EEF, the manufacturers’ organisation has urged the government to back replacement nuclear build as part of a balanced sustainable long-term energy strategy for the UK.
The call is made in a major report published today which sets out a wide- ranging future energy strategy for the UK, to deliver a secure, reliable and competitive low carbon energy supply and which does not rule out any options.
The UK’s energy supply has taken on a renewed sense of urgency given large rises in prices (50-80% for manufacturers contracting since the summer) and fears over supplies in the next two winters. In addition the UK’s carbon emissions have risen in both 2003 and 2004, leaving the government well off its own domestic target, though still likely to meet our Kyoto commitments.
EEF believes that a sustainable long term energy strategy is urgently needed to address these issues. Without such a strategy, EEF believes that industry’s competitiveness will be threatened by a more expensive and less reliable supply of energy prices and that there will be little chance of meeting the government’s aspiration to reduce carbon emissions by 60% by 2050.
Commenting on the report, Director General, Martin Temple said:
“Energy is now right at the top of the agenda and there is no time to lose in putting in place a long-term strategy that will provide a competitive, reliable and secure supply and generate significant reduction in emissions. Failure to do so will mean relying on new technology and energy efficiency to come to our aid which alone is unlikely to deliver on any of these fronts.”
In particular, EEF believes that future policy should include a range of options which feature fossil fuels (gas and coal), renewable energy and nuclear power. EEF’s detailed modelling analysis of the cost of various energy sources shows that:
in a world of low gas and carbon prices, conventional gas is substantially more competitive than any other energy source;
in a high gas and carbon scenario, nuclear power could be the most competitive form of energy supply;
the competitiveness of nuclear power is very sensitive to the rate of return required by those potentially financing the construction of new plants and that the government can have a significant influence on this;
the EU Emissions Trading Scheme is currently too immature to send a strong signal to investors about future carbon prices;
very significant reductions in capital costs would be needed to make wind competitive with other energy sources.
EEF therefore recommends a number of steps for government:
addressing planning, licensing and liabilities issues that will make a substantial difference to the rate of return required by investors in nuclear power;
make a decision on the disposal of radioactive waste;
exempt nuclear power from the climate change levy, given that it emits no carbon, which would sent out a powerful signal to potential investors;
replace the current Renewables Obligation with a zero carbon obligation in 2015 (the earliest feasible date in which a new nuclear plant could be operational with a zero carbon obligation.
Martin Temple added:
“Business values the benefits of a liberalised energy market and would strongly oppose the government underwriting the nuclear industry. However, in current circumstances, the market will provide little other than new gas plants which will not provide us with a secure energy supply or deliver lower emissions. The government must therefore take clear lead on this issue to create a secure environment which will encourage investment in future energy sources.”
Other recommendations for action include:
consider the use of long term power contracts with consortia of major energy consumers, or other forms of intervention which might assist the financing of large scale, low carbon power generation.
enhanced R&D support for technological solutions to reduce emissions;
set out a more effective approach on energy efficiency, especially in the household and transport sectors. It should also support businesses of all sizes in improving energy efficiency.