• Broad range of technologies needed to bridge energy gap of up to 50GW by 2020.
• Without a diverse generation mix the UK power sector could fall short of CO2 emissions target* by 30%.
• Clear signals will need to be given to industry by Government to stimulate up to £50 billion of investment to meet UK emissions targets and deliver security of supply
   

Analysis published today by business advisory firm Deloitte suggests the UK will need a flexible and diverse energy mix to meet the Government’s objective of ‘securing clean, affordable energy’.  The mix is likely to include some nuclear new build.

The report on how the UK can meet its power generation objectives in the medium term estimates that the UK will face an energy gap of up to 50GW by 2020 (against existing and currently planned installed capacity). This is equivalent to the energy generated by 55 combined cycle gas turbines; 95,000 on-shore wind turbines or 30 new nuclear power stations. 

Deloitte’s Lead UK Energy Partner, Carl Hughes, commented:
“The debate around energy supply and emission targets is challenging economies globally and our analysis suggests that if the emerging energy gap in the UK is filled predominately by more gas power generation capacity, the power generation sector could exceed CO2 emission targets by more than 30% in 2020.  In this potential scenario, security of supply may also be at risk from an over-reliance on imported gas, with consequent exposure to significant price volatility.

“In order for the power industry to play a meaningful role in meeting UK carbon emission targets, some nuclear new build is likely to be needed to replace existing nuclear plant as it retires. Some renewable and other low carbon technologies, such as Carbon Capture and Storage, are still being developed to the required commercial scale and exclusive reliance on them at this stage, without nuclear new build, is likely to prove a higher risk strategy. The UK can therefore expect an element of nuclear new build in the near term as newer technologies develop to their full scale and potential.”

The report recommends that Government needs to give ‘clear, long-term signals’ on market and fiscal frameworks in order to stimulate the investment required for a diverse and flexible future energy mix. Deloitte recommends the reform of incentives around emissions reductions which include the UK embracing a long term carbon price operating as part of, or complimentary to, the European Union Emissions Trading Scheme, beyond 2012. 

Filling the energy gap while meeting emission targets and security of supply objectives is predicted to cost up to £50 billion over the next 15 years. This is double the anticipated cost of meeting the gap in supply by reliance on gas power generation as the dominant fuel. 

Deloitte’s report finds the present limitations of renewable technologies contrasts with public perception. Ross Howard, Energy Partner at Deloitte, commented:
“Around 35% of the public** believe that the majority of UK electricity will be generated by renewable sources in only 15 years time.  With less than 4% of electricity today coming from renewable sources, these aspirations are likely to fall short of reality.

“Significant effort and investment will be needed to overcome technical and commercial barriers to unlock the potential of renewable and other low-carbon technologies. The Government’s current Energy Review presents an ideal opportunity to consider the key issues and create a market structure to stimulate the required investment.”

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Ends

Notes to editors
For a copy of the full report visit www.deloitte.co.uk

* Potential UK power sector emission reduction target in 2020 in order to contribute meaningfully to overall UK targets
** Finding of a survey conducted between 15 and 17 November 2005. The survey data was collected and analysed by YouGov Plc via on-line survey of 2,041 GB adults

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services through more than 9,000 people in 21 locations. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and its people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other’s acts or omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press.