Recently published research from Business Monitor International, "United Kingdom Power Report Q1 2014", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 12/26/2013 -- Investment in the UK power sector continues to stall, with little new capacity being brought online - even at a time when large amounts of thermal capacity are being shuttered to comply with EU emissions criteria. Besides significant developments in the nuclear segment, the freeze in investment is being reinforced by ambiguity with regards to the country's Energy Bill, unfavourable economics for gas-fired power generators, and policy uncertainty as the debate about rising electricity prices thrusts the 'big six' energy companies into the spotlight. With around one-fifth of existing installed generating capacity due to be taken offline over the next decade, there are fears the UK could suffer supply disruptions from around 2015/2016 unless the government addresses the issue and encourages utilities to invest in new capacity.
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Despite the government having agreed a strike price that it hopes will lead to the construction of two new nuclear reactors, investment in the traditional (thermal) areas of the UK power generation sector is stalling. This problem has been brought sharply into focus in recent months, as a vast amount of coal-fired baseload capacity has been shutdown or mothballed at an alarming pace without being replaced - so as to comply with European emissions reduction policies. With the Department of Energy and Climate Change (DECC) having stated that around a fifth of existing installed electricity generating capacity is due to be taken offline over the next 10 years, while electricity consumption is set to rise (albeit slightly), the UK is threatened by a capacity deficit that could result in supply disruptions from around 2015/2016 unless the government addresses the issue and encourages utilities to invest in new capacity.
As such, 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 for decarbonisation, Electricity Market Reform (EMR) and nuclear regulation that would go some way towards ending speculation and outlining a strategy for replacing power capacity, we emphasise that establishing the UK's energy security and securing such investment will certainly be more complex than simply signing the bill into law. Indeed, the bill itself has been criticised for being very complex and opaque. Objectives such as moving to 'a more efficient, low-carbon energy system in a cost-effective way' are generally agreeable but lack detail - and will not inspire much confidence in investors who want greater certainty with regards to the long-term investment climate.
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