UK set to miss 2010 renewables, CO2 reduction targets: Cam Econ

London (Platts)--9Mar2007

The UK is set to miss government targets of producing 10% of electricity
from renewables by 2010. And its target of cutting carbon dioxide emissions by
20% by 2010 seems, on current policies, to be unlikely to be met even by 2020.

These are the key findings of latest research from consultants and
forecasters Cambridge Econometrics, based on the latest edition of their "UK
Energy and the Environment" study. The forecasts are produced from a
sophisticated computer model of UK electricity generation.

The UK is widely expected to meet its Kyoto Protocol target of cutting a
basket of greenhouse gases by 12.5% from 1990 levels by 2010. But that is
because good performance on other greenhouse gases outweighs bad performance
on CO2 reductions. High natural gas prices in recent years have had a
particular effect in keeping up UK CO2 levels by driving generators to burn
coal and oil instead of natural gas, which is a cleaner fuel. Development of
renewables, mainly wind power, often runs into planning permission problems.

European Union ministers are now debating at a council meeting a
Europe-wide target of cutting carbon dioxide emissions by 20% by 2020. But the
Cam Econ report suggests that even if this target is agreed, the UK could have
trouble reaching this 20% target even by 2020. And some in Europe want to go
as far as 30% cuts by 2020.

Cam Econ believes that renewables will make up only 8% of total
electricity generation in 2010, as new gas-fired power plants make up much of
new build capacity rather than renewables.

But if electricity demand grows around 1%/year over 2010-20 and fossil
fuel prices remain relatively high, Cam Econ thinks the share of renewables in
generation could increase to around 14.5% by 2015, just short of the 15%
target set out in the government's renewables obligation, and could reach 20%
by 2020, the latter in line with government aspirations.

The share of renewables obligation eligible renewable sources in UK
electricity generation rose from under 2% in 2002 to 4% in 2005. The
government is looking at new ways to administer the renewables obligation, but
such changes would not affect the situation in time to substantially affect
the 2010 renewables target, Cam Econ believes.

Lower than hoped for renewables growth has combined with high coal burn
to push up CO2 emissions. Following a 3% decline in 2002, CO2 emissions rose
by around 2% in 2003, increased slightly in 2004-05, then rose by an estimated
1% in 2006. CO2 emissions are forecast to be just 14.3% below the 1990 level
in 2010, good enough for Kyoto, but not for the UK's own targets.

Cam Econ believes that after 2010 carbon emissions will stabilize to 2015
as a modest decline from power generation and industry is broadly offset by
continued growth in non-industrial sectors. From 2015 to 2020 carbon emissions
could fall 0.5%/year as emissions from power generation fall more quickly than
growth elsewhere, with power falling by 2.5%/year, as a result of phasing out
of old coal-fired generation.

By 2020, says Cam Econ, carbon dioxide emissions could be 15.5% below the
1990 baseline. But that would not meet the government's 2010 target, nor even
the EU's proposed 2020 target.