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EU energy targets require radical shake-up

United Kingdom
Financial Times
Sylvia Pfeifer, Ed Crooks, David Blair and Elizabeth Rigby

Sam Laidlaw, chief executive of Centrica, says: “The old utility business model is dead.”

Speaking at the Royal Society of Arts this year, the head of one of Britain’s biggest utilities pulled no punches in his assessment of the challenges his company and others faced as they sought to adapt to the coming shake-up in energy markets.

Mr Laidlaw went on to predict that the overhaul of the UK’s energy industry this decade would be as radical as the liberalisation of the gas and electricity markets in the 1990s.

“Electricity market reform, together with support for the carbon price, are both needed to deliver the significant investment Britain needs to ensure secure and decarbonised power generation into the future,” he said.

Along with other European Union member states, the UK is committed to reducing greenhouse gas emissions by 34% by the year 2020, compared with 1990. And at the national level, through the Climate Change Act, it has said it will cut emissions by 80% by 2050. It also aims for renewable energy to supply 15% of the UK’s total energy demand by 2020.

Meeting all these objectives will not be cheap. Ofgem, the energy regulator, has estimated £200bn of investment will be required in the energy sector alone to meet these targets and connect new sources of energy such as wind and solar to the national grid.

Deutsche Bank argues in a recent report that a determined effort to move towards the EU target for renewables would generate thousands of jobs and revive depressed manufacturing regions.

However, it warns that essential private sector investment will not be forthcoming unless the European government puts in place transparent and long-term regulatory regimes. It adds Britain is well behind most other EU members in the development of renewable energy.

Getting the mix of different energy sources right will not be easy. The government also needs to make sure it sticks to its pledge that there will be no public subsidy for new nuclear power.

Chris Huhne, the energy secretary, said this month that “left untouched, the electricity market would allow a new dash for gas, increasing our dependence on a single fuel and exposing us to volatile prices”.

Others, however, argue that the government needs to ensure it does not promote a cut in investment in new gas-fired power stations, which they point out emit 50% less carbon than coal and are a more reliable source of energy than wind.

“By 2015 or 2016, the irony is that all these people who want to build wind farms offshore might end up relying on coal-fired power stations to keep the lights on,” said Dieter Helm, professor of energy policy at Oxford university. “The big unknown about offshore wind is how often it will work.”

Gareth Stace, head of climate and environment policy at EEF, the manufacturers’ organisation, said the Treasury needed to take a more holistic approach: “At the moment we have a carbon reduction commitment, the carbon price support mechanism and the climate change levy requirement.

Our concern is that it will become just another scheme layering on to other schemes.”

El contenido de las noticias que se presentan en esta sección es responsabilidad directa de las agencias emisoras de noticias y no necesariamente reflejan la posición del Gobierno de México en este u otros temas relacionados.


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