Replace Renewables Obligation, says UK business group

“Business leaders are deeply concerned about the UK’s energy security” and, in a survey last month of 1800 IoD members, “ensuring secure energy supplies was identified as the single most important issue that a new government should address over the course of the next full Parliament,” the group says in response to Project Discovery: Options for delivering secure & sustainable energy supplies.

The consultation document was released by the energy regulator OFGEM.

“The proliferation of Government support mechanisms and policy instruments to encourage renewable energy and indecision about the role of nuclear power, has sent mixed signals to investors, and has not encouraged private investment in new capacity,” it argues.

“While we agree that OFGEM may be right to question the ability of current market arrangements to deliver new energy generating capacity, we believe that government indecision, flaws in the UK’s strategic planning system and the persistent threat of windfall taxes on the profits of energy companies have been extremely unhelpful.

“We agree that there is a serious risk of power cuts in the middle of this decade” and the goals of energy security and reducing GHG emissions should be complementary, the group notes. “Reduction in the use of fossil fuels and an increased share of generation from renewable sources should improve security of supply by reducing dependence on gas imports.”

Market would default to 'heavily-subsidised wind'

“Left to itself, the market would be likely to shift the future generating mix towards a combination of cheap gas-fired generation and heavily-subsidised wind power,” it adds.

The degree of support in the business community for new nuclear power stations is “startling,” it explains. In a survey of 1800 members, 85% said new reactors should be built in Britain and “if there is demand in the market, there is clear business support for nuclear.”

The four most important areas to invest in new power generation plants are nuclear (71%), wave and tidal (59%), offshore wind (56%) and solar (49%), according to members in the survey.

No single magic bullet for UK energy problems

“It is pretty clear that there is no one magic bullet that will solve the UK’s future energy problems,” the group explains. “Equally, it is not clear which low-carbon technologies will ultimately win out.

“Renewables are generally still comparatively expensive, although fossil fuel price increases could change that equation (and) it is clear that the Renewables Obligation does need to be replaced, particularly with respect to nuclear power,” it continues. A preferred option would be a carbon price that allows the market to determine the mix of low-carbon investments, including nuclear.

“A framework with a stable carbon price and significant market freedom beyond that does, however, run up against the problem of the intermittency of renewables such as wind, and hence the need for significant back-up storage and generating capacity,” it states. “We are not clear about the best way to achieve reliable back-up storage and generation, although note that it is a central concern, and an increasing concern if gas and wind make up a larger share of the UK’s energy mix in future.”

The IoD was founded by Royal Charter in 1903 as an independent, non-party political organisation of 45,000 individual members. It supports and sets standards for corporate directors.