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Energy at the Crossroads

September 19, 2002

Market intervention required if government emissions targets are to be met say chemical engineers

Low wholesale electricity prices in the UK's liberalised energy market are continuing to stifle investment into new clean power technologies with serious implications for the government's CO2 targets and the security of future energy supplies. This is one of the main conclusions in a new report, Energy at the Crossroads, published by the Institution of Chemical Engineers (IChemE) today. Energy at the Crossroads is IChemE's formal response to the DTI's energy policy consultation ahead of the publication of an Energy White Paper due later this year.

The report concludes that the findings of the recent Energy Review conducted by the government's Performance and Innovation Unit are incompatible with the objective of a balanced and secure energy policy in the UK. Energy at the Crossroads casts doubt on the PIU's forward projections for European gas prices and identifies the current low price of electricity as a major obstacle to investment in the development of other clean power technologies. The proposed high dependence on natural gas places the UK's energy security at risk and early intervention by government will be required in order to approach the emissions targets it has set - these are unlikely to be achieved by market forces alone. More attention to the generation of stable high quality electric power supplies for the future is also needed, says the reports' author David White:

"The Energy Review was complacent about future gas supplies. It looked at the UK in isolation and overlooked the impact on prices of Europe's parallel growth in gas demand. Prices will inevitably rise because of the growing European dependence on gas supplies imported from far-flung countries. Major new infrastructure will be required, but even when this is installed, the UK will be vulnerable on the end of a complex international gas grid.

If gas prices rise to recover investment costs, the economics of nuclear power generation and clean coal technology become far more attractive. But we need to act now in order to stimulate investment in high efficiency, clean power systems utilising fuels other than natural gas before it's too late."

Energy at the Crossroads calls for a far greater degree of realism in government expectations for the potential contribution of renewable to electricity generation in the UK. The report also supports retention of current nuclear capacity through a replacement programme and investment in clean coal technology including work on CO2 capture and sequestration.

Energy at the Crossroads also draws attention to a lack of coherent scientific and engineering input into government policy making on energy policy and other key areas of public concern. A shortcoming that should be urgently addressed concludes the IChemE's Head of External Relations, Andrew Furlong:

"Professional engineers must be given more opportunities to assist politicians with the development of policy solutions to complex and inter-related issues such as energy strategy. Chemical engineers can be found working in all parts of the energy sector and they are well positioned to provide expert advice in a critical area of policy where the price of getting wrong could be a nation plunged into darkness."

Institution of Chemical Engineers