New Energy market report from Business Monitor International: "United Kingdom Power Report Q4 2013"

Boston, MA -- (SBWire) -- 09/27/2013 --BMI View: While it is clear the UK must press ahead with plans to secure its long-term energy supply if it is to avoid a power crunch, progress has been slow and hopes are now being pinned on the country's Energy Bill and its various provisions. Although we maintain that the bill is muddled - with the UK's focus on a very broad range of options raising questions about the economic viability of pursuing them all as the country emerges from a recession - the government's plans to encourage cleaner gas-fired generation (under the Gas Generation Strategy) and greater adoption of renewable technologies look to be some of the more feasible aspects of the country's energy strategy. As a consequence, although the economics of coalfired generation will make the fuel a more profitable way to generate electricity in the short term, the utilisation of gas for power generation is forecast to increase gradually, with David Cameron's claims that 'no regulation must get in the way' of shale gas exploration creating potential upside to our long-term forecasts.

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Despite the fact a vast number of power plants are likely to be shutdown or mothballed due to emissions reduction policies, the UK has hitherto failed to attract sufficient investment into its power sector. With around a fifth of existing installed electricity generating capacity due to be taken offline over the next 10 years, and electricity consumption set to rise (albeit slightly), the UK is heading for an energy deficit that could result in supply disruptions from around 2015/2016 unless the government addresses the issue.

We have highlighted previously that the country's Energy Bill, which should be signed into law in 2013, will be crucial in establishing a policy that can secure the UK's energy future. Yet, while the Bill includes provisions on decarbonisation, Electricity Market Reform (EMR) and nuclear regulation that go some way towards ending speculation and outlining a strategy for replacing power capacity, we believe the UK's energy policy is a product of a difficult compromise between the two coalition partners - with differences over policy likely to become more pronounced as the Conservative Party and the Liberal Democrats fight the 2015 general election on separate platforms. As a consequence, we question whether the aims of the bill can actually be realised in practice.

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