The long-held figure of £200bn that is said to be needed to secure the UK’s energy future is in fact £130bn short of what will actually be required, claims a new report.
The London School of Economics and Political Science claims that £330bn will need to be invested by 2030 in the UK’s energy infrastructure to ensure a secure energy supply, meet carbon emissions reduction targets and protect the economy.
Professor Samuel Fankhauser, co-director of the Grantham Institute on Climate Change and the Environment and author of the report, said the study “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,” he said. “It is crucial UK businesses take action now to overcome the potential challenges they may face.”
The report examines three scenarios that could arise between now and 2030.
The first, dubbed ‘Hitting the Target’, is the projected plan for the UK’s energy market. However, the report states that it requires “a high degree of political cohesion and direction, supporting record levels of investment in the industry of 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 and specialisation, a focus on green growth and productivity gains and recovered financial institutions. In this scenario, the EU remains a market leader on low-carbon technology.
The second scenario is called ‘Gas is Key’ and short-term price gains by switching to 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.
The third scenario is less optimistic about the economic and technology outlook. Titled ‘Austerity Reigns’, it forecasts low confidence and investment, “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 and shale gas fail technologically or otherwise are not delivered. In the meantime, the BRIC (Brazil, Russia, India and China) countries power ahead.
The report was commissioned by utility RWE npower and its chief executive Volker Beckers said: “£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.”