 million is revealed to be merely £12 million over three years. In other words, the contribution from the £400 million fund promised in 1996 when the Government were in opposition, boiled down first to £60 million and then down to £4 million a year for three years.
Between 1991 and 1997, the last Conservative government funded clean coal research to an extent that never fell below £6.8 million per annum and an average rate of £8.15 million. Between 1997 and 2001 the Government's expenditure was a maximum of £4.3 million and an average of a £3.2 million. As can be seen, the Government did not even keep their promise of £4 million a year. What the Minister told the other place was that,
"our ability to pay aid is constrained by fairly concrete rules and that means cleaner coal technology is not included. However, my Department funds research into cleaner coal technology and is anxious to see the maximum uptake of schemes that promote it".—[Official Report, Commons, 22/11/00; Col. 385.]
Those are fine words. That means, translating the gobbledegook, that the Treasury will not part with the money in the form of various forms of tax on fuel it claws from the pockets of motorists, householders and industry—tax that is being increased by the climate change levy, which the Government are clearly not going to use to reduce the output of noxious emissions by Britain and to help us meet our commitments under the Kyoto agreement.
I hope that when the Minister replies to the debate we shall hear less about the penny-pinching of the Treasury and more about tangible assistance to long-term investment in the environment, in supporting our shrinking coal mining industry and in making us less vulnerable to economic pressure, possibly in furtherance of the political agendas of oil producing states. Above all, I hope that we shall hear more about government support for an industry which once was a world leader, as the noble Lord, Lord Mason, remarked, in exporting technology, but which, as so frequently happens, is slipping down the world ratings due to apathy—I suppose that that is the best word to use.
I was heartened by the confidence that the noble Lord, Lord Ezra, felt after attending the recent workshop. I wish that I had also had the opportunity to attend.
My Lords, I welcome the opportunity for the debate given by my noble friend Lord Lofthouse. The noble Lord is a great expert in this area, as indeed were all the other speakers today. I am sure that the noble Baroness, Lady Miller, will not mind if I say that the only two people who are not world-class experts in this area are the two Front-Bench spokesmen. We have therefore had a very interesting discussion of this key issue.
It is a timely issue, as the Government are now nearing the completion of their review of the case for supporting cleaner coal technology demonstration plant. This review has been running in parallel with the Performance and Innovation Unit's review of wider energy policy. The PIU is due to report to the Prime Minister in December. The two review teams have been keeping in close touch throughout this process. I am sure that everyone appreciates that I cannot, therefore, in the light of these two reviews give definite answers today. I shall try to indicate the key issues and questions that need to be addressed.
It is for the PIU review to examine the extent to which the Government should be concerned about the likely future energy mix in electricity generation. We all recognise, and the matter has been raised a number of times today, that the security of energy supplies is a key objective of our energy policy and that that must be kept to the forefront. Whether or not there is a case for government to intervene to influence the components of the energy mix depends on the way the electricity generation market develops and how it meets the multiple objectives of cost, security and environment. I agree with my noble friend Lord Lofthouse that affordability is not the only criteria, although we should never underestimate that when we are talking about the very important issue of fuel poverty.
We shall wait to see what the PIU concludes on this question. I have no doubt that it will listen carefully to the arguments that have been advanced here today. I shall ensure that this debate is brought to its attention, in particular, the question of how content we are to depend on a large amount of our energy supplies coming from natural gas from abroad.
Our current projections envisage coal playing a part in electricity generation for many years to come, even without any specific intervention to rebalance the energy mix. Coal has many merits. It is plentiful and cheap. We have large indigenous reserves, although costs limit the extent to which those can be exploited. It is easy to transport and to store. Coal-fired power plant is a highly mature technology. Although much is already tens of years old, it can relatively easily and cheaply be refurbished, allowing the life of coal-fired plant to be extended to all intents and purposes indefinitely. I say to my noble friend Lord Lofthouse that whatever the Yorkshire Post may say, there is no question of the Government pulling the plug on the coal industry.
Against this, however, new coal plant is relatively expensive to build and operate compared to gas, even without cleaner coal technologies. That is why no new coal plant has been commissioned for many years and why it is unlikely that generators will commit to such new build in the foreseeable future while current price differentials hold. But even more importantly, coal has a big disadvantage in that it is not a clean fuel when it is used in conventional power generation. It emits a number of gases which, if not controlled, damage the environment. The Government are therefore committed to reducing or eliminating these emissions.
Under the Kyoto Protocol, the Government are committed to reducing greenhouse gas levels by 2008 to 2010 to 12.5 per cent below the levels in 1990. While we are broadly on course to meet these targets, a major reason for this is the switch from coal-fired to gas-fired generation over the past few years. CO2 emissions from gas plant are about half of those of conventional coal-fired generation.
It is clear from the points made by noble Lords today that there is a broad acceptance that if coal is to continue to play a significant role in the future, it will need to be used much more cleanly than now in terms both of acid emissions and of CO2. If there is to be a new coal build, it will need to involve cleaner coal technologies. If the existing coal-fired power stations in this country are to continue to play a significant part in the longer-term energy mix, they will need to adopt cleaner coal technologies over time.
There are already a number of measures in place to limit emission of sulphur dioxide and nitrogen oxides from coal-fired generation, for example, through the implementation of the Large Combustion Plant Directive. The environmental challenges of sulphur dioxide and nitrogen oxides are now largely manageable, albeit at cost, with technologies such as flu-gas desulphurisation to sulphur dioxide and selective catalytic reductions for nitrogen oxides. Flu-gas desulphurisation is already fitted or being fitted to some coal-fired stations here. But it is carbon dioxide that presents the particular challenge to coal.
In this respect there are two main technologies that can improve the efficiency and hence the carbon effectiveness of coal use. One strand involves supercritical and ultra-supercritical pulverised fuel boiler technologies. These technologies can offer 15 to 20 per cent CO2 savings in terms of the emissions per kilowatt hour of generation. They can also, at least in part, be retrofitted to existing plant.
The second strand depends on the gasification of coal and the processing of the consequent synthetic gas in an integrated coal gasification combined cycle or IGCC. This offers similar CO2 efficiency gains. It also offers the potential to produce high-quality streams of hydrogen which may be valuable for future use in fuel cells if and when these start to mature as a technology.
A third group of technologies, to which I shall turn later, involves the capture and storage of CO2 produced from coal plant. That can be applied to either of the main technologies. My noble friend Lord Hardy of Wath mentioned the potential of underground coal gasification as a possible future technology. That remains an area of interest, but it is widely recognised to be still at the research and development end of the scale rather than something yet ready for development.
In looking at the case for a cleaner coal technology demonstration plant, the department's review team has consulted widely with people in an variety of industries with a interest in using coal more cleanly. The team has established a steering group made up of experts who have met regularly over the past three months. In addition to this, the team has held a technical workshop, which the noble Lord, Lord Ezra mentioned and indeed was an active participant in. The team has therefore ensured that it has taken evidence from a wide variety of interests.
What is clear from the review is that the two main cleaner coal technologies—supercritical and gasification technologies—are already largely demonstrated in projects overseas, and much is already known about what works and what does not work in different practical applications. That suggests that there is unlikely to be a strong case for the Government to invest further to demonstrate these concepts. We also need to ask what role there is for government to support the construction of a new demonstration plant if it is unlikely, all other things being equal, that the generators would invest in new coal-powered methods in the medium term. It would seriously undermine the value to be gained from such a demonstrator.
The review team will be considering those issues in more detail as it brings its work to a conclusion in the coming weeks. That relates of course to the PIU report on the likelihood of coal fired generators in the future.
There is another strand to the issue. There are some technologies, largely in relation to supercritical pulverised fuel where there may be value in demonstrating components that can be relocated to existing plant rather than whole new plant. That suggests that there may be a case for the Government to look again at the scale of their research and development programmes to see whether a relatively modest increase in resources might produce real benefits. There are some UK technologies which, with some help or demonstration through to existing UK kit, may prove themselves to be of particular value in promoting their use in the UK and in supporting export sales to China and India, for example.
I was recently in China and one of the main issues that the Chinese Minister of Science wanted to discuss was how we could co-operate—indeed, we are co-operating—on clean coal technology and how to push that agenda further and faster forward.
The noble Lord, Lord Hardy, raised the question of economic opportunities. From the preliminary trip that I made, I believe that there are possibly substantial opportunities, but obviously that requires to be examined in more detail. If there is a lack of opportunity to demonstrate those components, that stands in the way of potential exports. It should then be a case for government help, which is a matter that the review team will be considering further.
The noble Lord, Lord Ezra, raised the question of carbon capture and storage. I wish to say something about that technology, which is of great interest. Given that CO2 is the most significant challenge facing coal use in the future, the review team also looked at the possibility of securing even more significant CO2 savings for carbon capture and storage. It is, in effect, a potential third technology that could be applied to either supercritical or IGCC plant. It would increase the carbon saving from 15 to 20 per cent to as much as 80 per cent. I think that the noble Lord, Lord Ezra, said that he thought that all the CO2 could be recovered. A substantial amount but not all of it can be recovered.
Capturing the CO2 and locking it away underground in depleted oil reserves, for example, offers potentially the prospect of a material saving in the carbon impact of coal. It could also have added advantages in the medium term in that the CO2 could be used to help in the recovery of oil in our declining North Sea oilfields. Evidence to date indicates that CO2 can be used to flush out some of the oil that it would otherwise not be possible to extract. The oil companies have an interest and in the longer term we might be able to use the depleted North Sea reserves to lock away the CO2. A great deal of work still needs to be done in this area.
The team will also look at measures that might be taken to create an incentive to make carbon savings from coal use. The noble Lords, Lord Lofthouse and Lord Ezra, raised the question of a cleaner coal or sustainable energy obligation, which is a possibility. But we need to think carefully about the right mechanisms to create incentives in industry.
Your Lordships will understand that I cannot give precise answers to a number of questions until we have the outcome of the PIU's review of energy policy and my department's review of the case for supporting cleaner coal technology demonstration plant. These matters should be much clearer early next year when both teams have published their reports. I know that both teams will reflect carefully on the many points that have been made by noble Lords in this interesting and informative debate tonight. I am sure that it is a subject to which we shall return in due course.