Tuesday February 24, 11:55 AM
UPDATE 1-UK needs huge investment to secure power-study
By Nao Nakanishi
LONDON, Feb 24 (Reuters) - Britain's power industry needs to
invest at least 234 billion pounds ($341 billion) by 2025 to
secure supply and meet its targets for carbon emissions and
renewable energy, a study by Ernst & Young showed on Tuesday.
Ernst & Young upgraded its estimates for the investment
required for the UK energy sector from its previous study last
June, which put the figure at 165 billion pounds by 2020.
Steve Jennings, partner and head of Ernst & Young's power
and utilities team, told Reuters the big difference came from a
jump in costs for renewable generation and the nuclear build
programme, which was not included in its last study.
'The cost of renewable generation has increased
significantly,' he said, adding the costs for offshore wind came
up to over 2,600 pounds per kilowatt hour from 1,900 pounds
because of component inflation and the weakening pound.
The study was commissioned by Centrica (LSE: CNA.L - news) , one of
Britain's six biggest electricity suppliers.
Britain is already home to the world's biggest offshore wind
farms with around 3 gigawatts, but it is planning to raise
offshore wind capacity to 33 gigawatts.
Ernst & Young's study assumed more than 40 percent of
electricity would come from renewable sources from 2020 and that
carbon emissions would be cut by 26 percent by 2020 from 1990.
Britain has to renew almost all of its ageing nuclear power
plants, which currently account for about 20 percent of the
country's electricity supply.
'Broadly, investment is going to be double from what it
currently is. We are saying profits are going to have to be
double what they currently are, even though the level of returns
are the same,' Jennings said.
Asked what such huge investment might mean for consumers, he
said: 'It's not unreasonable to expect customer bills to rise to
fund this level of investment.'
He would not put figures on the scale of necessary price
increases but said Ernst & Young had estimated a 20 price rise
in its previous study.
The study also included investment to build coal-fired
plants with carbon capture and storage (CCS), a technology yet
to be developed and proven.
Ernst & Young gave following breakdowns for investment
needs:
Investment types Incremental spend Description,
from 2009-2025 including key
in real terms assumptions
(in bln pounds)
Nuclear power plants 38.4 12.8 GW online by 2023
Gas-fired plants 6.4 13.1 GW online by 2021
Coal-fired plants with CCS 7.3 3.2 GW online by 2025
Renewable energy (LSE: REH.L - news) 112.5 9 GW onshore wind
33 GW offshore wind
8.6 GW tidal
1.5 GW wave
5 GW others
Offshore transmission grid 12
Onshore grid reinforcement 12
Distribution network enhancement 4.2
Smart (SMAR.JK - news) metering roll-out 13.4
Carbon Emissions Reduction
Target Supplier Obligation 15.7
Gas storage 8.4 75 day storage capacity
LNG import terminals 1.0
New pipeline infrastructure 0.2
CO2 transport infrastructure
for CCS 2.0
Total 223.5
(Editing by Keiron Henderson)
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