Are the lights about to go out all over Britain?

Are the lights about to go out all over Britain? In 2005, Henry Davey, an energy expert at the law firm, Herbert Smith, offered his diagnosis on the UK's energy prospects. Mr Davey is at the helm of the Government's efforts to supply the £200bn investment in energy infrastructure it believes is needed by the end of the decade. There are three key questions: will enough nuclear power stations be built for the Government to meet its low carbon ambitions? Will the UK have enough power to keep the lights on? And, if so, at what cost to consumers? The consortium of RWE and E. Scenario modelling by Ofgem, the energy regulator, suggests capacity margins could now dip far lower between 2016 and 2019 than had once been assumed. The concern among some experts, though, is that Thursday's decision could put EDF in an alarmingly powerful position. Domestic gas production is declining and the UK is increasingly dependent on supplies of liquefied natural gas (LNG), with demand from Asia pushing prices higher. The UK now faces being a "hostage to volatile gas prices for years to come", Alistair Smith of the Institution of Mechanical Engineers said. High gas prices, combined with the increase in cheap but intermittent solar and wind power, together mean margins on gas-fired stations remain unattractive to investors. But the £200bn energy investment ministers say they are still aiming for was based on rather different economic assumptions. Last week the German utility giants RWE and E. They are not the only ones. That price is yet to be determined. "It will be the key single biggest element," in the Hinkley Point decision, Vincent de Rivaz, EDF Energy chief executive, told The Sunday Telegraph. While the notion that ministers were powerless to prevent their exit from UK nuclear could hardly be reassuring, ministers could draw some limited comfort from the companies' insistence that UK policy wasn't to blame. Davey and his DECC colleagues will, however, know they may not be able to duck the blame if French-owned giant EDF Energy were to decide against building its proposed plant at Hinkley Point. The Institute of Directors has also warned: "The longer it takes for our policy makers to accept the reality that the £200bn investment will not happen, the more expensive it will be to change direction," Ed Davey and the Chancellor, George Osborne, indicated their acceptance ofthat new reality last month, unveiling plans for a new gas strategy. Ministers insist there is interest, but if there are serious contenders details are not yet forthcoming. The Government could "pull this situation back from near-disaster" if it finds another partner for the Horizon project. But consumers who last year saw household energy bills hit record highs, blamed on "high gas prices", may doubt the logic of cheap gas. "You're looking at a huge gas over-dependency, a dreadful lack of balance on the network," Mr Lodge said. New nuclear may be key to the Government's long-term energy plans but experts point to shorter-term pressures when it comes to security of supply. Old and polluting coal-fired power stations are facing closure after using up their European Union-allotted running hours more rapidly than once thought, while new renewables are not going ahead as rapidly had been envisaged. "My opinion is no," Peter Osbaldstone, lead analyst at energy specialists Wood Mackenzie, said. "Getting the right commercial incentives for the market to respond to the future challenges, coupled with a clear steer of where nuclear will sit within the long-term energy mix, is essential. He is optimistic there will be an agreement: "Everything is moving in the right direction, at the right pace. Angela Merkel took the call in the face of overwhelming public opposition following the Fukushima disaster, landing the utilities with significant decommissioning costs. Their decision to withdraw was, therefore, the Department of Energy and Climate Change (DECC) admitted, "very disappointing". Both RWE and E. Last winter was mild, lowering demand that already remained muted from the recession. Avoiding that risk will depend upon the Government pursuing the only real option left: new gas plants. Are the lights about to go out all over Britain? Trade News selected by Local Linkup on 02/04/2012