THE high cost of natural gas is forcing electricity generators to burn more coal in an attempt to keep a lid on power prices. A doubling of the price of summer gas over the past two years has encouraged generators to switch back to cheaper coal, but the cost savings come at an environmental price.

Powergen, Britain’s second-biggest generator, said that it was using 20 per cent more coal than last summer, taking advantage of the widening gap between the costs of the two fuels. Last week the company gave in to the cost pressure of rising wholesale fuel prices, introducing steep increases in gas and electricity tariffs for its residential customers.

John Ridley, an energy trader for Powergen, said the company was using more coal than expected. “Coal is the main generating source in the winter months, but in the summer gas normally runs ahead of coal,” he said. “In the summer of 2003, gas was 16p per therm, but this year it’s 30p per therm. You think long and hard about using gas generators.”

Figures from the Department of Trade and Industry, show a significant shift away from gas in the winter months. In the first quarter of 2005, major power producers burned 4.2 per cent more coal than in the same period in 2004. Over the same period, when overall fuel consumption remained static, there was an 8 per cent decline in gas consumption.

Coal was once the UK’s most important source of fuel for electricity generation, but is in sharp decline, condemned for its high sulphur and carbon dioxide emissions.

“Coal generators emit approximately double the amount of carbon compared with gas,” Mr Ridley said.

That means that a generator such as Powergen will suffer an extra cost in buying carbon permits under the new emissions trading scheme.

Even so, Powergen reckons that it is still advantageous in cost terms to use up coal stocks rather than burn expensive North Sea gas.

The Large Combustion Plant Directive, a European Union environmental law, will between 2008 and 2015 progressively force the closure of coal-fired power stations that lack flue-gas desulphurisation units, equipment that cuts the emission of sulphur dioxide.

According to Powergen, the cost of equipping old generators with such technology is huge; the company spent about £300 million refurbishing Radcliffe, a coal-fired generator in Nottinghamshire.

Instead, the company expects that much of the UK’s coal-based electricity generation will be closed over the next ten to 15 years.

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