DTI study favours mine gas flaring over generation

A report for the Department of Trade and Industry has proposed a series of competitive bidding rounds for tackling methane emissions from abandoned mines.1 But it says that there is little scope for more power generation capacity - and expects flaring of the gas to be more cost-effective in most cases.

The coal mine methane industry has been lobbying for over three years for extra subsidies to generate electricity from gas escaping from abandoned mines (ENDS Report 315, p 14 ).

In 2001, the Government announced that the industry was to gain exemption from the climate change levy, but the tax break only came into effect more than two years later (ENDS Report 345, p 41 ).

In the meantime, the industry has all but collapsed. The biggest developer, Alkane Energy, has turned its attention to Germany (ENDS Report 339, pp 9-10 ) and Octagon Energy has gone into receivership.

The DTI commissioned a report from National Economic Research Associates to help it decide whether further subsidies for electricity generation are justified.

One of the reasons why the industry has struggled to win support is the considerable uncertainty about the size of the resource. The industry claims that around 600,000 tonnes of coal mine methane is released each year. In contrast, NERA says that coal mine methane is a "relatively small" problem with an annual flow of controllable methane of around 52,000 tonnes - equivalent to some 1 million tonnes of carbon dioxide. Of this, roughly 60% is already used for electricity generation or heat.

Surprisingly, NERA says that the remaining 40% of methane emissions could support only another 15MW of electrical generation capacity. Some 35MW is installed at present - but the industry has claimed that this could rise to 750MW with sufficient subsidy (ENDS Report 315, p 14 ).

The report proposes a series of competitive bidding rounds in which developers can apply for subsidies. However, it suggests that flaring "seems likely to be the most cost-effective control option in the great majority of cases."

Flaring would cost typically £4 million over seven years, equivalent to £1/tCO2e saved, it says. In contrast generation would cost around £9 million, equivalent to over £2/tCO2e.

Alkane's chief executive David Cross is dismayed that at the report's findings. He points out that the Government is happy to support generation from landfill gas under the renewables obligation. Mr Cross also claims that the report overstates the cost of generation.

The quoted costs for both flaring and generation are well below the current carbon price of €9/tCO2 under the EU emissions trading scheme. However, there is no straightforward way of bringing coal mine methane into the carbon market - and NERA's report says that is "not worth spending policy effort on negotiating a special status for coal mine methane" under the trading scheme.

Methane emissions are at their peak immediately after mines close - and "any policy with implementation delayed beyond a couple of years will fail to deal with emissions at a number of mines...while they are at their highest levels." In particular, the large Selby complex is due to close by the end of 2004.

  • Meanwhile, Alkane Energy has moved into anaerobic digestion by acquiring an 83% interest in Farmatic Biotech Energy. Farmatic was behind the UK's first centralised anaerobic digestion facility in Holsworthy, Devon (ENDS Report 329, pp 7-8 ), although it divested itself of the operation at the end of last year.

    Alkane intends to develop two new anaerobic digestors each with an electrical capacity of around 2MW. The first project at Fivemiletown in Northern Ireland will use a similar mixture of animal slurry and food waste to the Holsworthy plant and could supply heat to local businesses and a school. A second development in north Wales will rely more on food waste, Mr Cross said.