A new report released by energy regulator Ofgem predicts the UK will face an energy shortage crisis by 2015 or 2016.
In the regulator's first annual Capacity Assessment (.PDF), Ofgem predicts that the UK's spare generation capacity could fall from 14 percent in 2012 to 4 percent over the next three to four years. These figures are based on data from the regulator and the National Grid in order to compile a report presented annually to Parliament.
Tough environmental targets, financial instability and ageing power stations are all contributors to the predicted looming energy shortage. Energy law expert Simon Hobday of Pinsent Masons told The Register:
"The report is very clear on the dangers ahead for the UK's electricity generation capacity, and reflects widely-held concerns within the energy industry. This is one of the reasons behind industry's frustration with the draft Energy Bill, the lack of detail in which has done little to provide the certainty required for investors to build new capacity."
According to Ofgem, there are a number of uncertain factors in play when it comes to the UK's energy future. The EU's Large Combustion Plant Directive (LCPD) sets a legal limit on the level of emissions allowed by plants built before 1987, but their operational hours -- limited to 20,000 between 2007 and 2015 if they opt out of the directive -- are fast running out. Most are expected to close before 2015.
In addition, the report says that the level of demand for electricity may be affected by "the uncertain economic outlook and the potential for demand reduction through efficiency measures."
EU-based environmental legislation aimed at reducing carbon footprints has a side-effect -- the closure of coal and oil-fired power stations. Apart from potentially increasing unemployment, closing these stations early -- before the renewable energy sector has caught up -- may also result in a shortage of energy resources.
According to The Register, Energy Secretary Ed Davey said that the Government would "consider carefully the implications" of the report, and plan to issue a formal response this year. Davey says:
"Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives. That is why the Government is reforming the electricity market to deliver secure, clean and affordable electricity."
The Energy Secretary is keen on the idea of next-generation gas power, which is intended to replace coal and ageing power stations. A new combined cycle gas turbine is due to be built close to Manchester soon, although Ofgem's report states it is "difficult to form a firm view" on whether the new gas-fire generation will be built and sustained over the next four years.
Image credit: Martin Fisch