6 June 2007

New investment in nuclear power and renewable energy in the UK may not materialise because London has failed to understand the needs of investors, a group of energy experts is warning.

According to the Financial Times, the UK Energy Research Centre (UKERC), a government-backed academic group, argues that ministers show signs of continuing to believe that there is a Central Electricity Generating Board that can be directed to follow policy objectives.
 

In the UK's highly competitive and fragmented electricity industry, the academics argue, the government's objectives depend on the private sector taking decisions to invest tens of billions of pounds, which will not necessarily be forthcoming.

Robert Gross of Imperial College London and UKERC said: "The government has set very ambitious goals for reducing carbon dioxide emissions, but at the moment it is impossible to see how those goals will be met. Somehow you have to get the private sector to invest in building nuclear power stations and more renewable generation, and get away from what the market would like to build, which is essentially more gas-fired power stations."

He said last month's energy white paper had not included enough analysis of the calculations of risk and reward that would be made by investors.

Without such analysis, he said, the government risked making more mistakes like the Renewables Obligation, setting incentives for companies to sell electricity from renewable sources, which encouraged investment in onshore wind farms, landfill gas production and little else.

In the white paper, the government promised to re-move barriers to nuclear development over issues such as licensing, planning and waste. Several companies have expressed an interest in new nuclear power stations, but many investors remain sceptical of their commercial appeal.

In spite of the uncertainties, EDF Energy, the UK arm of the French EDF Group, yesterday reiterated its commitment to be the first company to open one of the new generation of nuclear power stations. Vincent de Rivaz, EDF Energy's chief executive, told the FT his ambition was to build four new plants, opening a new one every two years after the first, which has a target date of the end of 2017, although EDF might share the ownership of some or all of them.

However, EDF is also planning to build one or two new gas-fired power stations, to help meet the shortage of generating capacity that it expects to emerge in the next decade.

In a speech to a nuclear industry forum in London Mr de Rivaz warned that the threat of a tight electricity supply balance in the next decade means that "we do not have the luxury of time", and if new nuclear investment does not proceed rapidly, the gap will be filled by more gas-fired power stations.

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