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The Great Green Hangover

In a new report The Great Green Hangover, published by the Centre for Policy Studies on Wednesday 18 November, leading energy analyst Tony Lodge reveals that Britain is on the verge of an energy crisis, with demand set to outstrip dispatchable[1] supply for the first time from early 2016.

Tony Lodge argues that decades of energy policy mismanagement have overseen the shutdown of energy plants vital to Britain’s long-term energy security. Now for the first time Britain will not have enough dispatchable energy generation capacity to cover forecast demand from next year due to the systematic early closure of power plants. The average dispatchable capacity remaining by the end of March 2016 is calculated to be 52,360MW, this contrasts with National Grid’s 2015/2016 Winter Outlook demand forecast of 54,200MW.

Chart: Due to widespread plant closures dispatchable capacity has been in decline – and now for the first time will be lower than forecast demand

 

*     Remaining dispatchable plant must be ‘derated’ at 85% in order to accurately reflect its availability over peak running. Source: DECC, CPS analysis.

Over the last ten years electricity bills have risen by 131% in real terms, up by £705, easily outstripping any other household essential. High energy prices also burden British industry, jeopardising in particular the jobs of 225,000 workers in manufacturing as businesses consider closure or overseas relocation due to unaffordable production costs. These businesses are highly energy efficient but nevertheless consume large quantities of energy, which can account for between 20% and 70% of their production costs.

Tony Lodge comments:

Britain has lost over 15,400MW (20%) of its dispatchable electricity generating capacity in the last five years as baseload power plants have closed with no equivalent replacement. This month National Grid used emergency measures for the first time to call on industry to reduce its power usage in order to avoid shortages.

High UK Carbon Price Support should be abandoned before it forces the premature closure of more baseload power plants and thus threatens energy security and affordability.

The Government should prioritise energy security alongside its environmental commitments. In the spirit of the Conservative election pledge to enshrine in law not to raise income tax, national insurance or VAT, the Government should also legislate to deliver targets to maintain security of energy supply, diversity and affordability.

To avoid a winter crisis and secure reliable and affordable energy supply the Government should:

  • abandon the high unilateral UK Carbon Price Support before it forces the premature closure of more baseload power plants and thus threatens energy security and affordability;

  • urgently review and revise the measures passed in the Coalition’s Infrastructure Act which will see the Committee on Climate Change enjoy new blocking powers over future fossil fuel energy projects;
  • pledge to introduce an independent Annual Statement assessing the economic impacts of its energy policy on British industry, consumers, competitiveness, energy security and diversity;

  • should – in the spirit of the Conservative election pledge to enshrine in law not to raise income tax, national insurance or VAT – also legislate to deliver targets to maintain security of energy supply, diversity and affordability; and

  • the DECC should appoint an independent ‘not for profit’ Security of Supply System Operator (SSSO) with responsibility to maintain the resilience and integrity of the electricity grid.

Click here to read the report and proposals in full.

 


[1] If an energy source is ‘dispatchable’ it means that electricity can be reliably generated, as and when needed.