COAL - SUSTAINING POWER OVER THE CENTURIES

     the uk coal mining industry over recent years has made great strides to improve its productivity and reduce its cost base. UK coal production is the lowest cost within Europe and with the recent increase in world coal prices is currently competitive with imported coal delivered into inland UK power stations.

     Over the last 18 months, the UK has seen sustained high demand for coal in the power generation sector 2000 saw coal consumption at UK power stations rise by almost 14% to 46 million tonnes, and in the first fout months of 2001 there has been a further increase of 24% over the same period a year earlier.

     This increase has been driven by high gas prices, interruptions to gas supply and the poor performance of nuclear units. Coal generators and UK producers have been able to respond to this increased demand by the lifting of coal stocks as well as significantly increasing imports. UK suppliers and generators together can safely and easily hold several months fuel supply in stock. This option is not economically available to oil or gas generators.

     Despite the rise in gas prices, consumers have reaped the benefit of increased coal burn with a continued fall in electricity prices. This has benefited industrial competitiveness and helped alleviate fuel poverty, both major objectives of the UK Government.

     The UK is rapidly moving away from a position of being self-sufficient in energy to becoming more reliant on imports of oil and natural gas.

     The EU is also concerned over rising energy imports and has published a Green Paper on Security of Energy Supply. One proposal contained within the document is to enter into long-term energy contracts with Russia to supply gas. Coalpro believes this will reduce diversity and security and is not the way to proceed.

     Coalpro believes that it is only coal that provides real diversity in the geographical spread of resources, although the recent consolidation in world coal producers could lead to a continued upward pressure on prices.

     The UK has at present a diverse energy mix with nuclear, coal and gas holding major shares. Coalpro believes that the benefits of this diversity should not be lost. It has been suggested that one of the outcomes of the current Energy Review could be a programme of nuclear build which would probably need some form of support. In our vision for the longer term, the potential for new mines coupled with clean coal technologies and carbon capture and storage should be no less credible.

     There is, however, a grave danger that decisions made now may preclude coal from the long-term energy mix. Coalpro believes that the Government needs to develop an energy policy framework which is flexible and does not foreclose options for future years. Coal and in particular indigenous coal can provide a competitively priced long-term secure and flexible energy source which can only be of benefit to the UK consumer.