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EON confident in assets swap with RWE as Q1 profit drops

German energy giant EON expressed confidence in its planned massive assets swap with RWE’s renewable energy subsidiary, despite weaker first quarter results released Monday.

Essen-based group EON, which suffered terrible losses from 2014 until 2016 due to restructuring and Germany’s abandoning of nuclear power, has since got back in the black, but its figures were down for the first quarter of 2019.

Between January and March, its adjusted net profit — which strips out discontinued operations in the renewables segment, as well as other non-operating effects — declined 11 percent year-on-year to 650 million euros ($730 million).

Its adjusted operating profit also fell eight percent to 1.17 billion euros.

The figures roughly tally with the expectations of analysts from financial services provider Factset, which expected adjusted net income of 626 million euros and adjusted operating income of 1.15 billion euros.

“Aside from the special case of the United Kingdom,” where capped prices and keen competition saw a sharp decline in the group’s profits, “our core businesses delivered a solid performance,” said chief financial officer Marc Spieker.

The German energy giant has confirmed its target for adjusted operating income for 2019 is between 2.9 and 3.1 billion euros.

The adjusted net income is expected to be in the range of 1.4 to 1.6 billion euros.

Last year EON announced plans to take over German rival RWE’s renewables unit Innogy as part of a complex asset swap deal set to shake up the energy sector.

“The planned transaction with RWE is right on schedule,” EON said of the deal that is expected to impact the two energy giants’ financials.

EON added that as expected, the European Commission in March opened an in-depth probe into the deal but that the company was “confident that it will obtain the necessary approvals in the second half of 2019”.

The redistribution of assets allows the two former rivals to specialise in energy distribution and production respectively.

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Yü Energy shares soar after FCA drops investigation

Yü Group’s share price climbed 66 per cent in early trading on news that the Financial Conduct Authority has discontinued its investigation into the company and does not intend to take action.

The business energy and water supplier revealed a hole in accounts last October related to revenue it had booked but that was not actually recoverable from clients. As a result, Yü said would post a loss for full year 2018 and a much reduced profit for 2019. Its share price collapsed by 80 per cent.

Yü then hired PwC and DLA Piper to conduct a “forensic review” of its books, and CEO Bobby Kalar said the company would be “more selective and prudent” about customer acquisition.

Bad debt is a longstanding issue in the business energy market, particularly at SME level. Drax-owned B2B energy suppliers Opus Energy and Haven Power reported a 72 per cent increase in bad debt charges to £31m for the year ended 31 December.

 

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Siemens spins off struggling gas and power in smart digital shift

MUNICH (Reuters) – Siemens is spinning off its gas and power business, which has dragged on the German engineering firm’s performance as the rise of renewable power hits demand for gas turbines.

The new firm would be a “major player” in energy with revenues of 27 billion euros ($30 billion) and more than 80,000 employees, Siemens said on Tuesday, adding that it would now focus on its Digital Industries and Smart Infrastructure businesses.

Siemens said the Gas and Power division, which includes its oil and gas, conventional power generation, power transmission and related services businesses, will be set up as a standalone company with the aim of a public listing by September 2020.

Last week Reuters, citing sources familiar with the matter, reported that Siemens was considering carving out the unit, whose 2018 profit fell by 75 percent to 377 million euros ($421 million) as revenue dropped 19 percent.

“The new company won’t have to compete for resources with higher margin business like smart infrastructure and digital industries,” Siemens Chief Executive Joe Kaeser told reporters.

Siemens also plans to include its 59 percent stake in wind energy company Siemens Gamesa Renewable Energy in Gas and Power.

The decision to separate the business, which will be led by Gas and Power head Lisa Davis, was approved by Siemens supervisory board, which met on Tuesday ahead of its second quarter figures on Wednesday.

The Munich-based company said it would remain an anchor shareholder in Gas and Power with between 25 and 50 percent.

“It’s the right thing to do; it’s necessary and courageous to trigger the planned changes when the company is doing well,” Siemens chairman Jim Hagemann Snabe said.

STARVED

Unions also supported the decision, saying the business was better off outside Siemens.

“If the unit were to stay part of Siemens, investments would be further reduced. Thus the business would literally be starved to death,” Siemens works council head Birgit Steinborn, who is also deputy chairwoman of the company, said in a statement.

“With the planned initial public offering in Germany, co-determination will be maintained and Siemens remains committed to keeping jobs in Germany and Europe. In a joint venture, for example with a Japanese competitor, we would have seen that at great risk,” she added.

Siemens is targeting cost cuts of 2.2 billion by 2023 by cutting 10,400 jobs – mainly administration and support roles – at its remaining core units, including 3,000 at Smart Infrastructure and 4,900 at Digital Industries. The company will shed at least 10,400 jobs in the overhaul.

At the same time, Siemens plans to create 20,500 jobs by 2023, resulting in a net increase.

For its Smart Infrastructure unit – which makes fire safety and security products, grid control or energy storage systems for buildings – Siemens is now targeting a profit margin of 13-15 percent by 2023.

 

Digital Industries – which among other products offers industrial software and automation solutions for companies – is targeting a margin of 17-23 percent.

Kaeser stressed that Siemens has many options and plenty of time available for its rail unit Siemens Mobility.

Siemens tried to combine Mobility with listed peer Alstom, but scrapped the deal earlier this year as antitrust concerns mounted. Analysts expect that Siemens will eventually opt for a stock market listing for the unit.

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Government sidesteps Committee’s call for Scottish oil and gas sector deal

09 May 2019

The Government’s response to the Scottish Affairs Committee’s report on the future of the oil and gas does not directly address the Committee’s call for a sector deal, and instead states that the Government’s relationship with the sector is already “well-established.”

The Committee today publishes the Government’s response to its report on the future of the oil and gas industry. The Government sidesteps addressing the Committee’s headline recommendation of an ambitious sector deal to ensure Scotland’s energy industry can navigate the challenges of its future and continue to prosper.

Chair’s comments

Chair of the Committee, Pete Wishart MP said:

“Though there are some positive noises from the government, such as their enhanced funding for carbon capture and storage technologies and the recently announced centre of underwater engineering, we are disappointed by its reluctance to give a clear answer about whether it will implement an over-arching sector deal that would truly transform the oil and gas industry in Scotland. A sector deal would provide the coordinated approach needed to support transition to a new clean energy industry. The last thing the industry needs now is continuing uncertainty, so I have written to the Minister to press for more clarification on the Government’s stance on a sector deal.”

Sector deal

The Committee recommended an oil and gas sector deal that has the detail and ambition needed to support the industry’s challenging future and reflect the Government’s climate change targets by setting out a coordinated way for the sector to transition to green energy production. However, the Government response merely “acknowledges” the Committee’s support for a sector deal and argues that the Government already has a “well-established relationship” with the sector.

The Government suggests that a phased approach to funding and supporting the sector may be preferable to a formal deal. The Chair of the Committee has written to the Energy Minister, Claire Perry MP, to press the Government for more detail on its approach to supporting the industry, including its stance on a formal sector deal and to ask how it will ensure its phased approach does not lead to areas of less immediate economic benefit to the sector, such as work on energy transition and carbon capture, being neglected in favour of the areas of the deal that promise a more immediate economic return.

Climate change and new technologies

The Committee’s report outlined that one of the biggest challenges facing the industry is climate change and called on Government and industry to take a visibly more proactive approach to limiting the sector’s carbon footprint. The Government’s has responded positively to the Committee’s recommendations for increased support for carbon capture, usage and storage (CCUS) technologies.

In particular, the Government highlights its enhanced funding for CCUS innovations through the BEIS
call for funding applications for feasibility studies, industrial research and experimental development.

The government recently announced its support for a new underwater engineering centre at Aberdeen, which would bring together industry and academia from across the UK to develop new technologies which would enable the sector to move towards a low carbon economy. The Committee called for this in its report, however suggested it should be part of a more structured sector plan.

Decommissioning and skills transfer

The Committee’s report recommended that decommissioning – the process by which oil and gas infrastructure is shut down, or reconfigured, after oil and gas production ceases – should be made a central part of a sector deal. While the Government response acknowledges that decommissioning expertise presents a global economic opportunity for Scotland’s industry, little tangible progress has been made. The Government response points to the launch of a call for evidence on decommissioning in spring 2019, however this announcement had already been made in the 2018 Budget, marking a significant delay in opening the consultation.

Additionally, the Government does not make it clear whether it supports the Committee’s recommendation to set measurable targets for skills transfer as oil production ceases and industry professionals seek new work in clean energy technologies. The Chair of the Committee asks the Minister to provide more information on what the Government is doing to support decommissioning and skills transfer as the sector prepares for its future.

Commenting on the response, Pete Wishart MP said:

“Though the oil and gas industry will have a challenging future, these new circumstances could bring
significant opportunities and help the Government meet the UK’s climate change targets.  If the economic potential of decommissioning and cleaner energies is to be harnessed, the Government must act now by providing strategic vision, and support for the industry.”

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Government sidesteps Committee’s call for Scottish oil and gas sector dea

The Government’s response to the Scottish Affairs Committee’s report on the future of the oil and gas does not directly address the Committee’s call for a sector deal, and instead states that the Government’s relationship with the sector is already “well-established.”

The Committee today publishes the Government’s response to its report on the future of the oil and gas industry. The Government sidesteps addressing the Committee’s headline recommendation of an ambitious sector deal to ensure Scotland’s energy industry can navigate the challenges of its future and continue to prosper.

Chair’s comments

Chair of the Committee, Pete Wishart MP said:

“Though there are some positive noises from the government, such as their enhanced funding for carbon capture and storage technologies and the recently announced centre of underwater engineering, we are disappointed by its reluctance to give a clear answer about whether it will implement an over-arching sector deal that would truly transform the oil and gas industry in Scotland. A sector deal would provide the coordinated approach needed to support transition to a new clean energy industry. The last thing the industry needs now is continuing uncertainty, so I have written to the Minister to press for more clarification on the Government’s stance on a sector deal.”

Sector deal

The Committee recommended an oil and gas sector deal that has the detail and ambition needed to support the industry’s challenging future and reflect the Government’s climate change targets by setting out a coordinated way for the sector to transition to green energy production. However, the Government response merely “acknowledges” the Committee’s support for a sector deal and argues that the Government already has a “well-established relationship” with the sector.

The Government suggests that a phased approach to funding and supporting the sector may be preferable to a formal deal. The Chair of the Committee has written to the Energy Minister, Claire Perry MP, to press the Government for more detail on its approach to supporting the industry, including its stance on a formal sector deal and to ask how it will ensure its phased approach does not lead to areas of less immediate economic benefit to the sector, such as work on energy transition and carbon capture, being neglected in favour of the areas of the deal that promise a more immediate economic return.

Climate change and new technologies

The Committee’s report outlined that one of the biggest challenges facing the industry is climate change and called on Government and industry to take a visibly more proactive approach to limiting the sector’s carbon footprint. The Government’s has responded positively to the Committee’s recommendations for increased support for carbon capture, usage and storage (CCUS) technologies.

In particular, the Government highlights its enhanced funding for CCUS innovations through the BEIS
call for funding applications for feasibility studies, industrial research and experimental development.

The government recently announced its support for a new underwater engineering centre at Aberdeen, which would bring together industry and academia from across the UK to develop new technologies which would enable the sector to move towards a low carbon economy. The Committee called for this in its report, however suggested it should be part of a more structured sector plan.

Decommissioning and skills transfer

The Committee’s report recommended that decommissioning – the process by which oil and gas infrastructure is shut down, or reconfigured, after oil and gas production ceases – should be made a central part of a sector deal. While the Government response acknowledges that decommissioning expertise presents a global economic opportunity for Scotland’s industry, little tangible progress has been made. The Government response points to the launch of a call for evidence on decommissioning in spring 2019, however this announcement had already been made in the 2018 Budget, marking a significant delay in opening the consultation.

Additionally, the Government does not make it clear whether it supports the Committee’s recommendation to set measurable targets for skills transfer as oil production ceases and industry professionals seek new work in clean energy technologies. The Chair of the Committee asks the Minister to provide more information on what the Government is doing to support decommissioning and skills transfer as the sector prepares for its future.

Commenting on the response, Pete Wishart MP said:

“Though the oil and gas industry will have a challenging future, these new circumstances could bring
significant opportunities and help the Government meet the UK’s climate change targets.  If the economic potential of decommissioning and cleaner energies is to be harnessed, the Government must act now by providing strategic vision, and support for the industry.”

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Will Corbyn nationalisation kill the National Grid and SSE share prices?

Utilities companies like National Grid (LSE: NG) and SSE (LSE: SSE) have long been seen as reliable income providers, with great visibility of earnings and the ability to translate a high proportion of them to dividends.

National Grid, for example, is expected to provide a dividend yield of 5.6% this year, rising to 5.9% by 2021. SSE’s forecast yield is already even higher at 8.2%. But that would be nowhere near covered by an expected big dip in earnings, and is forecast to drop to 6.7% next year — but still pretty big, if relatively weakly covered.

Debts

SSE is already suffering with rising debts, and that’s added a bit of a drag to the share price. But both of these companies have suffered sharp share price falls in the past month — National Grid shares are down 6.1% with SSE down 7.4%, over a period in which the FTSE 100 gained 3%.

The recent dip was triggered when the BBC published an online article under the headline: “Labour to outline National Grid ownership plans,” reporting on Jeremy Corbyn’s apparent upcoming speech outlining his detailed nationalisation plans. It seems he changed his mind and decided to put off the subject until a later date, and the BBC pulled the article. But the damage was done.

Corbyn hasn’t spoken directly about SSE itself, but he has made clear his intention of nationalising the utilities business.

Popular

Whether Labour will win the next election is completely up in the air — but Corbyn’s chances might be high, with surveys suggesting around three quarters of the UK population are in favour of his nationalisation aims.

But it would be an enormous task. National Grid and SSE are the two biggest, with market capitalisation figures of £28.4bn and £11.8bn, respectively. Adding just the other FTSE 100 utilities firms to the list gets us a total of £56.9bn.

Then there are all the new upstart energy suppliers whose businesses will have to be bought out, and there are going to be plenty of other hefty costs too — so it’s going to be an expensive business.

Payment

Corbyn has mooted the idea of compensating shareholders with government bonds. Now, I don’t know about you, but I certainly don’t want any of those — though I suppose they can be sold easily enough.

One big uncertainty is what prices the companies might be bought out at. But it’s hard to imagine a possibility these days of the government being able to snap them up on the cheap at below market value. But those market values are already being damaged by Labour’s pronouncements.

A buyout of National Grid would be complicated by the fact that half the company’s business in in the USA, though that hurdle is not there with SSE.

Don’t panic

The two things that make me feel shareholders don’t have a huge amount to worry about is that there will surely be big legal challenges to anything institutional investors might feel is unfair, and that I expect it will all take a very, very long time.

In my view, either nationalisation won’t actually happen, or if it does, it will be at a fair price.

Financial Independence, Retire Early

If you’ve ever dreamt of retiring early, or if you’re already retired and protecting your financial independence is your aim, then this could be the report for you!

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All-Ireland electricity market sparks negative pricing

The new all-Ireland electricity market that came into effect last October has led to increased volatility in prices in the wholesale market, and a number of occasions when power companies were forced to pay commercial customers to accept their excess energy, according to Dublin-based energy trading company.

Under the Integrated Single Electricity Market (I-SEM), designed to boost efficiency and align Irish energy costs more closely with those in Europe, all generators, including wind companies, are required to price and sell their electricity output 12 to 36 hours ahead of actual delivery.

However, wind companies are often unable to accurately forecast their output up to 36 hours in advance.

“[When] wind output is very high we begin to see more circumstances whereby conventional power plants begin to offer their output for a negative price in an effort to avoid switching the unit off and having to go through a maintenance intensive operation to restart the facility when they are required ,as wind reduces,” said Ronan Doherty, chief executive of ElectroRoute, a Dublin-headquartered energy trading company.

Mr Doherty said that there have been 556 half-hour periods of negative pricing between October and mid-April in a market for power that has not been traded in advance. This is known as the balancing market.

Smart meters

While big companies can take advantage of power market fluctuations and secure negatively-priced energy, this is not currently an option for households. Still, Mr Doherty said that advent of smart meters, which will give consumers greater control over energy use, may in time provide an opportunity for households to benefit from periods of negative pricing in the balancing market.

Every domestic electricity meter in Ireland is set to be replaced by a smart meter by the end of 2020, according to ESB Networks.

While negative pricing is a common feature of the European energy market, it is a new phenomenon in Ireland.

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Britain Is Brimming With Natural Gas

Britain’s appetite for natural gas usually declines in the summer, but this season is different with a record number of LNG tankers due to land this month.

The incoming cargoes show no sign of slowing, and will keep the pressure on benchmark prices already trading below their five-year seasonal average. That’s good news for factories and households as Brexit clouds the nation’s economic outlook.

“We can expect a significant pressure on prices this summer,” said Murray Douglas, a research director for European gas at Wood Mackenzie Ltd. “The global LNG market is strong, we will still have a lots of LNG turning from the Asian to the European markets and we still see lots of LNG deals” and approvals for new projects.

Cargoes are heading to the U.K. and other northwest European nations because thanks to the extensive infrastructure and traded hubs they can absorb any global surplus as well as handle a growing worldwide production boom. Britain is still taking imports of the super-chilled commodity even after its gas export pipeline shut for repairs this month.

LNG prices in Asia, the biggest consumer of the fuel, have also been too low to spur traders to ship cargoes east. Cooler weather is also supporting demand in the U.K.

For projects due to reach FIDs this year, read this BloombergNEF report

While Asian LNG spot prices have regained their traditional premium over European hubs, Atlantic basin suppliers such as the U.S. and west Africa are still sending most of their cargoes to Europe, their nearest liquid market. Longer term, more plants are due to start producing LNG and a number of projects from Mozambique to Russia are nearing investment decisions this year.

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The truth about renewable subsidies

As Drax holds its AGM in London a new campaign calls for UK renewables subsidies to be diverted from biomass burning to genuinely renewable energy.

A surcharge on UK energy bills is funding subsidies for biomass electricity generation that is making climate change worse, polluting communities, destroying forests and harming wildlife.

In 2017, the UK Government granted around £1 billion in renewable subsidies to power stations – including Drax Power Station in Yorkshire – to burn millions of tonnes of wood for electricity.

Drax alone received £729 million – around £2 million per day – in subsidies to burn wood pellets and is now the world’s largest biomass burner.

Biodiversity hotspots

Despite claims by the biomass industry that they mostly burn “low-grade wood residues”, US conservation NGOs have proven that a significant proportion of wood pellets for Drax and other UK power stations comes from the clearcutting of whole trees from wetland forests in the Southern US.

These forests are at the heart of a biodiversity hotspot and are home to many endangered species, including salamanders, the Louisiana black bear and the Venus flytrap.

Meanwhile, new subsidies for onshore wind and solar power have been scrapped while the government is only planning to allocate £60m for the next round of renewable energy funding in May.

However, with a fixed amount of government money available for renewable energy under the Levy Control Framework, ending the generous biomass subsidies would automatically release around £800m for genuinely low-carbon wind, wave and solar power.

This would make a huge difference in reducing both our air pollution and our greenhouse gas emissions.

Sustainable?

Why are biomass power plants receiving these huge renewable subsidies for burning wood?

Governments and the biomass industry argue that converting old coal power plants to burn wood is ‘green energy’ which can help reduce our carbon emissions.

This argument is based on the mistaken belief that burning wood is ‘carbon neutral’ because there is an assumption that new trees will absorb the carbon emissions produced by the burning.

This has allowed the biomass industry to present itself as a ‘low carbon’ and ‘sustainable’ alternative to fossil fuels, with the Minister of State for Climate Change and Industry describing biomass as “a cost-effective and transitional means of decarbonising the electricity grid”.

Drax’s Chief Executive, Will Gardiner, claimed that the power station is: “the biggest decarbonisation project in Europe” and a “key part of the climate change solution.”

Green deserts 

However, the truth is that there is nothing renewable or sustainable about biomass burning. By contrast, biomass comes at an enormous cost for communities, wildlife, forests and the climate.

The biomass industry claims that it is actually helping to increase forest growth in America by felling large areas of forest and replanting them with new trees.

Yet, this supposed forest growth disguises the fact that when new trees are planted in these areas, they are often monoculture plantations which cannot support biodiverse species and are little more than ‘green deserts’ for wildlife.

The destruction of forests to provide fuel for biomass burning is also harming communities who live near the US wood pellet production sites and the UK biomass power stations.

Wood pellet production causes noise and water pollution for local communities in the Southern US, while both pellet mills and biomass power stations produce dangerous air pollution, including small particulates which can enter the bloodstream and cause cancer, heart disease and neurological problems.

Climate impact

The fact that biomass burning is increasing climate change is equally alarming. Far from being carbon neutral, burning wood actually emits more CO2 than coal per unit of energy generated because the higher moisture content means that burning it is less efficient.

In 2017, Drax alone emitted 11.7 million tonnes of CO2  from burning wood. This is more than the total amount by which the UK should be reducing emissions every year in order to meet its carbon budgets.

Biomass proponents claim that these emissions will be reabsorbed by forest regrowth or by planting new trees, but new trees will take decades or even longer to reabsorb the emissions, if they ever can. This is time which we do not have if we are to avoid the worst effects of climate breakdown.

The climate impact of burning wood for energy was highlighted by 800 scientists in a letter to the European Parliament in January 2018: “Even if forests are allowed to regrow, using wood deliberately harvested for burning will increase carbon in the atmosphere and warming for decades to centuries […] even when wood replaces coal, oil or natural gas. The reasons are fundamental and occur regardless of whether forest management is “sustainable.”

Burning wood not only adds to carbon emissions, but it also destroys the very forests which we need to absorb our greenhouse gases.

Bhis technology has not been tried in large power stations and many experts regard it as unfeasible, but the biomass industry argues that new carbon capture and storage technology will allow it to remove its emissions from the atmosphere.

Climate solutions 

We already have the most powerful means to remove carbon dioxide from the atmosphere and reduce climate breakdown – forests.

Protecting and restoring the world’s forests is as important as phasing out fossil fuels if we are to keep global temperature rises to 1.5 degrees, as 40 international scientists argued in response to the IPCC report in October: “While high-tech carbon dioxide removal solutions are under development, the “natural technology” of forests is currently the only proven means of removing and storing atmospheric CO2 at a scale that can meaningfully contribute to achieving carbon balance.”

In the light of the IPCC report’s dire warning that we are running out of time to save the planet from the worst effects of climate breakdown, it is essential that we stop wasting our money on the false solution of biomass burning and instead redirect subsidies to genuinely renewable wind, wave and solar power.

Over 120 international environmental groups emphasised in their position statement on forest biomass energy in October 2018: “Subsidies for forest biomass energy must be eliminated. Protecting and restoring the world’s forests is a climate change solution, burning them is not.”

Taking action

It is more urgent than ever that we call for an end to subsidies for burning wood, as Drax prepares to hold its AGM in London this coming week.

If you would like to take action to save forests and our climate from biomass burning, Biofuelwatch has launched a new campaign for people to ask their MPs to help redirect subsidies from biomass power stations to genuine renewables.

Last year, the government made a positive first step by effectively ruling out future subsidies for large-scale biomass electricity. This sends a strong message that biomass burning is not part of the solution to climate change.

However, the change in the subsidies rules only applies to new projects and existing biomass power stations are currently set to continue receiving many billions of pounds in subsidies between now and 2027, unless we can redirect them to wind, wave and solar power. Fortunately, this could be done easily through secondary legislation.

This is why we urgently need your help to contact your MP and if you’re in London on Wednesday, we’d love to see you at our protest outside the Drax AGM.

Please feel free to get in touch with Biofuelwatch if you have any questions or would like to organise a workshop or screening of the award-winning documentary: “Burned: are trees the new coal?

Together, we can persuade parliament to tackle climate change, save forests, reduce pollution and combat environmental injustice by ending subsidies for burning wood.

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UK power stations have gone without coal for the longest period since the Industrial Revolution

BRITAIN’s power stations have gone without coal for the longest period since the Industrial Revolution – it emerged yesterday.

Ministers hailed new industry figures which revealed the bulk of electricity over the Easter weekend was generated by renewable ‘green’ energy and nuke power.

Not a single kilo of coal had been burned for 82 hours.

In China, around 75 per cent of its electricity comes from coal.

The staggering figures were championed by Health Secretary Matt Hancock on Twitter.

The Tory leadership contender said: “One reason the UK has cut carbon emissions more than almost anywhere. It’s worth celebrating.”

Under current Government plans, all coal power plants are due to close in 2025 – five years ahead of Canada.