Energy Review - the sooner the better, says IoD

29 November 2005

Responding to the Prime Minister's announcement today of a new review of energy policy, Miles Templeman, Director General of the Institute of Directors said:

"The sooner this happens, the better. Energy costs have shot up the business agenda and we need to see firm decisions made as soon as possible, so that companies can be assured there will be affordable energy supply in the future. This review must have teeth and recommendations must lead to action."

Significant new generating capacity will be required over the next two decades to replace coal and decommissioned nuclear power stations, the IoD pointed out. Replacing this generating capacity with combined cycle gas turbine (CCGT) plants alone, raises issues of energy and price security. It also means that the Government will not achieve its desired reduction in CO2 emissions.

The Government has some tough choices to make, the IoD said. If it chooses to go down the CCGT road entirely, problems will emerge. While CCGT will prove to be the attractive option, owing to relatively low capital costs and intermediate CO2 emissions, there needs to be diversity in the fuel mix, the IoD argued.

Nuclear capacity should be maintained at least at current levels - around one-fifth of total electricity generation. Without any new build, the proportion is projected to fall to 7% by 2020. Construction of new nuclear power stations is inevitable. The only question is how far the nuclear construction programme should go.

The Governments' targets for renewable energy sources are overly optimistic and will not be met, the IoD added.

"The latest energy review should not ignore the international dimension. First, Government commitments to cut CO2 emissions 20% below 1990 levels by 2010, impose an extra cost on UK business beyond the Kyoto protocol. Second, the UK needs to lead a drive for true energy market liberalisation and deregulation across Europe."