E.On have annouced that they are going out to consulatation with regard to the development of their Kingsnorth plant. Kingsnorth currently has 4 500MW units which burn coal, under the LPCD (Large Plant Combustion Directive) they would have to close this plant down by 2015. So not surprisingly they are looking at alternatives. The favoured plan at the moment is to build two 800MW Advanced super critical boiler units, these would facilitate carbon capture and storage and would also increase the effeciency of the plant from 36% to 45%. What is interesting about this project is that it puts it in direct competition with CCGT technology.

So the assumption is that E.On have a view that coal prices will remain lower than gas prices for the forseeable future. Given that we are seeing gas and coal prices converge at the day ahead stage it is a brave call however you look at it.