Industry chiefs warn on UK energy shortage

Friday, February 06, 2009

Three new gas-fired power stations will be given the go-ahead by the government on Thursday, but industry executives have warned there is still a need to speed up the pace of investment to prevent electricity shortages in the next decade.



Relations between Ed Miliband, energy secretary, and industry leaders have improved since last year, when he was accused of failing to understand the threat to future energy supplies.

However, executives still say there is a lack of coherence in energy policy. In Thursday’s Financial Times, Andrew Duff, chief executive of RWE Npower, one of the “big six” energy suppliers, writes: “Government and regulators continue to treat the big energy issues in isolation ... The drive to set and meet ever more stringent CO2 targets is not integrated with the ministerial push to tackle energy costs and, vitally, the need to ensure security of supply.”

The expected retirement of nine coal and oil-fired power stations over the next few years, forced by European Union regulations to curb acid rain, has raised fears that there will be an inadequate margin of generation capacity over peak demand, creating a risk of electricity shortages and blackouts.

Mr Duff said a “significant” proportion of those stations could be shut by 2013.

The approvals for the three power stations – to be built by RWE in Pembroke, Richard Budge’s Powerfuel in Hatfield, Yorkshire, and Centrica in King’s Lynn – reflected concern Britain could face a “generation gap” by the middle of the next decade, according to Dominic Maclaine, editor of New Power UK, an industry newsletter.

However, the new stations can only be part of the solution. They have a combined capacity of about 4,000 megawatts, compared with about 12,000MW for the stations scheduled to be closed, according to Utilyx, an energy risk management company. That compares with total electricity supply capacity of about 79,400MW.

Not all of the new plants are close to being built. Mr Budge said his Hatfield project, which has the option of burning coal – capturing and storing its carbon dioxide emissions – could be producing electricity by 2012.

Centrica’s planned expansion at its King’s Lynn site will not receive final investment decision until 2012, meaning it is likely to be operational in 2016. Nick Horler, chief executive of ScottishPower, said government and regulators needed to understand Britain was in an international competition for investment by multi-national energy companies, which had been sharpened by the election of Barack Obama as US president.

GDF Suez, the French utility group, said on Wednesday it was teaming up with Spain’s Iberdrola and Scottish and Southern Energy to look at building new nuclear reactors in Britain. The partners are also talking to Vattenfall of Sweden about joining the partnership.

This story was featured on the Financial Times website


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