This week the UK announced its plans to rely on low carbon emitting  renewable energy (wind, tidal) and nuclear power to meet future electricity demand.  You can read the government’s statement here.

Billions of pounds will be spent on wind farms and wave power, while there will also be large investments to replace existing nuclear power stations, which are coming to the end of their useful life.

Renewable technologies and nuclear power are to receive a guaranteed price for their electricity (feed-in-tariff)  thereby giving them an assured rate of return.  At the same time a carbon floor price will be introduced in 2013.  This will raise the minimum price for power generated from carbon-emitting natural gas and coal to ensure they are not cheaper than wind and nuclear power.

The guaranteed price for power will help nuclear power stations more than wind power because of the volatile wholesale price of electricity.  A nuclear power station, generating electricity 24/7, will always be able to capture the time when this gap is widest; a wind farm, reliant on the vagaries of the weather, could be idle when that moment arrives.

The new policy also imposes more stringent environmental conditions for coal power plants.  Either they clean up or shut down.

Estimates about the cost of the policy vary widely.  The government says the impact on household electricity bills will be £160 a year by 2030, based on the need to spend £110 billion on the complete transformation of Britain’s electric power network. This is based on the assumption that families will cut their annual energy use in the home by 30 per cent over the same period.

Industry regulator Ofgem estimates the cost of upgrading the electric grid to be £200 billion by 2020 and predicts a 52% increase in electricity bills.  This equates to a hit on the average homeowner of £600 a year.  Some bank analyists, however,  think the costs will be even higher, reaching £1,000 to £2,000 annually.

As part of the policy, the government has set a target of building 18 GW of offshore wind generating capacity by 2020.

 

 

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1 Comment on UK Announces New Direction For Electricity Sector

  1. Donte says:

    You’re the one with the brains here. I’m watching for your posts.