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White paper  |  November 2017

European coal: the beginning of the end?

New Dutch government eyes coal phase-out by 2030 Coal phase out status
Coal plant closures could buoy Dutch gas demand
No phase out plans
Planned legislated phase out by 2030
Italy to end power sector coal use in 2025 Likely economic phase out by 2030
New gas capacity will be needed Has no coal capacity

Gas plants could replace UK coal fleet

Single Irish power market to phase out coal by 2030

Spanish coal could close despite government back-


ing

Portugal eyes 2030 coal power phase-out

Austria will phase out coal before 2020

Finland to impose carbon tax to phase out coal

Coal closures to weigh on ETS demand

Coal closures to boost European wood pellet demand

Coal imports rise but long-term outlook remains bleak

In 2015, the UK was the first European country to an- and this could become policy depending on the coalition
nounce that it was would end generation at coal-fired negotiations. While Germany looks unlikely to halt coal
power plants by 2025. generation entirely, it should also see a shrinking share of
Since then, governments in the Netherlands, France, generation over the next decade regardless of the coali-
Italy, Portugal and Finland have all announced that they tion outcome.
intend to legislate to end coal-fired generation by 2030. This leaves a clear divide between western and eastern
Other countries will stop burning coal to generate Europe with little indication that the public in Poland,
power before 2030 without legislation as the economics Czech Republic or Bulgaria - the three lignite generators -
of operating plants and investing in new technology look would back the phasing out of lignite-fired generation.
unattractive. Some of the retiring coal capacity looks set to be re-
Talks about forming a coalition of the CDU, FDP and the placed by gas but renewables, particularly offshore wind,
Green Party in Germany are ongoing. The Green Party is are increasingly competitive. Biomass may also play a role
pushing for the early closure of more German coal plants in some countries.

Market Reporting
Power Consulting
illuminating the markets Events
Argus news and analysis White paper  |  November 2017

European hard coal plants

Power output (Mw)


10 300 500 800

SWEDEN

FINLAND

FAROE ISLANDS

NORWAY
ALAND

ESTONIA

LATVIA
DENMARK

LITHUANIA

IRELAND BELARUS

POLAND
GERMANY
BELGIUM
LUXEMBOURG UKRAINE
GUERNSEY CZECH
JERSEY REPUBLIC
SLOVAKIA

AUSTRIA
HUNGARY MOLDOVA
FRANCE
ROMANIA
CROATIA

SERBIA
ITALY
KOSOVO BULGARIA
MONTENEGRO

PORTUGAL ALBANIA

SPAIN
GREECE

MALTA

Copyright © 2017 Argus Media group Page 2


Argus news and analysis White paper  |  November 2017

New Dutch government eyes coal phase-out by 2030 level for the minimum price or the timeline for its introduc-
The new Dutch government plans to close all remaining tion.
coal-fired power plants by 2030 at the latest and is looking The government plans to accelerate the country's
at introducing a minimum price for CO2 in the power sec- wind and solar power expansion and to expand support
tor, under a coalition agreement published on 10 October under the country's SDE+ auctions to other CO2-reduction
The government wants all remaining coal-fired plants technologies such as carbon capture and storage (CCS).
in the country to close by 2030 at the latest, it said in the Government support for biomass co-firing projects involv-
coalition agreement. This is a departure from the previous ing coal-fired plants will be withdrawn from 2025, under
government's position, which in January said that it does the coalition agreement.
not plan to force the shutdown of any additional capacity
beyond coal-fired plants with an efficiency below 40pc. Coal plant closures could buoy Dutch gas demand
Coal-fired power plants with a combined capacity of The Energy research Centre of the Netherlands (ECN) had
4.6GW are still operational. This includes four units with a said in July that a quick coal phase-out throughout the
combined capacity of nearly 4.1GW that have high efficien- next decade could raise Dutch gas demand, which is other-
cies of 46pc and only came on line in 2015. wise expected to decline sharply.
Prime minister Mark Rutte's centre-right VVD party Lower household demand as well as reduced consump-
has reached a coalition agreement with the CDA, D66 and tion from the industrial, agriculture and service sector is
Christenunie parties after lengthy negotiations in the after- expected to curb gas burn in the next two decades, ECN
math of general elections in March. had said.
The new partners agreed to implement a national But assuming a shutdown of all coal-fired plants in the
climate and energy law that will aim to reduce Dutch next decade could allow for aggregate Dutch demand to
greenhouse gas emissions by 49pc in 2030 against a 1990 remain above 350TWh by the mid-2030s while it could
baseline for now, subject to upward revisions should the otherwise fall below 280TWh by 2035, it said.
EU adopt tougher targets, under the coalition agreement. In the shorter term, the introduction of a minimum
The new coalition government estimates that the Neth- price for CO2 could also support power sector gas burn,
erlands will have to cut an additional 56mn t CO2 equiva- making gas-fired power plants more competitive with their
lent (CO2e) by 2030 relative to the status quo to achieve coal-fired counterparts.
the 49pc reduction, which includes a further 20mn t CO2e The Netherlands will become a net gas importer by the
cut in the electricity sector. The new government will start mid-2020s, according to the country's 2017 National Energy
negotiations with each sector regarding the timetable of Outlook (NEV) published on 19 October.
emissions cuts when drawing up the national climate and A decline in domestic production will outpace reduc-
energy agreement, it said. tions in gas demand in coming years, the Energy Research
The new coalition wants to introduce "a minimum price Centre of the Netherlands (ECN), statistics agency CBS and
for CO2 for the electricity sector" to incentivise emissions the country's Environmental Assessment Agency (PBL) said
cuts. The coalition agreement does not detail the planned in a study for the Dutch economy ministry.

European coal capacity closed so far MW Proposed European coal plant closures MW

8,000 25,000

7,000
20,000
6,000 7,180

5,000 15,000 768


670
4,000
6,262 22,545
10,000
3,000
1,700
2,000
5,000 2,420
1,000 2,731
0 0 814

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2030 Total

Copyright © 2017 Argus Media group Page 3


Argus news and analysis White paper  |  November 2017

The organisations lowered their forecast for domestic Calenda said at the time Calenda that it would result in
production compared with last year's NEV, largely because stranded costs for plant operators because some facili-
of the further cut to the Groningen production cap for the ties would be closed before complete amortisation of the
2017-18 gas year. Offtake from the field will be restricted initial investments. The stranded costs are hard to quantify,
to 21.6bn m³ in October 2017-September 2018, down from Calenda said.
24bn m³. Higher output is permitted in the event of cold
weather. New gas capacity will be needed
The NEV expects gas fired generation to decline consid- Lower coal-fired capacity will have to be replaced with
erably because of rising renewable output but completed combined-cycle gas turbine and open-cycle gas turbine
its studies before the coalition announced the coal phase capacity, according to proposals under the strategy. Terna
out plan. has said Italy should increase gas-fired capacity by at least
1GW to guarantee flexible dispatchable capacity without
Italy to end power sector coal use in 2025 destabilising the Italian system. But a complete phase-out
Italy will hasten the phase-out of coal from the generation by 2030 would require another 2.4GW of gas-fired capacity
mix and end all production from coal-fired plants by 2025, and another 1GW interconnector between Sardinia and the
economic development minister Carlo Calenda said on 24 mainland, according to the strategy. This suggests that a
October. 2025 scenario would require further investment. Replacing
Public consultation on the new national energy strat- coal only with renewable capacity does not seem possible,
egy highlighted the need to accelerate the decarbonisa- Calenda said.
tion of Italian power system, Calenda said. The government
will support a target of 2025 for the phase-out of coal- Gas plants could replace UK coal fleet
fired power. It will require grid operator Terna to report The UK plans to halt unabated coal generation by the end
on all the necessary infrastructure needed to achieve the of 2025, according to plans announced by the government
phase-out without threatening the power system’s safety, in 2015.
Calenda said. But the mechanism for enforcing this is not yet clear
Careful action will be needed regarding the decom- and the government has not presented legislation to
missioning of Italian utility Enel’s 2.4GW Brindisi South and parliament.
1.8GW Torrevaldaliga North plants as well as the 432MW The UK has around 13.5GW of operational coal capacity,
Sulcis facility and Czech utility EPH’s 534MW Fiumesanto of which roughly 10.2GW is contracted under the govern-
plant in Sardinia, he said. Italy has about 8GW of installed ment’s capacity market regime for winter 2017/18.
coal-fired capacity accounting for around 15pc of national Utilities are considering replacing some of the retiring
generation, according to the national energy strategy. coal capacity with new gas power plants.
The first proposal under the strategy — that all coal- Drax said in June that it was considering converting
fired plants be closed by 2030 — was outlined in parlia- its coal capacity to gas. Coal-fired units 5 and 6, with a
ment in May. The 2025 scenario was also considered but combined capacity of around 1.3GW, are the focus of a
coal-to-gas research and innovative trial. Power plants
European installed coal capacity MW
built on existing sites have the advantage of using existing
grid connections and infrastructure. This can cut construc-
25,000 tion times and makes a project likelier to receive planning
permission. If converted, the new gas-fired units would be
20,000 eligible to apply for 15-year capacity market contracts, the
utility said.
15,000 Drax’s 645MW unit 4 at its Selby plant — registered un-
der the Renewable Obligation subsidy scheme, although
10,000
not grandfathered — is undergoing separate coal-to-bio-
mass trials, but the outcome is uncertain. The utility would
5,000
not comment on whether coal-to-gas conversion was
0
being considered for unit 4.
Czech-Slovak private-sector energy firm EPH is consid-
DE
PL
TR
UK

NL
IT

FR
DK

PT
CZ

SE
SL
SI
HR
HU
FI

IE
AT
ES

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Argus news and analysis White paper  |  November 2017

ering building a 2.5GW gas fired power plant on the site of generation at the site when it switches the grid connection
its Eggborough coal fired power plant. The coal-fired plant from coal-fired to CCGT units.
is expected to have ceased all operations by 2022, which is German utility RWE is considering building up to 2.5GW
also the soonest that EPH thinks the new CCGT plant could of new gas fired capacity on the site of the former Tilbury
be commissioned. If planning consent is granted and a power plant in Essex.
final investment decision reached — which may be subject RWE is preparing its planning application for the Tilbury
to securing subsidies such as capacity market agreements Energy Centre project, which will involve plans to build the
— then construction could begin in 2019, with the plant large-scale CCGT plant, as well as a new 300MW open-cycle
operational by 2022. gas turbine plant and an energy storage facility on the
Construction is expected to take three years, including site. The new gas-fired plant will be expected to benefit
an estimated one-year period to install a new gas pipeline. from access to existing grid connections at the site, which
The CCGT will consequently not be bidding into this year’s housed a coal and biomass fired plant until 2013.
T-4 capacity market auction, as its first payment is for avail- The site’s proximity to London is highly attractive to
able generation capacity in the winter of 2021-22. EPH has RWE as system operator National Grid’s transmission sys-
not revealed the expected operational efficiency for the tem use charges are partly based on a generator’s distance
plant, but has suggested it could be in excess of 60pc. away from the key demand areas of the country.
The new Eggborough facility could house three CCGT Environmental assessments and public consultations
units and a peaking plant, which would either be an open- for the project are expected to be carried out over the next
cycle gas turbine or reciprocating gas engines. The peak- year, with RWE aiming to submit its planning application in
ing unit would provide fast-response balancing services to late 2018 or early 2019.
the grid, supporting it in times of sudden spikes in demand If the scheme is granted planning consent by the
or losses of power generation. The CCGT units would government, its timescale will then be dependent on its
provide base-load power, but CCGTs are also more flexible success in capacity market auctions.
than coal-fired plants and better suited to supporting the
growing amount of intermittent renewable generation on Single Irish power market to phase out coal by 2030
the UK grid. The single Irish power market will be coal free by 2030 and
A peaking unit would make it possible to indepen- the phase out could be complete as early as 2025.
dently restart the CCGT units in the event of a transmission- Eirgrid expects Ireland’s use of coal-fired power to have
system outage, allowing Eggborough to provide a “black ended under all scenarios by 2030, and by 2025 under the
start” service. Black start ensures that the grid is able to most progressive scenario.
be repowered following a transmission-system outage, as This means that the country’s last remaining coal plant,
large-scale power stations require substantial amounts of the 855MW Moneypoint facility, will either close or under-
electricity to start up. go a conversion to gas or biomass. The TSO suggested that
The plant would be built on the existing site of the a coal-to-gas conversion was the most likely option, but
Eggborough coal-fired power station and utilise its current the installed capacity of the converted facility and time-
grid connection. This means there will be a period of zero frame of the conversion vary across its scenarios.
Eirgrid also expects most of Ireland’s older gas-fired
New UK gas capacity MW
plants to cease operation by 2025 because of the EU’s in-
dustrial emissions directive, while the country’s use of peat
14,000 for power generation should end by 2030 at the latest.
12,000
Northern Ireland’s 514MW Kilroot coal and oil fired
power plant is scheduled to close by 2023.
10,000
The capacity will largely by replaced by new renew-
8,000 able capacity with 4GW of new wind power plants in the
6,000
pipeline in Ireland.

4,000
Spanish coal could close despite government backing
2,000 The Spanish government has backed coal remaining in
0
its generation mix but coal plants could close regardless,
Construction Approved but no FiD Planned faced with poor generation economics and as opposition

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Argus news and analysis White paper  |  November 2017

parties have backed enforcing greater emissions limits. Spain’s government has said that it is planning mea-
Opposition parties with a majority of seats in Spain’s sures to extend the life of plants fuelled with indigenous
parliament joined forces on 27 October to pressure the coal and is preparing draft legislation to regulate the plant
government to support the EU’s disputed proposal for closures requested by utilities, which it has hinted may
a cap of 550g/kWh on CO2 emissions for thermal plants include the obliged sale or transfer of ownership of some
receiving capacity payments. of the plants slated for closure.
The motion was opposed by Spain’s minority centre- The period of public consultation for the legislation
right government and its two largest trade unions, UGT ended on 15 September and the government is expected
and CCOO, which say that it would lead to the closure of to present a draft bill for discussion in November, but no
many of the older coal-fired plants in Spain if it is brought date has been set for its approval.
into force.
A majority of 59pc of members of Spain’s congress, or Portugal eyes 2030 coal power phase-out
lower house, voted on 24 October to support the mo- Portugal plans to cease coal-fired power generation by the
tion, while members of Spain’s ruling People’s Party voted end of the next decade, the country’s environment minis-
against it. The motion won the support of Spain’s largest ter Joao Pedro Matos Fernandes said in December 2016.
opposition party PSOE after an amendment to a previous The government will phase out the country’s two remain-
proposal put forward by the Podemos party that called for ing plants — the 1,180MW Sines and 576MW Pego genera-
a stricter 350g/kWh CO2 cap on emissions. tors — as part of a wider emissions-cutting strategy.
The EU proposal envisages the CO2 cap being intro- “The idea is… honouring the contracts that exist, these
duced in 2020 for new plants, with a transition period for plants stop using coal,” Matos said.
existing plants up to 2026 to bring their CO2 emissions Portugal’s announcement builds on two scenarios set out
levels into line or be excluded from participating in capac- by the previous government in 2015, which considered
ity markets. shutting coal-fired plants before or after 2025. Under the
The introduction of the cap would mean the definitive more ambitious plan, Sines would close in 2021, with Pego
closure of Spain’s older thermal plants, which use indig- following in 2026.
enous coal in their fuel mix, and Spain’s struggling coal Portuguese thermal coal imports — all from Colombia —
mining sector, according to CCOO. fell to 3.56mn t in the first nine months of 2016, against
Plant operators such as Endesa and Gas Natural Fenosa 4.17mn t in the same period a year earlier, customs data
(GNF) have said that unless they receive state support they show. Power generation accounted for more than half of
will close the plants before 2020 rather than invest to bring demand.
them into line with the EU’s current Industrial Emissions The 2030 deadline coincides with the end of lifetimes for
Directive. both plants, which make up around 10pc of installed ca-
Italian utility Enel, which owns Endesa, has said that it pacity. Sines’ four units were built from 1985, while Pego’s
plans to close just over 2GW of coal-fired capacity in Spain two were commissioned in 1993.
by 2020, while GNF plans to close the 347MW Anllares plant Portugal has 5.3GW of installed wind capacity and the
by 2019. European Wind Energy Association expects it to add a fur-
ther 1.75-2.25GW of onshore wind capacity by 2030 and up
Spanish proposed coal closures MW
to 200MW of offshore wind capacity. it has added 1.6GW of
new hydro capacity in the last two years and has a project
5,000 to add a further 1.1GW of hydro pumped storage capacity
4,500
906
at Alto Tamega by the middle of the 2020s.
4,000
3,500 570
Austria will phase out coal before 2020
3,000 707 Austria will close its final coal plant before the end of 2020.
2,500 4,720 Only Verbund’s 230MW Mellach coal plant remains op-
2,000
erational after ther retirement of the EVN’s 352MW Durn-
1,500 2,190
rohr coal fired power plant in March 2017.
1,000
A 405MW unit at the same site closed in April 2015 and
500
0
347 a 165MW unit owned by Energie beroesterreich closed in
2019 2020 2023 2025 2030 Total March 2016.

Copyright © 2017 Argus Media group Page 6


Argus news and analysis White paper  |  November 2017

Coal has been replaced by renewable generation with wood pellets at the end of last year. And its 95MW Skaer-
Austria planing to add up to 5.2GW of new hydro capacity. baek unit 3 was commissioned this spring, following its
conversion from gas to wood chips.
Finland to impose carbon tax to phase out coal Orsted plans to increase total installed offshore wind
Finland will introduce legislation in 2018 to phase out coal- power capacity by as much as 8.4GW by the end of 2025
fired power by 2030 by levying a domestic carbon tax. from the existing 3.6GW, as part of its transition to a more
The ban on coal plants had originally been proposed in renewable energy system.
Finland’s 2015 summer budget announcement, but it had
been unclear how the government would enforce their Coal closures to boost European wood pellet demand
closure until now. European industrial wood pellet demand could increase by
Finland has three coal-fired power plants, in addition to up to 3.04mn t/yr by the end of next year, according to Ar-
co-firing facilities which would also likely see their emis- gus analysis of planned wood pellet consumption projects
sions reduced by any carbon tax. in the region.
The government has indicated that some of the coal- About 11.6mn t of industrial wood pellets were con-
fired capacity may be placed in standby reserve after it sumed in the EU in 2016, an increase of 1.6mn t compared
ceases daily operations, allowing the Finnish grid to call on with 2015, according to Argus data. The commissioning of
it during any periods of tight supply during winter. three coal-to-biomass conversions in 2016 — Danish utility
The country has no plans to buy and cancel ETS allow- Dong’s Avedore 1 and Studstrup projects, and UK utility
ances that would be displaced by the tax. Drax’s unit 1 — supported Europe’s wood pellet demand
Finland plans to replace its retiring coal-fired capacity during the year.
with two new large-scale nuclear units which are due to A combined 2.8GW of dedicated biomass and biomass
begin operations over the next seven years. co-firing projects are set to come on line by the end of
The 1.6GW Olkiluoto 3 nuclear plant is expected to 2018, which could increase European wood pellet demand
begin commercial operations by December 2018. And the by up to 3mn t/yr.
1.2GW Hanhikivi 1 nuclear plant is expected to be opera- Czech utility EPH’s 396MW Lynemouth coal-to-biomass
tional by 2024. power plant conversion in the UK and German utility RWE’s
The Finnish grid should also be able to rely on in- 600MW Amer 9 biomass co-firing project in the Neth-
creased imports from 2025, when a new 800MW intercon- erlands are scheduled to begin operations in the fourth
nector with Sweden is expected to be commissioned. quarter of 2017, adding 2.3mn t/yr of new pellet demand.
Lynemouth will consume about 1.4mn t/yr of wood pel-
Denmark’s Orsted to use biomass to end coal lets when running at full capacity. Amer 9 will co-fire 50pc
Danish state-controlled Orsted (formerly known as Dong) biomass, adding an estimated 900,000 t/yr of demand.
will use the conversion of its coal-fired combined heat and Consumption projects due on line in 2018 could add a
power (CHP) plants to biomass to reach its new target of further 735,500 t/yr of wood pellet demand in Europe.
zero coal by 2023. Two Dutch biomass co-firing projects are scheduled
“We are now converting the last of our coal-fired power to commence operations in 2018 — German utility Uni-
stations to sustainable biomass,” chief executive Henrik per’s 1.1GW Maasvlakte 3 (MPP3) and French firm Engie’s
Poulsen said in February. 731MW Rotterdam 1. Uniper has secured a subsidy to
Dong began the construction of a new biomass CHP co-fire 15pc biomass at the MPP3 coal plant, generat-
unit at the site of its Asnaes coal unit in October and it se- ing about 450,000t/yr of demand based on an efficiency
cured a 20-year heat offtake agreement with a pharmaceu- level of 46pc. Engie was awarded a subsidy to co-fire 10pc
tical company. The unit is expected to be complete in late at Rotterdam 1, requiring 235,500 t/yr of pellets at 46pc
2019 and the future of the two operational coal units at the efficiency, according to Argus data. It has made the final
site, the 142MW unit 2 and 640MW unit 5, will be clarified investment decision to proceed with the project.
once the new plant is complete. Finnish utility Helen is set to commission its 100MW
Discussions continue regarding the other remaining Salmisaari heating plant in the first quarter of 2018. Salm-
coal plant - 371MW Esbjerg — are ongoing. isaari is the only large-scale wood pellet-fired generation facil-
Orsted completed the conversion of its 648MW Ave- ity scheduled to come on line in the Nordic region until 2021.
dore and 362MW Studstrup unit 3 CHP plants from coal to The plant will consume around 50,000 t/yr of wood pellets.

Copyright © 2017 Argus Media group Page 7


Argus news and analysis White paper  |  November 2017

Looking further ahead, RWE has secured a subsidy to a discussion on whether the cap in the next phase of the
co-fire 15pc biomass at its 777MW Eemshaven A and B coal ETS could be adjusted downwards, Ieta said. “There should
units in the Netherlands, generating 820,000 t/yr of wood be no changes to the cap within a phase,” according to a
pellet demand at 46pc efficiency. RWE plans to begin position paper — Reflection on National and Unilateral
co-firing at Eemshaven in the first half of 2019. The firm is Measures in the EU.
seeking a revision of the plant’s operating licence to allow
it to use biomass for up to 30pc of its fuel. Dutch remaining coal plant emissions t
The four Dutch projects could account for 2.4mn t/yr of Essent Amercentrale
new pellet demand by the first half of 2019, significantly in- 30,000,000 Nuon Centrale Hemweg
RWE Eemshaven Centrale
creasing the Netherlands’ wood pellet demand. The SDE+ Uniper Centrale Maasvlakte
subsidy awarded to the projects is the first governmental 25,000,000

financial support for wood pellet-fuelled generation in the 20,000,000


Netherlands since its previous subsidy scheme expired in
late 2014. 15,000,000

10,000,000
Coal closures could weigh on ETS price
The phase out of coal plants could weigh on prices for the 5,000,000
emissions trading scheme and exacerbate the oversupply
0
of allowances. 2014 2015 2016
A regular review is required of EU policies resulting in
emissions reductions and their the consequences for the A previous Ieta paper, published before the Nether-
ETS, the International Emissions Trading Association (Ieta) kands, Italy and France announced their phase out plans
warned earlier this year. - estimated that the consequences of additional policies
Polices such as renewable and energy efficiency targets in phase three (2021-30) of the ETS could reduce demand
contribute to the continuing surplus of allowances in the for allowances by 1bn t/CO2 equivalent (CO2e). Avoiding
ETS by driving emissions cuts that are not a result of carbon policy overlap as a matter of principle is important because
prices in the scheme. the ETS reduces emissions at the “lowest cost per tonne of
And if EU member states enact domestic climate CO2e abated, compared with other types of regulation”,
change laws, the resulting emissions reductions could Ieta said.
further contribute to the ETS surplus, Ieta said. A clause on the evaluation of overlapping policies was
The UK carbon tax has already led to the closure of eventually removed by EU MEPs from a recently agreed
some coal-fired power capacity, reducing demand for ETS deal on ETS phase-four governance (2021-30). But such a
allowances. measure could still be introduced by the European Council
A review of such policies every five years could inform or in talks between the council and MEPs before the file

Italian remaining coal plant emissions t UK remaining coal plant emissions t

Monfalcone Brindisi Sud Aberthaw


Fusina Genova Ratcliffe on Soar
Bastardo La Spezia 70,000,000
50,000,000 Eggborough
Sulcis Torrevaldaliga Nord
Tor Di Valle Lamarmora 60,000,000
40,000,000 Vado Ligure Fiumesanto Cottam
50,000,000 West Burton
30,000,000 40,000,000 Drax

20,000,000 30,000,000 Fiddlers Ferry

20,000,000
10,000,000
10,000,000
0
0
2014 2015 2016
2014 2015 2016

Copyright © 2017 Argus Media group Page 8


Argus news and analysis White paper  |  November 2017

becomes law. and the Middle East. While Russian firms are diverting coals
Countries phasing out coal generation or introducing mined in the country’s centre to far eastern ports rather
a carbon tax could cancel allowances but the UK has not than the Baltic.
done so after introducing its carbon tax and both Finland So far exporters have found homes for their additional
and France have indicated that they have no plans to do so. tonnage. But the EU’s decline as a market has scaled back
certain companies’ plans to ramp up future production.
Coal imports rise but long term outlook remains bleak The speed of eventual closures across the continent will
Thermal coal deliveries to the EU have undergone a revival determine whether or not this results in a supply overhang.
in the first seven months of 2017 in contrast to three years
of marked declines.
EU-28 net imports are up 3pc year-on-year to 9mn t/ Colombian coal exports to EU t
month, although remain much below the 12mn t/month
received in 2012, before UK demand collapsed. 5,000,000
But the causes for the year-on-year growth appear 4,500,000
transitory. 4,000,000
In Spain, a prolonged drought has sapped hydro 3,500,000
reservoirs, increasing the call on thermal plants. In France, 3,000,000
old coal units helped compensate for severe nuclear con- 2,500,000
straints last winter. And in Poland, mining firms’ attempts 2,000,000
to curb five years of overcapacity have left a surprise 1,500,000
1,000,000
deficit.
500,000
Other European markets have continued to decline
0
amid rising renewables penetration and competition from 2013 2014 2015 2016 2017
natural gas.
Italy, Germany and the Netherlands especially reflect
this trend, which underpins expectations of a lower de-
mand outlook.
Falling demand for imported coal has encouraged
Colombian, Russian and South Africa producers to actively
look beyond their traditionally dominant European mar-
kets to shift the EU’s displaced tonnes.
Colombian coal repeatedly makes the two-month
journey to Japan and South Korea now. South African is
focused on India and sourcing emerging markets in Africa

Coal imports by planned phase out countries t

8,000,000 Italy Netherlands UK Portugal Finland


7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
-1,000,000
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17

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• Interconnector projects • Russian exports • Italian gas and power data
• Installed renewable generation capacity • ARA stocks • Portuguese gas and power data
• German CHP generation • West European gas burn
• Polish coal prices

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