April 07 ,2014 | by Sarah Parkin

Does Coal Still Have a Place in the UK Energy Market?

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UK Coal is seeking government support to keep itself afloat. But even if it survives, does the struggling company really have a future?

Since the large-scale closures of the 1980s, the UK’s mining industry has been a shadow of its former self, while the country has become more dependent on foreign imports of fuels to keep its power stations running. But the country’s largest remaining coal miner is now on the brink of collapse once again.

UK Coal is appealing to the government for support to keep itself afloat, just a year after it was last saved from insolvency by the Pension Protection Fund (PPF). The company claims that the recent strong performance of the pound and competition from cheaper imports have damaged its sales figures, making it much more difficult to turn a profit.

 

According to the UK Coal website, 40 per cent of the UK’s electricity currently comes from coal. As the US has increasingly turned to shale gas as an alternative fuel, coal mined there has entered the UK and global markets, keeping prices down.

 

At the moment, there is hope of fresh investment to keep the company alive, with the UK’s only other large-scale miner Hargreaves Services in talks to inject new cash. But if that fails, the company is asking the government to provide £10 million that will fund the closure of two of the three deep pits left in Britain, as well as selling off all eight of its surface mines.

The alternative is definitely worse – if the company becomes insolvent more than 2,000 jobs will be lost as both the company’s working deep mine sites, Thoresby in Nottinghamshire and Yorkshire’s Kellingley, close down by the end of next year.

 

When PPF took the company over in July, it also became responsible for the pension pots of 7,000 workers worth close to half a billion pounds, so it’s already taken on a lot of risk. The company is currently owned both by PPF and an employee trust, so it stands to reason that it is in their interests to broker a deal as soon as possible.

What’s more, there’s a strong argument to suggest that the UK will continue to rely on coal for plenty of time to come, as investment in nuclear and renewable energy sources will take time to bear fruit and the UK has huge amounts of coal to burn.

Kellingley still has decades’ worth of coal reserves and Nottinghamshire MP Mark Spencer told the BBC that Thoresby still contains £80 million of the fuel. According to the former Newcastle University academic Professor Dermot Roddy, the North Sea still contains enough coal to power the nation for centuries. At the moment, it seems there are plenty of reasons to keep UK Coal alive.

Sarah Parkin

Sarah Parkin used to work as News Writer for LSBF.  Sarah is specialised in finance, technology and business news.

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