Power plants sit on growing mountains of discount coal

Britain’s coal mountain has soared to its highest level in nearly 15 years as power station operators stock up on cheap supplies of the fuel.

Drax power station in North Yorkshire, E.ON’s plants at Kingsnorth, Kent, and Ratcliffe-on-Soar, in Nottinghamshire, as well as Scottish & Southern Energy’s plants at Fiddlers Ferry in Cheshire and Ferrybridge in West Yorkshire are among those that have been taking advantage of the collapse in coal prices from a peak of $224.30 a tonne in July 2008 to $69 yesterday.

One industry insider said you “could ski down” the coal pile at one plant in the Midlands.

Coal plants usually hold about 30 days’ worth of supplies on site, but many stations are understood to be holding much more. Latest government figures show that coal stocks stood at 23.9 million tonnes in August, up from 15.9 million a year earlier and the highest level since January 1995.

The surge in British coal stocks, news of which comes days before the start of the United Nations climate talks in Copenhagen, raises questions about the effectiveness of government efforts to cut emissions and switch to low-carbon alternatives, such as wind and nuclear energy.

Nick Campbell, energy analyst at Inenco, said that lower prices were not the only reason for the stockpiles. “The recession has also cut electricity demand, so fewer coal units are running than normal, leading to a build-up of inventories,” he said.

While the price of coal has come down, gas prices have tumbled even further, amid talk of a global supply glut.

Coal is normally the cheapest fuel available and utilities burn it to produce “baseload” electricity, resorting to costlier gas and oil-fired plants to increase supply at peak times.

A spokesman for E.ON, which operates three coal-fired stations, said: “Coal is cheap right now so we have been taking advantage of that and stocking up . . . But the gas price has been even lower, so we haven’t been using as much of [the coal] as you would expect.”

A spokesman for Drax, Western Europe’s biggest coal-fired power station, declined to comment on the size of the group’s stockpile, but acknowledged that it was bigger than usual. Drax burns nine million tonnes of coal a year, or a trainload every 45 minutes when all six boilers are running at full pelt.

Another reason for the record UK coal levels is that coal for immediate delivery is cheaper than it is for delivery in 2011. As a result, some groups are buying coal now and selling it for delivery in a year. Profits are to be made because of the relatively low freight and storage costs.

Yesterday, in her annual speech to Parliament, the Queen announced plans for carbon-capture power plants, but it will take at least a decade for the experimental technology to be adopted.

Coal, which supplies about 35 per cent of UK electricity, is the most polluting conventional fuel.