Regulator says UK faces major energy shortfall

20 February 2013

On February 19 Alistair Buchanan, the chief executive of UK energy regulator Ofgem, said that with not enough generation capacity being built, the UK might have to rely on gas imports to keep the lights on just as global gas demand soars. This was likely to cause a big rise in energy costs for domestic and industrial users, he said.

In March, some 10% of the UK’s total energy generation capacity will shut down to meet EU-imposed emissions targets. This represents around 8GW of the country’s 28GW coal-fired power generation capacity

The EU Large Combustion Plant Directive – signed by the last Labour government – forces all coal or oil-fired power plants built before 1987 to install expensive emissions-reducing equipment or face closure by 2015.

Of the remaining 20GW of coal, only 6GW would currently pass the test, Buchanan said. At the same time, the UK’s dependence on gas will double from 30% of usage to 60% – even though many gas plants have being mothballed because they are loss-making.

Plants are already closing, and although planning permission for new ones has been granted, nothing is actually being built. The newest gas-fired station at Carrington, Greater Manchester, would not be ready for another four years even if construction started today, Buchanan said.

Currently the UK can generate 15% more energy than it needs, but this will drop to below 5% by 2015, according to Ofgem’s most recent research.

“Things are going to be very tight in three years’ time,’ Buchanan said. ‘Where’s the new nuclear, where’s the clean coal, where’s the carbon capture we were promised? We must be careful not to overplay new wind. We’re going to be short on capacity.”

Buchanan said it would push the UK “uncomfortably close” to a level where it must rely on imports to keep the lights on, or risk 1970s’ style blackouts.

He added: “The question we must now ask is how well do we know our neighbours? Have our neighbours got spare, and will they let it flow to us?”

Even shale gas would not save the UK, he said. “Dirt cheap” shale gas from the US would be shipped to Asia rather than the UK. And with China’s hunger for gas rising by more than 20% every year, global demand will only increase. “The horror,” he said, “is that this is at the time we are turning to gas power stations to get through this window”.

Buchanan pointed out that gas was already 60% more expensive in countries such as Japan that relied on imports. It was impossible to predict how high bills could go for users, he said.