15/07/2009
AEP statement on the Government’s plans for a low carbon future
Commenting on the government announcements today (15 July 2009) about the Low Carbon future, David Porter, Chief Executive of the Association of Electricity Producers pointed to the massive investment required and a number of serious issues that have to be resolved.
‘Electricity companies need to invest well over £100 billion on new power production in the next 10 years and perhaps another £100 billion in the decade after. Companies want to invest, but, these are very large sums of money in a difficult financial climate. So, it is vitally important that the UK is an attractive place for energy investment.
‘The ‘ambition’ which the government expressed today should help, but, there are serious practical issues that electricity companies are watching carefully: -
How can we finance ‘back-up’ power stations for renewables?
‘If a third of the UK’s electricity is to come from wind power by 2020, companies will also have to invest in power stations that will provide electricity when the wind is not blowing. But, they will find it hard to get a return on plant that simply has to ‘stand and wait’. That will deter investment. We must resolve this problem fairly soon, because the same companies that will put billions of pounds into wind power have customers that expect a reliable supply. Politicians have the same expectations, of course.’
A credible, long-term carbon price is essential
‘Carbon limits at EU level have to be long-term and believable. The mechanism (EU Emissions Trading Scheme – ‘EUETS’) has to deliver long-term credibility and a carbon price that investors can take seriously. At the moment, the view beyond 2020 is far from clear.’
How to accommodate massive growth of renewables on the electricity network
‘We need huge investment in power lines to accommodate the growth in renewable energy. That will take time. In the meantime, we have to find a way of getting the growth on to the existing network. The Secretary of State for Energy and Climate Change has been asked by Ofgem to arbitrate on how this should be achieved. It is not simple and we have to avoid perverse outcomes.’
A business-like planning system is essential
‘Town and country planning is also key to new investment. We support the government’s streamlining of the planning system for major infrastructure projects. The old way of doing things – remember, the inquiry into Sizewell B power station took six years – is no longer sensible. But, the Conservatives want to abolish the Infrastructure Planning Commission. If that comes about, we must have reassurance that any process that replaces it will be business-like and will avoid intolerable delays.’
Customers will have to pay – government and industry must be frank about that
‘Finally, all of these things are going to cost a lot of money and eventually, much of that cost will end up on customers’ bills. Domestic energy saving schemes should help in that regard, but, all concerned – the industry, politicians and regulators – have to be straight with the customers about this. If not, there is a possibility that there will be an adverse reaction, politicians will wobble and uncertainty will hit investment.’
ENDS
Contact:
Rachel Hunter
Communications Executive
Tel: 020 7930 9390
Direct: 020 7747 2922
Notes:
The Association of Electricity Producers is the UK’s trade association for companies that make electricity. It contributes to the work of many of the industry’s internal decision making bodies and it also lobbies in the areas where legislation and regulation affect its members’ interests. The members of the Association include all of the largest generating companies, most of the medium sized companies and many small generating businesses. Between them, the members embrace virtually all of the generating fuels and technologies used commercially in the UK – from coal, oil, gas and nuclear power to wind, wave, hydro and energy from waste.