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Deloitte reveals challenges for UK utilities industry in advance of the Future of Utilities conference

Members of the Utilities industry will gather next week to discuss the challenges facing the industry at the Future of Utilities Conference in London (17-18th March). Deloitte, the business advisory firm, has identified the burning issues facing the industry in 2009. Key issues includes the fall in the carbon price and delays to new nuclear build leading to a ‘second dash for gas.’

Doug King, Deloitte Vice Chairman and Senior Energy Partner stated: “One critical area of concern remains the carbon price and how the economics have been fundamentally altered for many renewable energy projects. A robust, enduring carbon market with a predictable carbon price is a prerequisite for investment at the levels required to meet emissions targets and bridge the generation gap. This has failed to happen and we are now faced with a bombed-out carbon price and no immediate prospect of recovery. This has seriously damaged the investment case for major renewables developments, making it much less likely that carbon capture and storage, tidal or marine power and other newer technologies will deliver any significant contribution to the 2020 targets.

“The potential for delays to new nuclear build and the reappraisal of renewable generation investment decisions may lead to a second ‘dash for gas’ to avoid the shortfall in generation capacity. Further concentration on gas brings its own problems, including political risks associated with many of the producing regions which were again evident this winter. Another challenge would be entrenching a level of carbon emissions for many years to come as gas displaces carbon-free generation investments.

A Deloitte review of the past year has found some areas of progress in the regulatory landscape for the utilities industry:

  • The Government’s creation of a new department – DECC (Department of Energy and Climate Change) – with clear cabinet level leadership and responsibility, focused on energy and climate change. Strong leadership is still needed to ensure the major generation investment programme takes place within the required timescales.
  • Ofgem has seen its objectives extended under the Energy Act 2008, with greater focus on sustainable development and security of supply.
  • The Climate Change Act makes the 2020 reductions legally binding. The prospect of legal action against ministers in the event of failure to achieve the targets should add focus.
  • The Planning Act 2008 aims to put in place the framework to facilitate faster decision making around new generation and grid development. The implementation timescale risks being further affected by a general election during this period with a potential change in direction under an incoming administration.

Doug King concludes:
“The Government may receive short-term relief in current emissions from the economic downturn, with the fall-off in manufacturing activity and therefore a reduction in energy demand. It should not be lulled into a false sense of achievement which might dampen the commitment to effecting the necessary change to decarbonise the economy.

“In conclusion, while we have seen some progress over the last year, strong leadership taking prompt and decisive action remains essential to avoid the UK facing an energy gap and failing to meet its emission targets.”

Ends

About the survey
The Future of Utilities conference takes place on 17 – 18 March 2009.

Notes for editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk\about for a detailed description of the legal structure of DTT and its member firms.
The information contained in this press release is correct at the time of going to press.

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Laura Parsons
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Deloitte LLP
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+44 (0) 20 7303 0885
Email
lauparsons@deloitte.co.uk

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