Wednesday, 25 September 2013

Price freeze will short-circuit UK energy supplies

LABOUR’S plans to freeze energy prices threatens the security of the UK’s energy supply and will hamper the Party’s efforts to de-carbonise the sector.

THE UK desperately needs new power generation capacity with EU emissions regulations meaning the on-going closure of the nation’s coal-fired plants and 20GW – or 20% - of capacity.

Ofgem and the National Grid worry about the UK’s declining capacity and warn that from the winters of 2014/15 onwards we may face power cuts.

The Energy Bill is set to unlock £100 billion of investment in new infrastructure spending. The Government is hoping the energy companies, most of which are producers as well as retailers, will invest in new gas-fired power stations in the short term.

But there’s no hope of any of this new large-scale capacity firing up before 2017. Gas would be the quickest to come on line – it takes about 3 years.

But the slow progress of the Energy Bill is already alarming investors, as is the prevarication of setting a decarbonisation target (see earlier blog).

However many commentators say we may just squeeze through we will just about be allright as long as there is enough to encourage the firing up of new gas capacity

But Labour’s plan to freeze price rises for 20 months has short-circuited the dynamic.

It will discourage investment in new capacity and force the power generators and the Labour Government to revert back to coal-fired power if we want to keep the lights – stymieing its green credentials.

In the 1970’s the unions forced the country into blackouts and a three day week. (I remember having corned beef and salad for tea in candlelight). Let’s hope Miliband, who got the leadership role on the strength of the support of the unions, does not allow us to go down that path once more.

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