Many of the UK’s ageing coal- and oil-fired power stations have to close in the next few years because they cannot meet ever-tightening EU air quality standards and fitting clean-up facilities to them is not economic. The older nuclear-powered stations are also scheduled to close. The climate change agenda is also putting pressure on the electricity generating industry – new electricity production not only has to comply with air quality standards, but also play a major part in reducing EU and UK emissions of CO2. In 2009, the EU Renewables Directive came into force. For the UK, this means that about 30 per cent of electricity must come from renewable sources by 2020 – a technically and financially demanding target.

Estimates suggest that, to maintain power supplies and reduce CO2 emissions, companies will have to invest about £100 billion by 2020 and up to £100 billion more in the following decade. These are very large sums and people that would like to invest in the UK’s electricity industry will not do so unless they are confident that they will get a worthwhile return on their investment. The Association has long argued that the UK must be an attractive place in which to invest in energy infrastructure – around the world, there are many other industries and countries competing for investment.

Investment in the electricity generating industry is not without risk. In 2003, some members of the Association went out of business. Generating capacity was over-supplied and wholesale prices crashed. The companies affected could not finance their loan repayments and banks found themselves, almost literally, holding the keys to certain power stations.

Some of the risks facing the industry are straightforward, albeit challenging, commercial ones – changes in technology, plant maintenance, availability of fuels, volatile fuel prices, etc. Others arise from changes in public policy – political decisions and regulation. Broadly speaking, public policy for the industry seeks security of supply, competition to put downward pressure on customers’ prices and a reduction in CO2 emissions. Taken at face value, these may not be unreasonable objectives. However, some conflict with each other and politicians are apt to give different emphasis to the different objectives at different times. This can present some businesses with opportunities, but for others it can mean that investments are threatened.

Issues like this and the way that they are addressed by legislation and regulation dominate AEP’s agenda. The Association engages with politicians and officials to ensure that they are aware of the impact of their policies and proposals. Quite often, the debate attracts the interest of the press, radio and television and AEP finds itself in the news.