It is imperative that Britain find new sources of energy soon as the quantity of imported natural gas increases quicker than expected, according to Centrica’s Chief Executive Sam Laidlaw.
Problems across Europe
Speaking at the CERA conference in Houston, Laidlaw said that “in primary energy, the UK’s production of gas is falling rapidly” and cited the 38% decrease in North Sea oil and gas output in the last three years, calling into question the future security of supply. He also suggested that the twin objectives of decarbonisation and affordability are becoming increasingly incompatible, a scenario which highlights real problems within the European power market.
Laidlaw used the UK as an example to demonstrate that the costs of offshore wind technology have not dwindled over time as previously speculated. Instead, subsidies are now far more crucial than they were even five years ago as projects are developed further offshore in deeper water and are getting further away from the transmission grid.
Political change reduces investment
Laidlaw further identified another growing problem in the increase in political intervention in energy markets and the changing of key policies. Speaking again, with specific reference to the UK, Laidlaw said that the threat by the Labour party to freeze energy prices, should they win the 2015 election, brings with it the uncertainty which is “the enemy of investment” in the sector. As a result, “investment in the UK generating capacity has ground to a halt and, unlike the rest of Europe, reserve margins are becoming uncomfortably tight.”
Centrica has said that European directives to curb emissions will result in an estimated 3.7 gigawatts of coal-fired electricity generating capacity in the UK are due to close by the end of 2015, with the risk of power cuts increased as the country’s reserves dwindle.
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