Energy firms must invest £200bn to meet UK targets

[bobalot]

Energy firms must invest £200bn to meet UK targets, says regulator

Ofgem warns of 60% rise in electricity and gas bills as private sector fails to deliver on security and green commitments

Volatile energy supplies over the next few years could lead to a surge in domestic bills, Ofgem warns. Photograph: Guardian

The energy regulator has warned that £200bn of new investment may be needed in the next few years in a tacit admission that the deregulated private sector industry is failing to deliver energy security and meet climate change plans for Britain.

Consumers could face price rises of up to 60% in their gas and electricity bills in the next seven years as energy supplies become more volatile, admitted Ofgem. The regulator has previously championed a low-cost market.

The unwillingness of energy companies to invest in Britain was underlined this week when German-owned utility E.ON postponed a plan to build a new "clean" coal-fired power station at Kingsnorth in Kent.

The recession and the difficulties of obtaining funding, plus uncertainties over government energy policies, have led some other companies to delay their plans for renewables or concentrate on building relatively cheap gas-fired plants.

But an Ofgem report said the biggest challenge was the country's growing reliance on a volatile global gas market as North Sea supplies dwindled and the need rose for variable power to compensate for intermittent sources such as wind.

"Our scenarios suggest that Britain faces a tough challenge in maintaining secure supplies whilst at the same time meeting its climate change targets ... Early action can avoid hasty and expensive measures later," said Ofgem chief executive, Alistair Buchanan.

Too little, too late
Energy analyst David Hunter at McKinnon & Clarke welcomed the Ofgem review but said it was a decade too late. "Lack of clear direction from the government has not given privately owned energy companies confidence in investing in the UK's energy market. This has led to ageing power stations not being replaced, a lacklustre approach to developing new technologies such as carbon capture and clean coal, and poor gas storage facilities."

The accountant Ernst & Young said the deregulated and competitive market had left companies making commercial decisions that suited their own interests but not necessarily those of the country.

The energy sector has been delivering investment of £6bn to £7bn of every year, but this is half the amount necessary by 2020 under the £200bn target used by Ofgem. "That [£200bn] figure is going to be a stretch," said Duncan Coneybeare, utility analyst at Ernst & Young.

Shadow energy secretary Greg Clark said the challenges in the energy sector came about because of government "dithering". "There has been no policy, effectively," he said. "We are in the situation we are because they have had their head in the sand for 12 years."

Clark said a Conservative government would take immediate action to authorise 5GW of capacity in clean coal and publish planning guidance for companies wishing to invest in nuclear power.

The Department of Energy and Climate Change said the report by the energy regulator was just a timely review of what might be needed in future.

"Ofgem is examining a range of hypothetical scenarios. It's prudent to do so, however unlikely they are. What's clear, and set out in our transition plan, is that there's no low-cost, high-carbon future. It's critical we maximise the effect of our planning reforms, clean energy rewards and efficiency measures to shift us away from fossil fuels and into a low-carbon mix," said a spokesman.

Gas dependence is predicted by the regulator to increase "dramatically", leading to risks if supplies are disrupted through a severe winter. Ofgem said that while the outlook for the coming Christmas period is "more comfortable" – with National Grid anticipating high capacity and good gas infrastructure – its analysis suggests "existing regulatory and market arrangements may well be tested severely over the next two decades". The report outlines its provisional assessment of supply issues. Ofgem is due to make further recommendations at the end of the year.

Market failure
But energy industry experts see the report as an acceptance that the market-driven system has failed and the government needs to be more interventionist.

The Which? consumer group said the Ofgem licensing agreements should force energy companies to build new gas storage facilities and other plants. "If the market isn't delivering the necessary investment, the government needs to act to ensure the lights won't go off and consumers aren't left to pick up the tab," it added.

The EEF manufacturing organisation said the Ofgem report raised questions about relying on a "dogmatic" approach to renewables targets, indicating these should be scaled down.

I bolded the interesting points.

I like this quote:

The accountant Ernst & Young said the deregulated and competitive market had left companies making commercial decisions that suited their own interests but not necessarily those of the country.

Seriously?! No way! The magic of the free market didn't ensure the long term interest of the entire nation was looked after? Who would have fucking thought! It's amazing that accountants and economists have only figured out what engineers on the ground have being warning of for years.

We have similar problems in South Australia and Victoria, private companies failing to invest in long term power production. Victoria in fact had some black outs not too long ago. South Australia saw it's energy prices soar after privatisation.

[Psychic_Sandwich]

Honestly, in the long term something like this might actually be good for the country, even if regular blackouts would be shitty to live through. If anything is calculated to crush opposition to nuclear power, it's having people actually suffer inconvenience due to a refusal to construct more plants.

[Darth Tanner]

even if regular blackouts would be shitty to live through

Thats already a certain in the UK, 40% of our generation capacity will be decommissioned within twenty years and nothing has even got to the planning stage on replacing it, other than a few hundred wind turbines that barely register a couple of pump storage units in Scotland.

Its particularly sickening that despite the only real electricity generation being built in the country being wind farms the only wind farm manufacturer in the country still shuts up and moves to china stating lack of demand as the cause.

Seriously?! No way! The magic of the free market didn't ensure the long term interest of the entire nation was looked after?

Although relying on private companies to take a long term view for the good of the country rather than their own interests is ridiculously stupid it is largely the governments fault as is indicated in the article. This country has not had an energy policy for decades, no company is going to invest the billions needed to build a nuclear reactor or a practical level of wind generation when government policy could render your investment worthless the day after its built. Just look at how long various governments have been pissing money down the drain with the Severn Barrage which could have been producing three or four nuclear reactors worth of power for the last twenty years if people had pulled their fingers out and done something.

Privatising it in the first place was just plain greed and stupidity though. If the country wasn't bankrupt it would be a great idea to renationalise it.

[[R_H]]

Ironically, there was an article in the local paper last week about the energy demand, but here the companies are worried that supply won't keep pace with demand. Basically they want to build nuke plants, but the greentards (and lefttards) are against it.

[Psychic_Sandwich]

Thats already a certain in the UK, 40% of our generation capacity will be decommissioned within twenty years and nothing has even got to the planning stage on replacing it, other than a few hundred wind turbines that barely register a couple of pump storage units in Scotland.

Its particularly sickening that despite the only real electricity generation being built in the country being wind farms the only wind farm manufacturer in the country still shuts up and moves to china stating lack of demand as the cause.

So change that to 'will be shitty to live through' then.

Ironically, there was an article in the local paper last week about the energy demand, but here the companies are worried that supply won't keep pace with demand. Basically they want to build nuke plants, but the greentards (and lefttards) are against it.

Well, ostensibly left wing Labour were, and AFAIK still are, pro-nuclear. As I understand it, it's a combination of ecomentalists and NIMBYs that scuppered that plan. Once we start getting rolling blackouts, nobody's going to listen to the Greens (possibly because they won't have a working telly with which to do so...), and there will probably be enough public support to just ignore the NIMBYs with no consequences.

[Darth Tanner]

Well, ostensibly left wing Labour were, and AFAIK still are, pro-nuclear.

Browns brother is head of media relations at EDF and Labour has regularly come out saying they approve in theory the idea of a new generation of nuclear reactors. The problem is that we just dont have the skill set in this country any more and even using French engineers there are plans for only a couple of reactors when we are set to shut eight of them in the next decade.

and there will probably be enough public support to just ignore the NIMBYs with no consequences.

NIMBYism could just be ignored by building the new reactors on the old sites, the MAGNOX reactor sites are huge and are essentially going to be left as barren wastelands as there's nothing else you could do with the land other than it serving as a great bird sanctuary.

[Rye]

Labour's nuke plans haven't been scuppered, at least not entirely. To be honest, their nuclear position is the main reason I'm going to vote for them next time. Everything else is just enough to put up with to get that, as much as I like the lib dems on most things.

[Master of Ossus]

Interstingly enough, England was one of the "success stories" for electric-market deregulation that the California Legislature studied way back when. I guess England didn't learn from California, either.

[bobalot]

As bad as NIMBYism and the Greentards are, they are simply a convenient excuse. We have had very similar problems in Australia. The State governments would be delighted for more coal power plants to be built. The fact is, private industry is simply not interested unless they get massive government handouts. The disgusting thing is, they might just get it.

[Jade Falcon]

Up in Scotland, Hunterston A, a Magnox station has been decommed for some years, B is due to be decommed and there was at one point plans to build a C Nuclear station but the greens have been kicking up hell.

Now it seems that they will be building a 'clean coal' reactor, citing the fact that at Hunterston it's idead due to the adjacent ex British Steel Deep water mooring.