LONDON Feb 19 Britain faces a rise in energy
prices as the market is on a bumpy ride heading for a power
supply crunch while needing to compete globally for gas
resources, the outgoing head of energy regulator Ofgem said.
Alistair Buchanan warned in a column published in The
Telegraph newspaper on Tuesday that within three years Britain's
spare generation capacity would become "uncomfortably tight" and
that avoiding supply shortages would carry a price.
"If you can imagine a ride on a roller-coaster at a
fairground, then this winter, we are at the top of the circuit
and we head downhill - fast," said Buchanan, who is stepping
down as chief executive in June after 10 years in the job.
Britain's excess power generation capacity will shrink to 4
percent by 2015/16 from 14 percent now as old and polluting
power plants close without immediate replacement.
Buchanan said this meant Britain's electricity network
operator National Grid faced tough challenge over the
next few years to ensure the lights stay on because of a lack of
spare production capacity over a prolonged period.
At the same time, energy technologies such as wind farms,
nuclear plants and carbon capture and storage (CCS) facilities
have faced financial obstacles, making gas the most likely fuel
to produce electricity in the short term, he said.
"The big worry about gas for all consumers is what price
will we have to pay to get it? Because just when we need more
gas, world demand for gas is set to rise while our own supplies
are predicted to fall by another 25 percent by 2020," he said.
Unlike in the U.S., shale gas is not going to contribute
significantly in Britain or elsewhere in Europe, he added,
leaving Britain prone to competing for liquefied natural gas
(LNG) in the global market.
Britain's energy ministry said in response to Buchanan's
warning that the government's reform of the electricity market
was aimed at plugging the supply gap.
"Our reforms will incentivise a record 110 billion pounds
($170.27 billion) of private sector investment in new clean
power generation - in renewables, new gas, nuclear and CCS," a
spokesman for the ministry said.
Britain plans to create a capacity market whereby backup
plants, such as gas stations, are spurred to power up at times
when intermittent renewable energy plants are not producing.