Government embarks on review of energy policy, with a return to nuclear power not ruled out

Prime Minister Tony Blair announced the review to be conducted by the governmental Performance and Innovation Unit (PIU) in Parliament on 25 June. “The aim of the review will be to set out the objectives of energy policy and to develop a strategy that ensures current policy commitments are consistent with longer-term goals,” Blair said. The review has been ordered because of the increased risk of climate change, questions about the security and diversity of energy supplies and potentially conflicting policy goals for energy prices.

The PIU says that if current energy policy remained unchanged, including the currently-planned progressive decommissioning of nuclear power stations, CO2 emissions from UK energy consumption are likely to rise by between 0.01-0.3% per annum to 2050, yet the country needs to cut emissions by an estimated 60% by this date.

The body also states that a review is necessary to address the fact that as nuclear power, currently providing 25% of UK electricity, is phased out under current policy, there will be no large-scale domestic substitute. Coal only plays a limited role and a decline of projected North Sea oil and gas production from 2004 will lead to oil and gas being increasingly imported. On current policies, it says, initiatives to promote domestic renewable energy sources and reduce demand will be insufficient to reduce dependence on imported oil and gas. The regulatory regime for the privatised energy utilities has, to date, focused on a price control regime that seeks to promote cost efficiency and to reduce or contain real energy prices, but such a regime has the potential to conflict with the government’s environmental objectives. The government is also concerned whether the UK regulatory regime provides utilities with appropriate incentives for investment in generating to minimise the risk of blackouts.

On prices, the PIU says that the impact of ‘green’ taxes on fuel poverty and industrial competitiveness must be further considered, particularly where, as in the case of petrol used by motorists, the consumption of energy is relatively insensitive to price.

Although the challenges explored by the project will be largely placed in a UK context, they are global challenges to which global solutions will be required with UK policy having to evolve in step with that of other countries. Furthermore, new policies to meet these challenges will have to be sufficiently flexible to cope with large economic, technological and scientific uncertainties in the transport, domestic, and industrial and commercial sectors, it says.

The report, which is due by the end of the year, will also receive input from other government departments such as the Department of Trade and Industry, the Department for the Environment, Food and Rural Affairs (see related story) and the Department of Transport, Local Government and the Regions. “This group has been set a vital task – identifying the longer term strategic objectives of energy policy for Great Britain,” commented new Minister for Energy, Brian Wilson, who will oversee the project’s advisory group. “We will examine all aspects of energy policy, including how we can meet the challenge of global warming. The review will consider the role of coal, gas, oil and renewables in our future energy balance as well as Combined Heat and Power and the enhancement of energy efficiency. The review will also need to consider what, if any, role the nuclear industry should play in meeting the environmental and security of supply objectives.”