At last – the UK energy regulators have woken up to what everyone else has been saying for months – Britain’s energy infrastructure is crumbling – and massive price rises, plus probable power outages, face the British consumer for the next five years.
The electricity industry is delighted at the announcement – they expect the result will be more subsidies to build a bigger and more wasteful energy infrastructure. They are already demanding cash for the so-called smart grid. Now companies like EDF, the French nuclear giant, want an increase in subsidies for “clean“ energy such as nuclear, so it can get increased payments for more nuclear reactors
According to Dow Jones ”U.K. utilities welcomed proposals from gas and electricity regulator Ofgem for a radical shakeup in regulations that will lead to more government intervention in the liberalized energy market.” Isn’t this a sign that Ofgem have got it wrong?
The positive response from Big Power reflects the huge cost of the challenges gas and power companies face in replacing aging energy infrastructure or adapting it to a low carbon future.
“EDF Energy welcomes [Ofgem’s] recognition of the need for reform of the U.K. energy market,” said the utility’s Chief Executive Vincent de Rivaz. “Changes to the market are needed if we are to meet the challenge facing the U.K. to provide clean, secure and affordable energy.”
The one assumption that nobody is questioning is whether to continue to enhance the existing, wasteful national grid. The billions could be more effectively spent developing locaql micro-grids.
The U.K.’s gas and electricity network operator National Grid PLC (NGG), which will have to make huge future investments connecting new power plants and wind farms, also welcomed Ofgem’s proposals.
“The current framework has served us well, but it makes simple common sense that it will have to change to meet the big challenges ahead,” said Nick Winser, National Grid’s director of transmission. “The right market arrangement and incentives will be vital to the success of all the work National Grid is doing to prepare for the future.”
EDF Energy, the U.K. arm of French state-controlled Electricite de France SA (EDF.FR), is the largest operator of nuclear power plants in the British Isles and plans massive investment in a new fleet of reactors. The company has said in the past that additional government action, such as setting a floor price for carbon dioxide emissions allowances, may be necessary to build low carbon technology, such as new nuclear plants, on the scale required.
Ofgem said that the financial crisis and uncertainty over future carbon prices, following the weak agreement at the Copenhagen climate change summit, cast doubt on whether the free market can deliver the GBP200 million investment needed to secure energy supplies over the next 10 to 15 years.
“We agree with Ofgem that uncertainty in future carbon prices risks delaying investment in low carbon technology,” said de Rivaz. “We believe that a priority action should be to establish greater long-term clarity on the carbon price…the U.K. could do this independently if necessary.”
Industry lobby group, the Association of Electricity Producers, expressed some skepticism about Ofgem’s most radical proposal–a central energy buyer that would determine the amount and type of new generation needed and enter into long-term energy contracts for power.
“The industry is plagued with political and regulatory uncertainty,” said David Porter, Chief Executive of the AEP. “The last time we changed the electricity trading arrangements it took three or four years to complete.”