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Economic slowdown means UK can phase out more fossil energy

The economic slowdown means the UK could retire old coal, oil and nuclear power plants without risking black-outs between 2015 and 2020, according to Bloomberg New Energy Finance.

By Kari Williamson

A combination of increased renewable energy capacity, along with already-planned, additional gas-fired capacity, could provide most of the additional electricity that the UK needs through to 2030.

In addition, the UK’s second 'dash for gas', which could see the addition of 15 GW of new capacity between 2010 and 2016 at a cost of £7.5 billion, is likely to be the last, the analyst predicts. Renewable energy, nuclear power, energy efficiency and retrofits to existing plants should be able to meet all additional needs from 2020 onwards.

Government and other market participants have expressed concern that Great Britain will experience a shortage of power supply as 12 GW of coal and oil-fired plants close by 2016 due to environmental requirements. An additional 7 GW of nuclear is scheduled to close by the end of the decade.

Bloomberg New Energy Finance says the main factors reducing the need for new power plants in the UK are weak industrial demand and declines in domestic usage. The recession and European debt crisis have caused electricity consumption to fall 9% from its 2005 peak.

Power demand may not return to pre-recession levels within the next 20 years, as a full recovery in industrial production remains elusive, and energy efficiency improvements are taking hold. Even if electric vehicles take off, their impact on electricity demand will be limited, according to the analyst.

20 GW of new renewable capacity

The second factor helping to offset plant closures is the large amount of new capacity – around 30 GW – expected to be added between now and 2016. Around two-thirds of this will come from renewable energy sources, as large offshore wind projects come online and developers continue to build onshore wind and biomass.

Although power from renewable sources is mostly intermittent, in aggregate these sources could contribute some base level of output, and they are complemented by several large thermal projects such as RWE’s 2 GW gas-fired Pembroke plant, due to come online this year.

Beyond 2016, the country will continue to build high levels of wind power, as well as increasing amounts of solar and marine – wave and tidal – depending on how the costs of these technologies evolve.

Great Britain will also build some new nuclear plants – but not until the 2020s.

Brian Potskowski, Senior Power Analyst at Bloomberg New Energy Finance, says: “The long lead times for building new nuclear plants and uncertainty over how they will be subsidised means that the recent agreement between the UK and France on nuclear cooperation has little impact on whether the lights stay on in the 2015-20 timeframe.”

While capacity margins will tighten, particularly after the main wave of plant retirements in 2015, Bloomberg NEF expects them to stabilise in the 10-15% range, which is generally seen as acceptable.

Although coal-based generators in the UK are currently enjoying higher profitability than gas-based ones, the report highlights how this is set to change.

Potskowski: “Coal plants without carbon capture technology face a grim future in Great Britain, as plants are hit by the full cost of buying carbon permits at auction, along with the carbon price floor. This will push coal to the margin. Generators will be forced to either install carbon capture and storage, or retire their capacity.”

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