Energy Companies Choose Coal Over Gas To Generate Electricity

The Government is keen to move to a low carbon economy but it seems that while power from sources of renewable energy has increased the rise in the price of gas has seen energy companies move from gas power generation to coal fired power generation.

In the first quarter of 2011 green energy accounted for 27% more electricity generation in Britain compared with the same period last year but energy companies were using 7% more coal to generate electricity compared with last year.

commercial electricity rates

While the Government’s plans of increasing low carbon generation was helped by an increase in output by renewable energy and nuclear power, the figures were not helped by a move from gas fired power to coal fired energy generation. Department of Energy & Climate Change figures show that the use of gas fell 20% in the first three months of the year.

Both domestic and business electricity prices have increased over recent months a move which has been blamed on an increase in the price of wholesale gas.

It’s thought that owners of coal fired power stations are benefitting from the fact that coal is cheaper than gas at the moment and it seems they are trying to beat carbon restrictions which come into place in 2013. A new floor price for CO2 is set to be introduced by the Government in the energy bill which will increase the amount companies have to pay for using high carbon fuels such as coal.

Coal generation in the UK has also increased by 31% in the first quarter and there was an 80% increase in deep mined coal. These increases have been put down to an increased demand from utility companies who have turned to coal.

It’s believed coal fired plants are being used as much as possible before they are forced to close or before they become more expensive. Others argue that the use of coal fired power stations has increased because British Gas has temporarily closed some of its less efficient gas fired power plants.

However, British Gas has said it has not bought any extra electricity from Drax – its supplier of coal generated electricity. ScottishPower said it was not generating any extra electricity from its coal fired power stations.

While green energy generation has increased, the amount generated by onshore wind farms actually dropped by 6% and this was blamed on low average wind speeds. Utility Exchange reported at the beginning of the year that during the coldest period of December when more energy was required many onshore wind turbines were not generating because there was no wind.

If it’s true that there’s an increase in the amount of electricity generated by coal fired plants because it’s cheaper, then why are increasing domestic and business electricity prices blamed on the rising price of wholesale gas? However, it could be argued that electricity prices may have increased even more if coal fired generation hadn’t been used.

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