Monday, 1 June 2009

Government to set clear targets for UK energy mix

Britain is set to turn its back on a wholly liberalised energy market and will return to a more interventionist, state-directed model, according to Ed Miliband, the Energy Secretary.
In an interview with The Times, Mr Miliband said that a more assertive role for government was the only way that Britain could achieve its present target of slashing its carbon emissions by 34 per cent by 2020 and 80 per cent by 2050.
“The market on its own is not going to ensure that we make the transition to low carbon,” he said. “It's not necessarily going to ensure the right diversity in our energy mix.”
Mr Miliband, who is pushing for a big rise in electricity generated from low-carbon sources, said that this summer the Government would set out a clear framework for Britain's future energy mix — specifying future targets for total power generation from nuclear, gas, “clean coal” and renewables for the first time since the 1980s. The so-called Summer Strategy, dubbed the “2030 Masterplan” by senior industry executives, will also provide a long-term framework for the development of the National Grid, which is facing a big overhaul in order to support a huge increase in offshore wind power in the UK, as well as a fleet of new nuclear reactors.
Mr Miliband insisted that “dynamic markets” and private investment would remain central to future UK energy policy, but said: “The days of an energy policy of ‘let's leave it to the market and the market will take care of it' are over.”
He said that this return to a more state-directed model of energy policy represented the biggest turning point since Nigel Lawson called for the free market to govern the mix of fuels in the 1980s. He said that Mr Lawson's approach had been forged when Britain still had access to plentiful supplies of North Sea gas and when there was no consensus over the threat of climate change.
Since liberalisation of the industry in the early 1990s, the Government has refused to issue targets for the desired portion of electricity to be generated from a single fuel type.
But that has led to uncertainty over the long-term direction of UK energy policy and encouraged many energy companies to make short-term decisions on energy investments.
“There is an old view, a Lawsonian view that government shouldn't take a view on the energy mix. But government does need to give people a sense of its vision for the energy mix and for the grid.”
Mr Miliband said he believed that a more directive approach from government would be greeted positively by the energy industry.
About 76 per cent of Britain's electricity is generated from fossil fuels — chiefly coal and gas — but the Government is trying to replace much of this with a huge increase in more expensive, low-carbon power sources.
A spokesman for Centrica, owner of British Gas and one of the Big Six energy companies, said: “It is important that the right framework is put in place in order to make it economic to deliver the investments which will bring about the low-carbon energy industry that we are all looking for.”
Source: The Times

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