Byers scraps gas moratorium and approves six new stations

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The Government scrapped its moratorium on building further gas-fired power stations yesterday and gave the go-ahead for a £2bn investment in six new projects.

The Government scrapped its moratorium on building further gas-fired power stations yesterday and gave the go-ahead for a £2bn investment in six new projects.

The announcement coincided with European Commission approval for a £110m aid package for the British coal industry to help protect the country's 17 remaining deep mines.

Stephen Byers, the Secretary of State for Trade and Industry, said he had decided to lift the moratorium "with immediate effect" because the reforms in the electricity market designed to lead to lower power prices were largely complete.

Mr Byers' predecessor, Peter Mandelson, introduced the moratorium in October 1998 to halt the "dash for gas", and prevent the imminent closure of several deep mines. The controversial move created uproar, with several American-owned power producers threatening to pull out of the UK and diplomatic pressure brought to bear on Tony Blair through the US embassy.

If all six of the projects approved by Mr Byers yesterday go ahead, they could generate enough electricity to displace 15 million tonnes of coal a year - enough to wipe out half of what is left of Britain's mining industry. There are doubts as to whether all six stations will be built, however, since the price of gas has risen three-fold to 29p a therm since the moratorium was imposed.

The US-owned NRG said yesterday it would go ahead with a £600m gas-fired station built by its Wainstones Power subsidiary at Langage Energy Park near Plymouth in Devon, one of the six approved by Mr Byers. A senior NRG director, Robert Brown, said the 1,000 megawatt station could help secure up to 4,000 jobs, bringing a huge boost to the economy of the South-west.

The other approved stations are at Spalding and Scunthorpe in Lincolnshire, Fleetwood and Partington in Lancashire, and the Isle of Grain in Kent.

Mr Byers said the six projects would provide 8,000 man-years of employment and would result in more competition in the generating market, cheap heat and power, and greater security of supply.

But Friends of the Earth said the resumption of the "dash for gas" was a "serious blow" to the Government's climate change project. Mark Johnston, FoE's energy campaigner, said this type of power plant was based on second-rate technology that wasted rather than recycled heat.

The Confederation of UK Coal Producers welcomed the announcement of the £110m in subsidies, saying the aid would ensure Britain maintained an energy option that it would otherwise have lost at a time of sharply rising oil and gas prices. The subsidies, available over a two-year period, will help maintain production at Britain's 17 remaining deep mines employing around 15,000. The biggest recipient of aid will be RJB, which is expected to receive about £70m to subsidise output from its 13 remaining deep mines.

The group has 8,000 employees and produces around 20m tonnes of coal a year. In anticipation of approval for the £70m grant, it has been keeping open its loss-making pits at Ellington in the North-east and Clipstone in Nottinghamshire. Between them the two collieries employ 3,000 people.

Mr Byers said that it remained government policy for the coal industry to find its own place in a competitive energy market. To qualify for support, coal producers must demonstrate that a mine will have a commercially feasible future once the subsidy runs out.

Although the Mr Byers said that the reforms to the generating market were largely complete, the new electricity trading arrangements, which are due to have been introduced by next week, have been put back until next March because of computer problems.