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.

In addition, up to a third of the UK’s existing electricity generation capacity will close over the next decade, either as they come to the end of their operational lives or are 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.

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 by 2015 from 1990 levels 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, a recent report by industry regulator Ofgem predicted that up to £200 billion* is needed in UK electricity and gas infrastructure by 2020, of which the Government believes around £110 billion** will be needed for new electricity infrastructure in the same timeframe.

It is clear that, despite the significant sums already being invested by companies like RWE, 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.

It is clear that 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.

*Ofgem - Project Discovery **EMR consultation