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UK energy crisis within 10 years

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FEARS OF the UK facing an energy crisis within 10 years escalated this week with the publication of a report by business consultant LogicaCMG.

It predicts that by 2015 the UK energy demand could exceed supply by 23% at peak times, suggesting that the crisis is more imminent and serious then previously thought.

The report, Mind the Gap, warns that in just four years the gap between supply and demand could be 5%; by 2025 this figure could have risen to 30%.

Former ICE Energy Board chairman David Anderson said: 'There is a huge gap in energy.

The 2003 [ICE] State of the Nation report predicted all this and the sad news is that none of it's changed.' Over the coming years generation plant will be retired as it reaches the end of its working life. Anderson warns that the market situation means that investment into replenishing capacity shortfall might not be forthcoming.

Investment in new gas or coal generation (nuclear could not be built fast enough to plug this gap) is based on the 'spark spread' for gas and the 'dark spread' for coal.

The spark spread is the relationship between the gas price and the electricity price.

If the margin between the two is small then an energy firm will not invest in new plant because the risk on return is too great.

The same is true for coal under the dark spread.

If the spread is right for investment the energy firm will want to be sure that its investment plan is not put at risk by outside issues, such as set backs in the planning phase.

To address the issue LogicCMG energy and utilities business managing director Kieron Brennan said that 'planning laws around the storage of energy resources and the construction of new generation facilities will need to change as a matter of urgency'.

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