Back in October, I published UKIP’s Energy Policy Statement, warning that “the lights could go out by 2020”. Many people thought I was being alarmist. But a new report from analysts at Liberum Capital, a London-based investment bank, suggests that I may have been underplaying the threat. They foresee a generation capacity crunch in 2014/2017, with a lack of dispatchable generation by the end of the decade, together with spiralling consumer costs which they describe as “untenable”. Find the full report. There’s also a more comprehensive summary on the Global Warming Policy Foundation’s web-site.
There will be an inevitable crisis in UK energy policy, which will impact three stakeholders: the government of the day; the consumer; and the investors who have funded the programme. Government will do its best to protect itself and consumers, so investors will take most of the damage.
UK Energy policy is not plausible: moving to a low-carbon electricity generating system by 2030 may simply be impossible.
Costs are excessive: Estimates £161 bn to 2020 and £376 bn by 2030.
Economic rationale looks weak: This is in effect a huge bet on oil futures. It’s predicated on massive price rises in fossil fuels. But that assumption is undermined by the rapid growth of unconventional gas and oil.
Policy amounts to re-nationalisation: risks and costs will be transferred to the public. We in UKIP believe that the risk should remain with the private sector, but this would require much more long-term regulatory certainty than is available today.
Triggers for the crisis: capacity crunch 2014/17; lack of dispatchable generation by the end of the decade; spiralling costs.
For a more extensive summary, see the Global Warming Policy Foundation. Liberum concludes that utility companies and investors should limit their exposure. I conclude that the EU should scrap its Climate & Energy Package, and that the British government should focus on gas, nuclear and coal, and abandon its unpopular and disastrous commitment to wind energy.