LONDON, England, October 29, 2007.
Market forces and an explicit price for carbon will boost the uptake of
renewable energies for green power, green fuels and green heat, concludes a
report from the British government.
“In the very long term, the fuel inputs to renewable energy are much more
plentiful than those forms of energy production which depend on the
irreversible use of finite geological resources,” says ‘Energy Markets
Outlook’ produced by the UK Department for Business, Enterprise & Regulatory
Reform. “As these geological resources become scarcer and the easily
accessible reserves are depleted, the commodity price can be expected to
rise, encouraging both demand reduction and the development of previously
unexploited supply sources as well as increasing the competitiveness of
alternative energy sources. Investment and experience should ensure cost
reductions through economies of scale and technological improvement.”
“These market forces, along with the incorporation of an explicit carbon
price into the cost of fossil fuel based generation, should help to bring
forward the point when renewable and low carbon technologies overtake
increasingly scarce and expensive fossil fuels as the most competitive form
of fuel for electricity generation, heat production and transport,” it
notes. “The deployment of intermittent electricity generation does present
challenges to the real-time management of the overall electricity
supply-demand balance, but the means are available to manage this at the
levels of penetration currently envisaged.”
“Other forms of renewable generation and renewables used in heat and
transport are less intermittent and/or more predictable in their output,” it
notes. Recent research suggests that security of supply can be maintained
with a higher proportion of energy from intermittent renewable sources in
the mix.
The Energy Markets Outlook provides market information on security of supply
over a 15-year period. The objective is to increase understanding of the
longer-term outlook for energy supply and demand, and to understand emerging
risks that could affect security of supply to Britain.
“We need to ensure that the market delivers enough energy supply in five
years' time, in ten years' time and in fifteen years' time,” says energy
minister Malcolm Wicks. “Security of energy supply is one of the fundamental
challenges this country faces.”
There is “significant medium-term opportunities for the construction of new
electricity generation capacity in response to expected demand and plant
closures,” noting that 25,000 MW of new generation capacity will be required
by 2020. Delivery of new gas capacity should compensate for reduction in
indigenous production in the medium term, while “the future use of other
fuels - coal, oil and nuclear fuels - is unlikely to be limited by resource
availability. There may be scope for additional indigenous coal production.”
Increases in the price of carbon should encourage investment in new,
low-carbon generating capacity in the long term, but the short-term
uncertainty about the future of the carbon market may cause delays in
investment in new capacity which could be a cause of market tightness in
future, it warns. Greater deployment of renewables will have an important
role to play in cutting carbon emissions, and maintaining security of supply
while expanding the use of renewables is achievable given the UK's
significant primary renewable resources, “although this will involve some
additional costs.”
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