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There is not enough stability coming from the European energy policy
Brian Ricketts, Secretary-General of EURACOAL
AUTHOR: Atanas Georgiev

The interview with Mr Ricketts will also be published in the next issue of the Bulgarian Utilities magazine

Mr Ricketts, what are the main activities of EURACOAL and who are the members of your organization?

We have members from 20 countries across Europe and we extend even out of the borders of the EU, because we have members in Bosnia-Herzegovina, Serbia, Turkey and Ukraine. We have 35 members in all. Some of the biggest members are lignite producers – for instance in Germany where we have one of our biggest members. We also have the Polish Hard Coal Association, which represents a very large and important industry in Poland. And we have members as well in the UK, the Czech Republic, Bulgaria of course, Romania – all with the interest in ensuring a future for coal in Europe.

We have an Energy Policy Committee, an Environment Committee, a Technical Research Committee, and a Market Committee. Each of them examines the different aspects of the coal world. We have some members who joined just because we are very strong in technical research – we form joint projects which then apply for different funds for research work.

What is the current position of coal in the EU’s power production and what are the forecasts for its development?

The forecasts always look quite grim, with a projected decline of the use of coal in Europe. The forecasts have been grim for the past years but the fact is that coal trade is still buoyant with still strong demand in Europe. I mentioned in my presentation during the conference, organized by the Bulgarian Energy and Mining Forum, that Germany is the world’s largest producer of brown coal. At the same time it is going through the Energiewende and is closing nuclear plants, so it still depends on coal and could not survive without the lignite.

This is true about some other countries as well where brown coal is the cheapest source of electricity. The forecasts do not look good because the European Commission has to produce forecasts with particular CO2 emission targets, but the reality is that the targets will be tough to meet and as I explained in the conference, the easy way to meet them is through more fuel switching away from coal, which will make Europe more and more dependent on expensive imported gas.

The European Commission is discussing the new climate and renewable energy targets. What will be their effect on the coal sector?

They will be tough and what it means is that people will be very reluctant to invest in power plant modernization, which is needed in many of the Eastern and the Southeastern Europe member-states. I travel around and I see power plants that have clearly passed their best years and could quite economically be replaced, but this needs certainty in order to justify the very high investment. We witnessed in the conference today that there are some who question the existing power purchase agreements for the new plants in Bulgaria. That attitude adds to the investment risk, which is not good. Anything, which increases the political risk for investing in assets which have to earn their money for the next 25 years at least is a disaster for coal. These are not short-term investments – they need stability. Yet there is not enough stability coming from the European energy policy and those who are still investing are very brave people.

And here is an example – ten years ago much had been promised in terms of free allowances under the EU emissions trading scheme. The German government promised utilities free allowances and they invested in more efficient coal-fired power plants. This promise, which was written down in letters from the ministry, now filed away in the companies – RWE, E.ON, etc. – they all invested in new coal power plants which are coming online now. And they are fine plants – very flexible, capable of balancing renewables, very efficient, a lot more efficient than the old plants that they replaced, but those free allowances never came. So they were bribed with a false promise to build and are now very cautious about future investments in Europe.

As it turned out, their past investments were good, because those plants now run at base load and earn good money, competing well against gas, but the companies would not have made these investments without the promise from the government. Each plant is worth a billion to a billion and a half Euros and they cannot make such investments without solid contracts. And even if they got lucky in Germany, the trouble is that now other countries need such investments as well and it is getting more and more difficult to make new investments. The political cycle is also getting shorter in many countries, for example in Bulgaria, so there is a lot of uncertainty. But you have some very good power plants and I think that Turkey needs more electricity and Bulgaria can be there ready to supply it.

The power plants in the Maritsa East basin – especially the AES plant and the ContourGlobal plant – are fine examples of what we consider to be “clean coal technology” with emissions significantly lower than in the past. They do a fine job at Mini Maritza and with a little more investment they could do even better and even grow.

There was some other movement in the European market as a result of the cheap shale gas in the USA, which pushed coal over the Atlantic. What are the effects on your members and on the power market in the EU?

The global coal market is massive – one billion tonnes, and the United States is a small part of it. In the 1980s Europe relied on coal from the USA. People forgot about that in the recent years and were surprised when those imports started again. In the years after the 1980s, Europe imported from other sources as well – South Africa was a major exporter to Europe in the 1990s and today it is not, because India is closer to them and pays higher prices. Today most of our coal is coming from Russia, Colombia, and the USA.

It is a nice story to say that the US shale gas glut pushed US coal into the export market, but US coal miners are high up the cost curve, so if prices go down, they may very quickly leave the export market. They are very market-responsive and shut down mines very quickly, faster than in Europe. Now coal prices are moderating, so I would expect them to leave the market again. We do not know how the coal market will be in the future, but it is a global one and coal moves all over the place. In the end, global markets and economics will define who exports to Europe.

And what will be the effect of the current gas supply security concerns in Europe? Do you expect this issue to be a push for coal as well?

The European Commission made only a passing reference to coal, despite the fact, that coal supplies about 28% of Europe’s electricity. I was at a conference in May and Donald Tusk was the only person there who mentioned coal positively. It was in President Barroso’s speech, but he read the sentence so quickly, that even I as an English speaker missed what he was trying to say – but it was about clean coal technologies and the importance of CCS – carbon capture and storage.

The energy commissioner, Guenther Oettinger, and others have put far more effort into the “sexy” business of negotiating gas deals and gas pipelines – trips to Azerbaijan and elsewhere have been with higher priority than coal. But if you look at the gas we are talking about – there is not so much really. Europe needs hundreds of billions cubic meters annually, but these projects do not supply so much. Europe has to decide where it is going to get its energy from in the future. I explained at the conference in Sofia that renewables are nice to have, but they look like a second system on top of the existing reliable system with its combination of things like fossil fuels, nuclear, etc.

There were some pilot projects for CCS in the EU. Is there a future for this technology in Europe?

There have been pilot project in the European Union, one of them is at Jaenschwalde, others as well. There is one operating in France at Le Havre. Elsewhere in the world there are commercial-scale CCS plants, which are now operational. The Boundary Dam project in Canada, there is one in Texas – a lignite gasification plant at Kemper County. So there are examples now of large plants with CCS. In the case of those two in North America, they are linked to enhanced oil recovery, because the CO2 is used to recover oil from oil fields in Texas and Alberta.

There was a hope, years ago, that the North Sea would go the same way – because the oil fields are reaching the end of their life or primary production, but the technical challenges of doing so offshore are quite significant. But it still remains a possibility. Also in Europe there are two projects which are still progressing and looking good – the White Rose CCS in the UK and the ROAD (Rotterdam Opslag en Afvang Demonstratieproject) project in Rotterdam. So Europe still has a chance to catch-up. Five years ago it had the ambition to be the leader in CCS – with 12 demonstration projects. Maybe this was too ambitious, maybe two European projects will be enough. And two would be more than none – as is currently the case, which is bad news, because the Commission and some member-states have highlighted the importance of CCS in meeting climate targets. One of the reasons for none in Europe is, of course, cost.

Mr Brian Ricketts is the Secretary-General of EURACOAL – the European Association for Coal and Lignite, since August 2010. Prior to joining EURACOAL, Mr Ricketts worked at the International Energy Agency, which he joined in 2005 as a coal analyst in the Energy Diversification Division of the Energy Markets and Security Directorate, later spending time in China in 2007/2008 to author the IEA’s “Cleaner Coal in China” publication. His work at the IEA was preceded by UK Coal which he joined in 1997as a project engineer working on a new integrated gasification combined cycle (IGCC), which included political lobbying. This followed a position at Alstom, which he joined in 1987 and where he was responsible for dynamic modelling of power systems. Mr Ricketts is a chartered mechanical engineer and holds an MBA from the Open University.

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