According to online energy auction house BuyEnergyOnline, during April 2007 UK gas wholesale prices rose by just 1% while electricity prices increased 13%, making the widest spark gap since deregulation.
The decoupling of gas and electricity prices is largely due to increased use of coal in existing UK power plants, which incurs much higher penalties than gas in terms of the cost of carbon emitted. This carbon cost is reflected in the wholesale price of grid electricity.
All this is good news for CHP, whose economic viability is reliant on the spark gap. On most schemes, electricity generated by CHP on site is just as valuable as the equivalent power from the grid, but using gas generation to make electricity more cheaply improves financial viability.
The coal renaissance is not a blip. BP and Rio Tinto have announced a joint venture to use carbon capture and sequestration (CCS) to generate “clean” electricity from coal. Although ironically the captured CO2 is then pumped into oil fields to improve oil production before being sealed off underground.
It even looks like Hatfield Colliery is reopening to meet demand from existing coal-fired plants like Drax.
The Energy White Paper limps back onstage for its next appearance on 23 May. In it, the government is expected to restate its support for CCS and “clean” coal so we’re likely to see more BP-style CCS projects in the future.
What are the implications for CHP?
While electricity generated by coal+CCS will not incur the carbon costs of coal alone, it will bring its own additional costs. As BP have said, they’ll only push ahead with these projects if government offers incentives, such as extending ROCs to include coal+CCS (completely contrary to the notion of the Renewables Obligation, but that may not stop the government).
In addition, while new nuclear will have to be subsidised in one way or another, because of public scrutiny this time around I hope it will have to support itself more than in the past. If government doesn’t guarantee a buy price, the cost of nuclear generated electricity will also be high.
All this means electricity prices will continue to rise, potentially with increasing independence of gas prices. If gas prices remain relatively low, it looks good for gas-fired CHP.
carbon limited 
I suppose that this improves the economic viability of gas fuel cell CHP as well.
Anyone know what state fuel-cell CHP technology is in at the moment because they must be making giant strides in the increasing effieciency and reducing the cost?
I didn’t think coal could ever be “clean” and Hanford in Washington State is an enduring testimony that waste storage with nuclear energy is problematic..wind, sun, wave energy all are much more appealing.