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Lacking energy

Does the government have the time and political nerve to deliver green and secure energy? John McKenna reports.

This week, in his speech to the CBI, Prime Minister Gordon Brown claimed that it was imperative to take a long-term approach to the UK's energy needs. Such an approach was, he said, vital to meet the twin challenges of energy security and climate change.

Brown's words, while laudable, may have had a hollow ring about them for many engineers working in the energy sector. The Labour government, just like its Tory predecessor, has been wedded to the private market as a way to determine what infrastructure will be supplied to meet the UK's energy demands.

As a result, decisions taken by energy providers very rarely follow the ideal long-term vision that Brown laid out. Rather, they have focused on facilities that are the cheapest and quickest to build – namely, gas-fired power plants.

The UK has long been reliant on gas for its heating needs, and since the 1990s, when a large swathe of coal-fired power plants were replaced by gas facilities, it has come to be the dominant fuel for electricity generation, too.

Following the decline of North Sea reserves, the UK has made the switch from a net exporter to a net importer of gas. Completion of a gas pipeline from Norway last year and the construction of liquefied natural gas storage tanks in Milford Haven, Wales, will help ensure that the many gas-fired plants are fed with foreign fuel.

With Russia sitting on the world's largest gas reserves and famously turning off the supply to the Ukraine last year, this hardly correlates with Brown's vision of a secure energy supply.

Atkins executive board director Ivor Catto says there are three important challenges for the UK energy sector: climate change; security of supply; and keeping the lights on.

"My concern is that we will be forced into making short-term decisions to keep the lights on, to the detriment of the other two key points," says Catto.

In other words, as the government drags its heels on enshrining the energy white paper into legislation, the opportunity will be lost for new nuclear, clean coal and renewables to plug the energy gap left as ageing coal and nuclear power stations are decommissioned over the next 10 years.

ICE energy board chairman David Kerr estimates that roughly 25GW of UK generating capacity will need to be replaced in the next 15–20 years. Much of the UK's coal fleet, built after the Second World War and one of the dirtiest in Europe, will go offline in 2016 when strict EU legislation on emissions from coal-fired plants comes into force.

The decommissioning of nuclear plants should be more gradual, says Kerr, but he fears that several reactors may have to close earlier than planned.

Nuclear reactors that generate more than 25% of Britain's nuclear output were closed last month as maintenance problems emerged at three plants, adding to two plants already operating under capacity.

Two reactors at the Hartlepool power station were closed after corroded steel wire was discovered in the concrete casement of one of
the reactors, Torness power station in East Lothian was closed after an electrical fault and both reactors at the Heysham-1 power station south of Morecombe were also shut down.

The shut downs followed the four-month closures of reactors at Hinkley Point B and Hunterston B power stations last year after cracks in boiler tubes were discovered. The plants are now only back up to 60% operating capacity.

But for all of Gordon Brown's tub-thumping at the CBI, claiming that nuclear is a vital part of the UK's energy make-up, the procrastination of the Labour government over the past decade has meant that new nuclear power will not be available to fill the 2016 energy gap, due to the long lead times required for planning, design and construction.

Nuclear lobby group the Nuclear Industry Association has already accepted this, telling NCE in July that it would be gas that makes up the gap.

There is currently 16GW of capacity in planning, most of it gas, but there are also some coal-fired plants in the pipeline. While these are less-polluting than their coal-fired predecessors, they are not "clean coal" technologies and to get through the planning process they
must reserve a plot of land alongside so that one day, if required, carbon capture technology can be retrofitted.

Clean coal and nuclear are both more costly and time consuming to build than gas plants, and with the wholesale price of electricity so low at just 3p per kilowatt, generators could even stand to make a loss if they started building today (see graph).

With global demand for power plant rocketing, and a severe shortage of engineers and manufacturers to supply components, the cost of construction is only going up.

The government takes the economists' view that the market will sort itself out, and that high demand will drive supply.

But even the CBI thinks the market needs a gentle push in the right direction by politicians if we are to build anything other than gas-fired plants.

Government intervention in the market has so far been limited to the renewables obligation, which requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity they supply from renewable sources. The current level is 7.9% for 2007/08 rising to 15.4% by 2015/16.

The CBI's report this week, "Climate Change: Everyone's business", claims that an effective price for carbon is essential if we are to create a low carbon economy and meet the government target to cut carbon emissions by 60% by 2050, or even just the 20% by 2020. A high price for carbon would make investment in low carbon technologies more financially attractive to energy firms, but the current EU emissions trading scheme only lasts until 2012 and it is unclear what will replace it.

Mott MacDonald energy director Simon Harrison agrees that carbon pricing is vital to delivering green and secure energy, it is especially needed for clean coal and new nuclear.

"The long term construction and massive investment in nuclear means that carbon needs to be something you can forecast with relative certainty, so that you know nuclear will reap the financial benefit of being low carbon," he explains.

It looks like carbon pricing will be one area of energy policy the Government will be unable to throw back at the private sector and wash its hands of.

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