The market forces that pushed coal offline for five days in April
3rd May 2018 | Commercial Energy
April 2018 saw three consecutive days without coal-fired power generation, from 10:00 on 21st to 13:30 on 24th. This record run came in a month that also had a two-day period without coal, from 16th to 19th.
The UK carries an uplift to carbon prices that amounts to around £18 per tonne of CO2 and this is added to the normal cost of carbon that applies across Europe to create a higher carbon price within UK shores.
This originally controversial uplift was originally brought in to fix an otherwise failing European carbon price (EU ETS), and has continued in recent years to do so, with the cost of carbon in Europe still languishing at around £4 per tonne of CO2 twelve months ago in April 2017.
Outside of the UK this made it possible to generate electricity at high-carbon emitting sources of power, such as lignite and coal, without incurring much of a disadvantage in terms of carbon costs, ensuring tha commodity prices rather than carbon prices defined the fuel mix.
The EU ETS price originally peaked back in 2011 at around £15 per tonne of CO2, but quickly saw values decline to a low of less than £3 by 2013: with a recovery through to the end of 2015 ending after failures to fix the scheme.
The activity in the past 12 months has, however, seen a major change in fortunes, with the cost of carbon rising to £12 per tonne of CO2. This, combined with the UK-only uplift, creates a huge disincentive to generate electricity from coal sources. The current situation has been driven by reforms designed to remove any excess supply of carbon permits from the market, and along with the growth in renewable power generation within Britain proved to be a key force behind the three consecutive coal-free days seen in April 2018.
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