industry

The UK ditched coal and left itself with a new set of challenges


By kicking its coal habit, the U.K. has charted a route for the U.S. and other nations seeking to reduce carbon emissions. British governments made it prohibitively expensive to burn coal while prodding investors to plow tens of billions of dollars into renewables, energy executives and financiers say.

The U.K. has also drawn attention to challenges countries can encounter—and errors they might commit—when weaning themselves off fossil fuels. Chief among its missteps: The government replaced coal with a mix of natural gas and wind turbines, but kept almost no gas in storage, assuming importers could buy as needed in the international markets. A global gas shortage and unusually light winds have created a surge in energy prices that now threaten the country’s economic recovery from Covid-19.

Millions of households are bracing for a difficult winter of rising energy bills. So are companies in the steel, cement, glass, paper and chemical industries. Shortfalls of gas and power have prompted factories to throttle back production, deepening supply-chain problems and increasing prices for customers.

The energy squeeze is unfolding before world leaders negotiate plans to limit climate change at the United Nations conference in Scotland starting later this month. Scientists say that reducing emissions to the levels required to keep global temperatures from rising more than 1.5 degrees Celsius from preindustrial levels—a key goal of the conference—will require effectively eliminating coal-generated power.

The Glasgow conference is a chance for Prime Minister Boris Johnson to showcase the U.K.’s transition. So it was an awkward moment for the British hosts when utilities in the country recently fired up a handful of idle coal plants after winds died down and gas supplies ran low.

Coal generated less than 2% of electricity in the U.K. in 2020, according to International Energy Agency data, compared with a fifth in the U.S., a quarter in Germany and almost a third in Japan. Surviving U.K. coal power stations have orders to close by late 2024.

Mr. Johnson has said the drive to cut emissions could rejuvenate the economy, particularly in struggling towns such as Blyth that were Labour Party strongholds until he flipped them Conservative in 2019.

The evidence is mixed. Blyth, just north of Newcastle, is home to a growing number of companies in the renewable and battery industries, but thousands of secure jobs lost when coal mines closed are yet to be replaced. Unemployment here is higher than in the U.K. overall and the town’s main drag is peppered with closed shops and discount stores.

“When the pits went, it all went,” said David Jones, a local teacher.

Coal has been mined in Blyth since at least 1315, when monks dug up and burned the fuel to make salt, said Maureen Patchett, head of the Port of Blyth archives. Workers sank the town’s first deep pit in 1794.

Seams of coal, like those running under Blyth, helped Britain launch the industrial revolution. The coal enabled blast furnaces, railroads and steamships that patrolled trade routes through the British Empire.

Coal also brought noxious clouds that gave London the moniker the Big Smoke. When George ventures north in Charles Dickens’s Bleak House, “coal pits and ashes, high chimneys and red bricks…and a heavy never-lightening cloud of smoke become the features of the scenery.”

Coal was Blyth’s lifeblood until Bates Colliery, the town’s final pit, closed in 1986 after a labor dispute with Margaret Thatcher. More than 200,000 people employed in the coal industry in northern England, Wales and elsewhere would lose their jobs in the coming decades. Towering chimneys at Blyth’s coal power station came down in 2003. A wind turbine took their place in the skyline.

Ronnie Campbell first descended into Bates for the 3:15 a.m. shift as a 16-year-old in 1959 and led the walkout there during a nationwide miners’ strike in the mid-1980s. Now the former member of Parliament supports the energy transition. His son works on turbines at sea.

“I’m all for the wind farms,” Mr. Campbell said. “You shouldn’t send human beings down the pit digging coal when there’s other stuff available that’s environmentally friendly.”

The Port of Blyth, Europe’s biggest coal exporter as of 1961, has become a one-stop shop for the offshore energy industry. Vessels pick up equipment manufactured by companies based in the port before sailing off to build wind farms.

General Electric Co. said its Danish subsidiary LM Wind Power plans to build blades destined for Dogger Bank wind farm off the coast of Yorkshire at a new factory south of Blyth in Teesside.

One potential employer is Britishvolt Ltd., which is building a car-battery factory on the coal yard at Blyth’s defunct power station. The startup raised £15 million from commodities giant Glencore PLC in a funding round that valued it at about £800 million, or $1.1 billion, according to people familiar with the matter. The company is seeking £200 million in grants and loans from the U.K. government, some of the people said. Britishvolt has said the factory will employ 3,000 people.

Nationwide, the shift to renewables could create up to 150,000 power-sector jobs by 2030, according to a 2020 paper by Theodoros Arvanitopoulos of the University of East Anglia and Paolo Agnolucci of University College London.

The U.K. has cleaned up its power industry more quickly than nearly all advanced countries. Carbon emissions from power generation plunged from 204 million metric tons in 1990 to 45 million metric tons in 2020, according to the government’s climate advisers.

Gas has taken coal’s place as the workhorse of the British grid, and renewables are catching up. Wind provided almost a quarter of electricity last year.

The decline of coal initially had nothing to do with the environment. Nuclear power chipped away at the fuel’s dominance starting in the 1950s, when governments wrongly assumed reactors would be cheaper and more efficient than coal. Abundant North Sea gas further curtailed coal use in the 1990s.

The final blows came this century, when the government enacted tougher pollution rules and raised prices for the permits required to burn fossil fuels. Coal-fired plants became uneconomic for utilities, which scrapped plans for new stations and wound down existing ones.

“The driver for renewables was a carbon price, a clear carbon price,” said Alistair Phillips-Davies, chief executive of SSE PLC, a utility that closed its final coal power plant last year and began laying onshore cables for the Dogger Bank wind farm this summer.

Renewables got a boost when the government encouraged utilities, banks and investors to sink money into wind, solar and hydro power. Under an auction system, developers of renewable projects compete to be paid a guaranteed rate for electricity for 15 years. With those contracts in hand, they won over bankers and other investors who could now confidently predict their profits.

A gush of capital entered the market, technology improved and the cost of offshore wind power plunged. Consulting firm Wood Mackenzie estimates that €4.2 billion, equivalent to $4.89 billion, was invested each year on average into new offshore-wind capacity between 2011 and 2020 in the U.K. Measured in 2021 terms, that figure will rise to €7.3 billion between this year and 2030, the firm forecasts.

Blyth is reaping benefits. A 107-meter-long (about 350-foot-long) blade made by a unit of GE—the longest in the world—was put through its paces this summer at Blyth’s Offshore Renewable Energy Catapult, a portside research center that stress-tests turbine components to show…



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