The UK is proposing major changes to energy policy in two decades ago, when the coalition government set plans to ensure the aging plants are replaced and met with the climate targets.
Government, David Cameron, is likely to reassert state control over the market-based system introduced by his predecessor, Margaret Thatcher, when submitting proposals to Parliament. The regulator has proposed a "carbon floor" price target to increase the cost of emission of greenhouse gases, encouraging investment in nuclear reactors and wind farms.
The cost of replacing existing facilities and the creation of renewable energy projects will be around 200 million pounds (316 billion), according to a report by Ernst & Young LLP. The government says that existing agreements do not provide the security necessary for utilities to finance new plants. Electricite de France SA and Centrica Plc, which own nuclear plans and a plan, you might benefit from policies that raise the cost of burning coal or gas.
"Not enough time if companies start building and investing now," said Bill Easton, director of European public services of Ernst & Young, in an interview. "Within the next 12 months, the industry should not be looking over their shoulders wondering if the market will change."
The UK is committed to get 15 percent of its energy from renewable sources by the end of the decade and reduce carbon dioxide emissions by 80 percent from 1990 levels by 2050. Achieving this will require as many as 40,000 megawatts of energy projects, low-carbon, according to a report of 07 December the Commission on Climate Change.
"The fragmentation of the market"
"We have a unique opportunity in a generation to rebuild our fragmented, restore investor confidence, and rebuild our plants," said Chris Huhne, the secretary of state for energy and climate change, in a speech on 17 November. "This will be a radical change."
Britain is trying to reduce emissions linked to global warming, while replacing much as a quarter of its existing generation by 2020 as older plants are closed, Huhne said.
power network in Britain was built in the 20th century to move energy from coal in northern England to consumers the power concentrated in the south, according to Robert Gross, head of Imperial College London Centre for Energy Policy and Technology . Existing transmission prices are set in 1990 under Thatcher to reduce energy costs by promoting the generation as close as possible to consumers.
Government Guarantees
Thatcher created the most competitive European electricity and gas markets, privatization of state enterprises, including British Gas, British Energy, National Power and PowerGen. In 1997, the change was down consumer prices up by 20 percent, compared to costs prior to privatization, according to former British Energy Plc, the chief executive, Robert Hawley.
While privatization has remained low energy prices, the scale of investment needed to meet climate change goals and to replace aging plants is so great that it will not happen without government guarantees, according to regulator Ofgem. The global financial crisis, the toughest carbon targets and increasing dependence on gas, have weighed on the finance industry, the regulator said.
Tomorrow's proposals may include capacity payments call, raising a pool of consumers who make payments to the generators of low carbon energy, including nuclear reactors and wind farms at sea, said Easton.
The government may also introduce so-called contracts for difference to cope with the volatility of future energy prices and avoid windfall profits, "said Easton. These contracts are utilities to offset energy prices lower than expected or charge if prices are higher, thus locking in a price and ease concerns that costly projects, only paid off.
Carbon Flat
The Committee on Climate Change proposes to replace the climate change levy to establish a carbon floor is 27 pounds per tonne in 2020. European Union carbon permits closed yesterday at € 14.46 per tonne in Europe ICE Futures in London.
A flat carbon assets would benefit nuclear and renewable energy, including by raising the cost of other forms of generation, according to analysts at the corporate parent of Capital LLP. Such a policy is likely to adversely affect companies such as Drax Plc, owner of Western Europe's largest coal fired power station, they said.
Drax has fallen 8.8 percent this year to 378.3 pence in London trading, valuing the company at 1.4 billion pounds. Centrica has increased by 17 percent this year to 329.7 pence at 11:07 am in London, making it one of the performers of the first level in the World Europe Index Income, up 16 percent this year. E. ON AG and RWE AG, German utilities that operate on coal and gas generation in the UK are lagging behind the index.
Nuclear Renaissance
Britain's 19 operating nuclear reactors account for 18 percent of the country's energy generation. The government approved eight sites for new facilities in October. EDF, Centrica, Scottish & Southern Energy Plc, based Iberdrola SA in Spain and France, GDF Suez SA, RWE and E. ON announced plans for about 19,000 megawatts of new reactors until 2050. Utilities may have to spend as much as 6 billion pounds in each reactor in Britain, according to Energy Minister Charles Hendry.
The UK generates about half its electricity from gas and is forced to import increasing amounts of their reserves decrease. UK market gas monitoring makes it possible wholesale costs at any time. That transparency can allow other nations to make a higher bid for the supply of gas, leaving them vulnerable to shortfalls in Britain.
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