Low Carbon and the Future of Energy
The energy industry is facing unprecedented challenges.
The UK has binding and ambitious climate change targets – 15% of the UK’s total energy use must come from renewable sources by 2020 and the UK’s greenhouse gas levels must reduce by 34% by 2020 and 80% by 2050. This means the decarbonisation of the energy industry by the 2030s.
In addition, up to a third of the UK’s existing electricity generation capacity will close over the next decade, either as it comes to the end of its operational life or is unable to meet stricter environmental standards.
At the same time, it must be remembered that access to affordable energy supplies is fundamental to our personal wellbeing and is the foundation for the country’s economic wellbeing.
Whilst the economic climate and resulting austerity measures may have switched much of the focus away from climate change towards the issue of cost for many consumers and businesses, it is important that the ‘three Cs’ of Cost, Carbon and Continuity of Supply are considered not in isolation but are delicately balanced to ensure the future of the UK’s energy. Navigating the intricate balance between transforming the way we generate and use energy, whilst ensuring energy is always there when required and that all this is achieved at an affordable cost, is the ultimate responsibility of energy companies like RWE npower.
To achieve this, our business strategy takes a balanced but innovative approach to our future generation fleet. We will make the best use we can of our present assets to ensure best value to both our customers and our investors.
However, we will invest for the future, aiming to be a market leader in the development and deployment of low carbon generation technologies. In 2007, we set ourselves a target of halving our carbon intensity from 1990 levels by 2015 and our current investment programme demonstrates the significant progress we are making towards this challenging commitment.
Our parent company, RWE, has a long history of investment in the UK and has invested over £1 billion in each of the last three years.
However, it is predicted that up to £200 billion1 is needed in UK electricity and gas infrastructure by 2020, of which the Government believes around £110 billion2 will be needed for new electricity infrastructure in the same timeframe.
It is clear, despite the significant sums already being invested by companies like RWE, that the energy industry alone cannot fund this revolution in its industry. To achieve financial backing from outside the industry, it is crucial that the UK is an attractive market to invest in. This is why the Government is seeking to reform the electricity market, to pave the way for the delivery of a new low carbon framework.
We are conscious of the need to articulate our plans to invest in new infrastructure and deliver carbon emissions reductions in the long-term. However, new investment at the necessary scale can only be delivered by a reformed electricity market and we would expect that, once there is clarity over the nature of market reform, we will be able to communicate our longer term plans.
Moving to low and zero carbon power generation will go some way to achieving the UK climate change targets. However reducing the amount of energy we consume will be critical. Demand management is essential to help businesses and households reduce the energy they use. Energy efficiency measures and smarter technology will be key to realising this - this includes the need in the longer term for the electrification of transport to achieve the transition to a low carbon economy.
1 Ofgem - Project Discovery
2 EMR consultation