UK energy sector requires £330bn to achieve carbon targets, says LSE report

by ClickGreen staff. Published Thu 08 Nov 2012 13:38, Last updated: 2012-11-08
LSE report paints a costly picture for UK energy future
LSE report paints a costly picture for UK energy future

The urgent need for up to £330bn of investment in the UK’s energy infrastructure to ensure a secure energy supply, meet carbon emissions reduction targets and protect the UK economy by 2030, is highlighted in a new report from The London School of Economics and Political Science released today.

The npower Future Report - ‘Energy and the economy: The 2030 outlook for UK businesses’ - reflects upon the need for a balanced focus on economic growth and investment in the energy infrastructure to deliver a low carbon and strong UK economy. It also calls on businesses to act now to ensure they are protected for the future.

Three potential scenarios for the 2030 energy and economic landscape and the implications for UK business are examined in the report. From continued austerity to a sidelining of carbon emissions reduction targets in favour of cheaper energy sources to power the UK and businesses. The report shows how a number of factors will shape what 2030 will mean for UK plc.

Professor Samuel Fankhauser, author of the npower Future Report, Co-Director of the Grantham Institute on Climate Change and the Environment at The London School of Economics and Political Science and a member of the Committee on Climate Change, said: “This report shows how fragile and delicate the equilibrium of factors is for protecting the future of the UK energy industry.

“A slight change of emphasis in policy, a weakening economic picture or a preference for cheaper energy sources over low carbon energy generation could result in very different operating environments for UK businesses. It is crucial UK businesses take action now to overcome the potential challenges they may face.”

The npower Future Report examines three scenarios that could arise going forward to 2030.

Scenario 1: Hitting the Target

This scenario is the projected plan for the UK’s energy market. However, it requires a high degree of political cohesion and direction, supporting record levels of investment in the industry (up to £330bn) and driving down carbon emissions to achieve the long-term 2030 target. This scenario is made possible by a recovering Eurozone and UK economy; more trade integration, specialisation; a focus on green growth and productivity gains; and recovered financial institutions. The EU remains a market leader on low-carbon technology.

Scenario 2: Gas is key

Short-term price gains by switching onto gas power are followed by environmental problems from missed carbon targets. The presence of gas-fired capacity slows down needed structural change, and necessitates costly action when carbon constraints bite. This scenario depends less on what happens economically in the Eurozone and internationally. However, there will be less committed political action in Europe on carbon emissions reduction, fewer productivity gains and more fractured trade patterns. The Eurozone will still eventually recover, but the momentum is with Asia, which is catching up with Europe in productivity and growth.

Scenario 3: Austerity reigns

This scenario is less optimistic about the economic and technology outlook. Confidence and therefore investment are low, but less is needed due to ongoing Euro sclerosis and continued stagnation in the UK. The grid ages and upgrades are not driven by a need to accommodate renewable energy. Some technologies like carbon capture and storage (CCS) and shale gas fail technologically or otherwise are not delivered. In the meantime, the BRIC (Brazil, Russia, India and China) countries motor ahead.

Volker Beckers, CEO of RWE npower, added: “£200bn by 2020 has been the long-held figure recognised as being key to a secure energy future. However, this report shows that almost the same amount again is needed just 10 years later to provide the right environment to balance cost, carbon and continuity of supply.

“It is therefore crucial that the UK energy industry, Government and businesses work collaboratively to ensure this level of investment is secured and foundations are set for economic and environmental prosperity by 2030.”

And Wayne Mitchell, Industrial and Commercial Markets Director at npower, commented: “This report issues a very clear call to action for UK businesses. Managing energy well and making it a strategic issue is vital. A focus on energy efficiency and making good use of self-generation energy technologies are also crucial.

“I would also encourage UK businesses to follow policy developments and understand the implications for their organisation.

“In addition, calling for a level playing field in the industry and being ready to commit to the will to decarbonise the energy supply, are essential actions for UK businesses to ensure they are well-placed for the immediate future challenges facing them as well as for any potential scenarios by 2030.”



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