Construction of power stations to replace ageing coal and nuclear plants may fail to go ahead due to low electricity prices, a top energy consultant said yesterday.
Wholesale electricity is currently valued at 3p per kilowatt hour - a price that research by consultant Parsons Brinckerhoff (PB) indicates is too low to persuade energy firms to invest billions in new power plants.
With embedded construction costs, the cost of generating electricity in new plants is currently greater than the wholesale electricity price, meaning energy firms would stand to lose money.
Speaking at Civils 2007, PB Power head of sustainable energy developments Ian Burden said: "Electricity prices are going to have to increase significantly if anybody is going to be induced to build power stations."
Burden added that the cost of generation is only likely to increase as a relatively small construction supply chain is squeezed by rocketing worldwide demand.
"Delivery periods are stretching enormously, the price of kit is going up and the UK will now have to pay premiums to get place in the que - everybody in the world wants new electricity generating plant," he said.
While there is 18GW of generating capacity planned in the UK to replace 30GW of nuclear and coal-fired plants due to go off-line in the next decade, Burden said there was a huge difference between energy firms submitting planning applications and then committing billions of pounds to actually build the facilities.
"There's no shortage of people coming forward to put new plant through planning, but it's a relatively small investment put a submission together to get planning permission," said Burden.
"But the boards of electricity firms are unlikely to be convinced that it's then worth making the major investment in new plant so long as the cost of generation in new build is greater than the wholesale price of electricity, effectively losing them money."