Fundamental Drivers and Probable Trends 2008 to 2020
The mindless and self-congratulatory drift and chatter in the UK’s energy area during the last fifteen years, in particular the last ten, has the UK sleep-walking into brown-outs and/or severe energy rationing in less time than it takes to plan, engineer, license, procure, build and commission more than 30 GW in new, “clean coal” or nuclear plant by 1st January 2016.
Some gas capacity is on its way but this will be commissioned just in time for a World gas-supply crunch, sparked by the serial failure of Indonesia to meet its Far East contractual commitments, continued decline of gas production in Russia and Canada, the cap on new LNG exports from Qatar and exports from Norway and the continued reluctance of Iran to develop any gas export business at all. Most seriously of all, for UK (and Europe), it is the deliberately contrived investment policy of Gazprom to remain very tight on upstream capacity far into the foreseeable future, while dominant in down-stream infrastructure.
We are in good company. Our analysis of the prospects for UK going black are more or less identical assessment to EdF’s analysis which is reproduced in the article.
If as I expect, the UK cynically manages to delay the closure of its dirty and inefficient coal fleet, no doubt citing “Act of God” or some such with its EU partners, it may not lack for MWh but could, still, frequently lack MW. So, by 2010 the value of any reserve capacity, especially peak reserve, could shoot up by many, times.
Two years ago, when I wrote “anybody investing in large amounts of reserve today is going to look nuts to your normal, establishment financier. But by 2010, the time it takes to plan, procure and deliver battery reserve, the market will have completely changed.” In fact, the reality is much worse.
The massive investments needed to forestall a complete breakdown of the electricity system will have to be made at a time when the terms of trade of the UK economy are already sharply deteriorating. Over the next 5 years, the UK will be accumulating a hydrocarbon (oil and gas) deficit alone of $500 billion. How will the UK find the credit when its currency is in free fall? Read the full paper here:
Hugh Sharman www.incoteco.com
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