Q3 2024: After kicking out coal, what comes next will be harder

The UK’s end to over a century of coal power is commendable; however, it cannot rest on its laurels. Its economy is still dependent on coal, which is used in industry and heavily embedded in the things we import. Coal is also not the only fossil fuel to worry about, for the power sector still relies heavily on gas to meet demand. So what is next for the UK? Not just in reducing its coal dependency, but in delivering a net-zero power sector.

Getting to zero coal

In 2023, UK industry consumed 3 million tonnes of coal. This was twice the amount used in power stations, but it has fallen more than 10-fold in a decade, and is just 1% of what was used in the 1950s. Around half of industry’s coal consumption is in coke ovens and blast furnaces to produce steel. UK steel has been in decline for decades. In 1970, the UK was the fifth largest steel producer, but now it has fallen to 28th (behind Belgium). Only two coal-consuming blast furnaces remain in the UK at Chinese-owned British Steel’s Scunthorpe mill, following the closure of Tata Steel’s Port Talbot mill in September, but these may too close down by the end of the year. Both Tata and British Steel plan to replace their blast furnaces with electric arc furnaces, as the remaining steel industry moves towards a greener future.

The government has not yet announced a firm deadline to eliminate coal from all sectors, but its Industrial Decarbonisation Strategy will work towards this by promoting hydrogen and electrification for industry. The writing may already be on the wall, as economy-wide coal consumption in the UK has fallen by 23% per year over the past decade.

The UK’s coal consumption and exports over the last hundred years, split by sector.

The UK has partly reduced its emissions by offshoring the most energy-intensive industries, instead relying on imports. Around one-third of the UK’s carbon emissions come from imported goods. Many imported products come with a heavy coal content, as they are produced with coal-rich Chinese electricity. Carbon pricing plays a key role in decarbonisation but does not yet apply to imported products. The Carbon Border Adjustment Mechanism (CBAM), due to be introduced by 2027, is designed to ensure that embodied carbon emissions in imports are charged at the same price as domestic production, incentivising cleaner production abroad. Yet, critics of the CBAM point to higher prices for consumers and argue that it is unfair, shifting climate responsibilities onto countries with lower historical responsibility.

The elephant in the room: getting rid of gas

The Government is aiming for 100% clean power by 2030 – the most ambitious target of any G7 nation – although the enormity of this challenge has led to questions over its feasibility. The new NESO currently defines clean power as being 95% from clean sources, with the remaining 5% from unabated gas. The UK needs to reduce its share of gas from around 25% to 5% in just six years. This means bulk energy generation must rapidly wind down, but provides some leeway for gas to provide essential balancing services via flexible gas turbines.

Share of the UK’s electricity demand from fossil fuels, with the trajectory from 2024 to 2030 needed to meet the Government’s expected definition of clean power.

Phasing down gas will be much more difficult than it was for coal. Coal was replaced partly by gas, which can operate flexibly according to demand. Now, however, gas is displaced largely by wind and solar which require other technologies, like long-duration energy storage and dispatchable thermal power, to maintain flexibility as they approach high shares. Connecting electricity generated by distant renewables to the regions that use it also requires vast grid upgrades. An alternative is to fit gas plants with carbon capture technology, allowing them to operate as before but with greatly reduced emissions. Both options require considerable investment, hence the Climate Change Committee note that the costs of decarbonisation escalate rapidly as you approach 100% clean power. The challenges are made more difficult still, as demand for electricity is expected to increase by 50% by 2035, requiring more capacity and greater flexibility to cope with bigger swings.

The target of 95% clean power by 2030 requires a rapid scale up of renewables. The Government’s CfD scheme is instrumental to this transition, with the September auction delivering a record 9.6 GW of capacity. Yet, only 3.4 GW of this was new offshore wind capacity, meaning the next auction must deliver five times more capacity (16.6 GW) to meet the Government’s target for 55 GW of offshore wind by 2030. The UK’s progress towards its net-zero targets should be applauded, as should the new Government’s ambitions to accelerate future progress. Major challenges lie ahead in delivering clean power and in decarbonising the wider economy, but the UK must lead by example as it encourages other nations to follow suit at COP29.