Closing the coal chapter: how the UK is leading the energy transition

What has happened?

On 30 September 2024, the UK’s last power station making electricity from coal – Ratcliffe-on-Soar in Nottinghamshire – closed, ending a century and a half of coal playing a central role in powering the British economy and keeping the lights on.

Figure 1: UK electricity generation (1920-2023)
Source: Our World In Data

The beginnings of coal

Figure 1 (above) shows the profound transformation that Britain’s electricity system has undergone over the past 100 years. Electricity generation increased very gradually before the Second World War, almost all of it from coal and much of that from city-centre power stations that made electricity close to where it was needed (for example, the iconic Art Deco structures that are now the Tate Modern art gallery and Battersea Power Station shopping complex).

The system we inherited

The UK’s transition to a modern economy was only made possible by the rapid expansion of energy generation and the supporting infrastructure that powered the nation’s post-war years of technological advancement and economic prosperity. Demand for electricity rose rapidly, more than quadrupling in 20 years. Although Britain’s pioneering civilian nuclear power programme played a role, more than half of this increase came from a new generation of large coal power stations, mostly built close to coal fields such as those in the Trent Valley and South Yorkshire. The high-voltage transmission grid that still forms the backbone of our electricity system was built to connect these power stations to the industrial and population hubs of London, the Midlands, and the North. This was an era of state planning, nationalised industries and the embracing of “the white heat of technology” that saw ambitious leaps in the engineering used to power the country. Ratcliffe-on-Soar, completed in 1968, is part of that transformational generation of coal power stations.

The dash for gas

From the 1990s, gas started to play a larger role in making electricity as the power industry was privatised, rules on burning gas to make electricity were relaxed, and North Sea gas production rose to its peak around the millennium. Around 20GW of gas capacity was built between 1990 and the early 2000s. This allowed electricity made from coal to fall by 60% between 1990 and 2000s while gas went from producing virtually no electricity to making up 40% of supply, overtaking coal in 1999.

Phase-out

Increasingly mindful of the harmful emissions from burning coal, subsequent governments have taken steps to mitigate its impact and reduce the role of coal in our electricity system. This started with early concerns about air pollution, including the Clean Air Act of 1956 which restricted the use of coal in urban areas in response to the Great Smog. By the late 20th and early 21st centuries, concern for climate change at a global level saw this transform into an ambition to replace coal with renewables and cleaner gas, and ultimately phase out coal altogether.

What this means for the UK

The phase-out of coal in the UK was driven by the need to tackle climate change. In addition to helping slow the rise in global carbon levels, the coal phase-out offers the UK distinct near-term benefits:

• Reduced air pollution: burning coal leads to air pollution that causes reduced life expectancy. Particulate pollution in urban areas fell by two-thirds between 1992 and 2023,^[1] partly thanks to reducing the use of coal, in addition to rising standards for other sources of pollution like cars. Britons now breathe the cleanest air since the industrial revolution, and this will only get better as we replace petrol cars and gas boilers with clean – mostly electric – alternatives.
• Reduced coal imports: following the decline of domestic mining, the UK increasingly relied on imports to feed its coal power stations. This led to us spending a peak of almost £6bn in today’s money on imported coal in 2008,^[2] representing a hit to our balance of trade.
• Leading the world: tackling climate change is a question of global cooperation. Of the major rich-world economies that had coal-based electricity systems, the UK has cut its use the fastest, as shown in Figure 2 (below). Although this happened against the backdrop of rapidly rising use in developing countries – especially China and India – this example of climate leadership strengthens the UK’s hand in vital climate negotiations, by enhancing our legitimacy.

Figure 2: Use of coal for electricity in selected developed countries (1990-2020)
Source: Energy UK analysis of Statistical Review of World Energy

How it happened

The phaseout of coal was the culmination of decades worth of policymaking. With an economy-wide target for Net Zero by 2050 and the new Labour Government’s target for clean power by 2030, the UK continues to have ambitious climate goals. As we plan for how to achieve these goals, let us reflect on how the milestone target of the coal phaseout was achieved.

Ambition and vision

A major lesson from the phaseout of coal is the combination of setting ambitious targets, alongside the implementation of effective policies to reach our goals. Several landmark commitments were made that led to the eventual end of coal, including:

• 2008: The Climate Change Act commits the UK to reduce its emissions to 80% of their 1990 level by 2050.
• 2015: The Government committed to phasing out coal by 2025.
• 2019: The Climate Change Act is amended to commit the UK to Net Zero carbon emissions by 2050.
• 2020: the target for the phaseout of coal is brought forward to 2024.

These targets focused attention and gave both industry and civil society the long-term pathway needed to deliver change.

Supporting the alternatives

If we had stopped using coal overnight, the lights would have gone out. The electricity system has continued to function despite removing a previously-core element because alternative sources of power had been introduced as coal has been withdrawn. This has been actively supported by policy, including:

• Nuclear: despite policies like the Non-Fossil Fuel Obligation trying to support nuclear development, no new nuclear plants have come online since Sizewell B (1.2GW) in 1995. New mechanisms to support nuclear will see a new generation of facilities help the country reach Net Zero, but they will come too late to see nuclear play a role in the phaseout of coal.
• Wind and solar: the mass deployment of renewables over the past few decades has been a great success story. The evolution of early support programmes like the Renewables Obligation and Feed-in Tariff into the world-leading Contracts for Difference programme has scaled the production of renewables and lowered prices. The UK’s 16GW of solar and 30GW of wind were approximately a third of our electricity in 2023.[3]^,[4]  
• Biomass: several coal power stations were converted to run on low-carbon biomass, most notably Drax (2.6GW) and Lynemouth (0.4GW). This provides the system with large-scale generation that can be ramped up and down to meet demand but in a more sustainable way.
• Energy efficiency: total demand for electricity fell by 15% from 2005 to 2023, driven in part by increased energy efficiency.^[5] This was encouraged by both EU and UK policymakers as electrical appliances were mandated to become more efficient over time, and inefficient uses of electricity such as incandescent lightbulbs were banned.

Embracing markets

In addition to emissions limits and regulatory measures such as the Large Combustion Plant Directive (LCPD) and the Industrial Emissions Directive (IED) that impacted coal generation, market-based measures were also crucial.  A critical factor was changing the economics to make it more attractive for generators to operate gas (which is comparatively cleaner) than coal. Two main mechanisms delivered that:

• Emissions Trading: emissions trading requires power stations and polluting industries to pay for every tonne of carbon they emit, with the price set by allowances traded on the market. The EU introduced its Emissions Trading Scheme (EU ETS) in 2005 as a world-leading initiative to curb carbon emissions. Following Brexit, a successor UK scheme was launched in 2021.
• Carbon Price Support: in its early days, the EU ETS traded at prices that were too low to shift the economics of coal generation enough to meet the UK’s climate goals. In response, the British government introduced the Carbon Price Support (CPS) in 2013 to act as a supplementary carbon price for electricity generation only, topping up the ETS and driving faster change in the power sector. It now sees generators pay an additional £18 for every tonne of carbon they emit.

These worked because for every MWh of electricity it generates, coal emits around twice as much carbon dioxide as gas.^[6] As shown in Figure 3 (below) this raised the price of coal above gas, making gas a more attractive source of electricity. Coal generation started falling away in response to the increasing price relative to gas as a result of the CPS from 2013. The combination of market-based measures and stringent regulatory limits on emissions, made it increasingly costly and difficult for coal power stations to operate without significant emissions reductions, accelerating their decline and allowing a shift towards natural gas. By the mid-2010s, gas was firmly established as the cheaper source of power.

Figure 3: the impact of carbon pricing on coal and gas prices (1996-2020)
Source: Energy UK analysis

Note: Only includes fuel and carbon pricing, not other costs such as capital or maintenance. More recent years excluded to focus on underlying trends, not the consequences of the post-Ukraine price shock.

Adapting the system

Coal power stations were built as large, capital-intensive assets designed to run most of the time providing ‘baseload’ power. Figure 4 (below) shows that even until the early 2010s, that is usually how coal operated. Stations would generate around half their potential output at a minimum through the winter (with average loads around three-quarters of capacity) before slowing down in the summer due to lower demand and to shut down for maintenance.

As coal became less competitive because of the market signals described above, plants closed and the remaining plants shifted to increasingly provide electricity just when demand was high, such as cold winter days. This required a change in how power stations were used but also helped lead to the introduction of the Capacity Market. Payments to generators through the Capacity Market meant that coal power stations could earn money for being on standby even if they produced no electricity, helping keep plants online for the small number of days they were needed.

Figure 4: Monthly maximum, minimum and average coal generation (2009-2024)
Source: Energy UK analysis of ESO

The coming gas transition

Phasing out coal wasn’t easy but there were some tailwinds that helped push us in the right direction. Today’s challenge is the phaseout of unabated gas. In some respects, that is going to be a harder challenge than phasing out coal, for several reasons:

• Demand: falling demand made the move away from coal easier. As we switch to electric cars and heating, demand for electricity is set to start increasing again.
• Trade: electricity imports stepped in to support the move away from coal. Although trading with our European neighbours will still help us when we need electricity the most, the UK is preparing to shift to being a net exporter of electricity.
• Need for dispatchable power: although increased renewables helped displace coal, gas became the essential source of power that was not weather-dependent. As we transition away from gas, there is no one source of electricity that can do that. Instead, we will need a variety of more renewables, hydrogen, gas with carbon capture and storage, and demand flexibility. For more information, see our Fuelling the Future paper.

Figure 5: change in electricity supply and demand (2012-2023)
Source: Energy UK analysis of DUKES

That is not to say we should be disheartened. In recent years we have seen a revolution in low-carbon technology, with dramatic falls in the price of solar (88%), wind (60%)^[7] and batteries (90%).[8] The introduction of the Demand Flexibility Service during the winter of 2023/23 is another pioneering initiative that allows customers to adjust their energy usage in response to price changes or demand peaks. This flexibility is increasingly important for managing our energy consumption and reducing our demand for gas. This, alongside advancements in digital technology that can make demand smarter and more responsive, gives us tools for the coming gas transition that we could not have dreamt about a decade ago.  

We also have the advantage that for the next stage in the energy transition we can learn from the successes and challenge of the last one. These include:

Embracing markets

Carbon pricing was pivotal to the phaseout of coal. Since the creation of the UK ETS following Brexit, however, the smaller, less liquid UK carbon market has experienced volatility and typically lower prices compared to the European market. Linking the UK ETS with the EU ETS is vital to achieving the stable carbon prices that are needed to encourage investment in low-carbon technology and make unabated gas less competitive. For an overview of carbon pricing and the challenges, see: The UK’s Emissions Trading Scheme for more detail.

Ensuring a just transition

The phaseout of coal over the past few decades is perhaps the archetype of an unjust transition. From the Industrial Revolution onwards, communities were built around coal mining. As the industry’s decline accelerated after the Second World War, hundreds of thousands of jobs were lost. 700,000 people worked in coal in the late 1950s. By 1980 this was down to just over 200,000 people, and this had fallen to less than 10,000 by the mid-1990s.^[9]

The transition was poorly managed, resulting in many miners never working again and former coal mining communities continuing to face significant deprivation. To achieve Net Zero, the UK must learn from these failures. For example, there are opportunities for oil and gas workers to transition to new roles in offshore wind, hydrogen and carbon capture and storage. However, for this to be successful and to ensure workers and communities are not left behind, a coordinated plan is essential.

Keeping the lights on

In winter 2022/23, the system operator spent between £220m and £420m to ensure four remaining coal units remained operational because of concerns over electricity supply during the gas crisis following the invasion of Ukraine.^[10]

As a result, the plants temporarily generated electricity. However, despite attempts to keep them online for the winter of 2023/24, these stations were closed. This illustrates the difficult balancing act of keeping a fossil-fuelled power station online in the last few years before it closes. Go too fast and there are risks of power outages, however if it is too slow then the country risks unnecessary emissions or burdening consumers with the cost of keeping largely inactive plants online.

The Government will need to explore strategies for managing the continued operation of unabated gas plants, similar to the approach taken with coal contracts, which effectively functioned as a form of ‘strategic reserve’ in the past. However, when applying this concept to gas, it is important to recognise that designing an effective strategic reserve is a complex challenge that will need careful oversight to maintain grid stability without excessive reliance on fossil fuels.

The Government is engaging this challenge, both through the commitment in its manifesto to consider a “strategic reserve” (the details of which are still being established), and proposed reforms to the Capacity Market that could allow gas plants to be favoured over, say, batteries, depending on the needs of the system.

The grid

The electricity grid was mostly built around coal. This was exploited in the transition towards gas with many gas power stations built in the shadow of their coal predecessors. As the sources of electricity move from a few very large, centrally located plants to wind and solar spread throughout the country – especially in Scotland and offshore – the grid will need to undergo a serious transformation.

This requires massive investment (£58bn, by one estimate^[11]) and the pace must accelerate if we are to meet our goals. This grid upgrade will still use the skeleton of the coal system, with many new lines making use of the large grid connections found at old coal power stations.

Don’t neglect nuclear

Inaction by government over a generation will lead to an over thirty-year gap in new nuclear power stations coming online. As old plants close, this made the phaseout of coal unnecessarily more difficult. This error has already been partly corrected by the development on Hinkley Point C, but the Government must now double down, including by committing to Sizewell C, a new generation of modular reactors and potentially further gigawatt-scale nuclear developments.

[1] Energy UK analysis of DEFRA (2024), Air quality statistics in the UK, 1987 to 2023 – Particulate matter (PM10/PM2.5)

[2] Energy UK analysis of ONS (2024) Trade in good: country by commodity imports, adjusted for CPI inflation

[3] Digest of UK Energy Statistics (2024), Chapter 5.12

[4] Digest of UK Energy Statistics (2024), Chapter 5.6

[5] Digest of UK Energy Statistics (2024), Chapter 5.6

[6] Digest of UK Energy Statistics (2024), Chapter 5.14. The carbon intensity of coal has risen in recent years because using coal only during peaks rather than constantly makes it less efficient.

[7] House of Commons Library (2023), Why is cheap renewable electricity so expensive on the wholesale market?

[8] IEA (2024), Batteries and Secure Energy Transitions

[9] Our World in Data (2019), The death of UK coal in five charts

[10] National Grid ESO (2022), National Grid ESO confirms early detail of winter coal contracts

[11] National Grid ESO (2024), ESO publishes “Beyond 2030” – a £58bn investment plan in the future of Britain’s energy system