Recently NUON announced the postponing of their coal gasifier in the northern Netherlands. In several media this was called brave. In this blog it is argued that the decision was just simply based on economics. NUON promised, however, that if they will build it in the future, they will give themselves a CO2 emission standard for the plant. The latter is indeed brave.

A provoking analysis of NUON calling off the construction of the coal-fired power plant by Sander van Egmond.

Plans on hold

NUON recently announced that their plans for building a coal-fired power plant in the Eemshaven are suspended for now. Agreements about this are made with several environmental organizations. In several media this decision was praised and even called brave. But how brave is it? Insiders have known for much longer that the question was not if, but when NUON would announce that the plan would be put on hold. Coal-fired power plants are the diesel engine of the power plants: they are more expensive than gas power plants, which is compensated by lower fuel cost. In recent years, however, the differences in price of natural gas and coal has decreased. Consequently, the lower fuel price of coal does not outweigh the higher investment. It could also well be that the use of coal in the future will be more expensive. Coal is indeed worse for climate and environment than gas.

Coal gasification

In addition, NUON has chosen a special type of power plant, the so-called coal gasification. This technology is cleaner, so to speak, or less dirty, but more expensive to buy. As a traditional coal-fired power plant is not commercially feasible, then modern coal gasification is certainly not going to be profitable. NUON divided the project in Eemshaven into two phases. The first phase, the building of the gas-fired plant, is already in full construction. In the second phase the coal gasifier would be built. Even less investments have been made in this part. There were legal procedures of the environmental movement against both parts of the plant. Closing the coal plans made a deal possible with the environmental movement: they now stop all procedures, including those against the gas plant. This makes NUON's investments in the gas-fired plant more secure.

Smart decision?

Is NUON now smart enough to postpone the construction of the power plant, or are other energy companies now foolish for not stopping their coal plans? The situation is different for E.ON and Essent/RWE. Their power plants are already being built and many parts have been ordered. For them, cancelling their project would mean a depreciation of billions. Calling of NUON's project, however, costs relatively little. As such, postponing the power plant of NUON is not so much brave, but the result of simple economic laws.

Brave emission standard

Brave, however, is that NUON has unilaterally promised that the power station - if it will ever come to this - will emit no more CO2 than a gas-fired plant. Normally a coal-fired power station approximately emits twice as much CO2 as a gas station. That is twice as bad for the climate. Halving emissions could be made possible by, for example, replacing part of the coal with biomass and / or by capturing CO2 and storing it.

The commitment of NUON is brave and unique for a large energy company. Until now, the electricity industry claimed to consider such emission norms only at EU level, because of international competitiveness. NUON now makes  the first move; the government will only have to take the next step. The government can use this precedent to introduce a CO2 emissions standard for the entire industry to take effect. This would translate climate policy into concrete measures.

Written by Sander van Egmond

With this blog CATO contributes to the debate about energy issues and CO2 capture and storage. The contents are not necessarily endorsed by the CATO programme partners. CATO is the Dutch CO2 capture and storage research programme.