UK energy prices to rise in supply 'roller-coaster' - regulator

LONDON Tue Feb 19, 2013 12:30pm GMT

A gas cooker is seen in Boroughbridge, northern England November 13, 2012. REUTERS/Nigel Roddis

A gas cooker is seen in Boroughbridge, northern England November 13, 2012.

Credit: Reuters/Nigel Roddis

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LONDON (Reuters) - Britain faces a rise in energy prices as the market is on a bumpy ride heading for a power supply crunch while needing to compete globally for gas resources, the outgoing head of energy regulator Ofgem said.

Alistair Buchanan warned in a column published in The Telegraph newspaper on Tuesday that within three years Britain's spare generation capacity would become "uncomfortably tight" and that avoiding supply shortages would carry a price.

"If you can imagine a ride on a roller-coaster at a fairground, then this winter, we are at the top of the circuit and we head downhill - fast," said Buchanan, who is stepping down as chief executive in June after 10 years in the job.

Britain's excess power generation capacity will shrink to 4 percent by 2015/16 from 14 percent now as old and polluting power plants close without immediate replacement.

Buchanan said this meant Britain's electricity network operator National Grid faced tough challenge over the next few years to ensure the lights stay on because of a lack of spare production capacity over a prolonged period.

At the same time, energy technologies such as wind farms, nuclear plants and carbon capture and storage (CCS) facilities have faced financial obstacles, making gas the most likely fuel to produce electricity in the short term, he said.

"The big worry about gas for all consumers is what price will we have to pay to get it? Because just when we need more gas, world demand for gas is set to rise while our own supplies are predicted to fall by another 25 percent by 2020," he said.

Unlike in the U.S., shale gas is not going to contribute significantly in Britain or elsewhere in Europe, he added, leaving Britain prone to competing for liquefied natural gas (LNG) in the global market.

Britain's energy ministry said in response to Buchanan's warning that the government's reform of the electricity market was aimed at plugging the supply gap.

"Our reforms will incentivise a record 110 billion pounds ($170.27 billion) of private sector investment in new clean power generation - in renewables, new gas, nuclear and CCS," a spokesman for the ministry said.

Britain plans to create a capacity market whereby backup plants, such as gas stations, are spurred to power up at times when intermittent renewable energy plants are not producing.

(Reporting by Karolin Schaps; editing by James Jukwey)

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Comments (1)
farmerrobin wrote:
as ever, the nuclear lobby holding sway; apart from the fact that it takes years to build a nuclear powered power station, there is always the conveniently sidelined matter of the waste products, some of which will be dangerous for up to 100,000 years!!! we currently have a £60 plus BILLION pound problem with existing waste which nobody has a clue what to do with but, hey ho, our lords & masters [the fact they are elected representatives goews straight out of the window once they have settled themselves in parliament] are conveniently ignorin g this teensy, ongoing problem instead of spending, probably much less money on the totally renewable [until the tides stop] energy that the Severn barrage could generate ad infinitum except for maintenance –not 30 or 40 years as per a nuclear facility. There is, according to some reports, plenty of gas beneath various parts of the country [Whitehall] to keep us going without new nuclear facilities in the shortish term so why is everyone so keen on nuclear/oil. bought in gas? could there be massive lobbying in progress and who will gain from it all? I know who will lose; the tax payer as ever.

Feb 19, 2013 2:07pm GMT  --  Report as abuse
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